The possible sustainability practices that businesses deploy can differ enormously, depending on the industry. However, once everybody understands what sustainability is as an organisation, each functional unit – including treasury – is going to prioritise those steps that will reduce cost or improve profitability, whilst also improving what the impact their business or their function has on both the environment and society.
Actions, not words
If something is important to the long-term success of a business, it will be on the management scorecard, not, say, a separate scorecard for a “sustainability working team”. If your business is not really serious about it, then question whether it is worth doing at all. If a company decides it’s going to eliminate paper, or streamline cash operations, or stop trucking coin and currency all over the country, it needs to put it on the scorecard, measured, and hold itself accountable for those results.
Once goals are set and implementation is complete, the organisation’s leadership teams must then call out progress against milestones, presenting them alongside financial and other performance metrics. When monitoring what the company is doing, it’s important for you to ask if it’s making a difference and being really honest when answering.
By constantly monitoring inputs and the scorecard, it is possible to determine if the business is having the desired impact. If so, celebrate that success. If not, you must re-assess the plans in place, adjust, and update the scorecard.
Keeping it going
Keeping up to date with progress in this space largely comes down to observation. Newer companies tend to leapfrog out-dated processes used by older competitors, such as having no retail locations, or automating processes from the start. Companies should be watching their competitors.
Equally, listen to employees that spend time on these activities, and ask customers about their experiences. At Bank of America, we start by asking ourselves “what are our own people telling us we need to do better?”. It’s amazing what can be learned by simply taking a walk to the loading dock and seeing what the company is throwing away, or how much packaging is wrapped around every delivery!
Make it realistic
Another element companies must keep in mind is that sustainable goals have got to be realistic. There is no use in creating a sustainable practice that puts you out of business. For example, if the business is heavily reliant on single-use cups for hot beverages, then switching to an entirely paper cup that is quick to disintegrate could deter customers.
Instead, the business should be figuring out how to either make them functional as well as recyclable or biodegradable, and how to offset any negative environmental impact of change. Pick the really serious problems though. Tackle the hardest problem first, and don’t just do it to make yourself feel good or the company look better; do it to make a difference.
Reporting and governance
In the ‘new normal’, ESG programmes have become useful tools for public companies trying to increase investor appetite, operational efficiency, and decrease resource dependency whilst attracting a new generation of empowered workers.
Trends suggest that companies are expected to deliver investor-grade, high-quality ESG disclosures, for the benefit of external stakeholders and for management decision-making. For this reason, ongoing reporting and governance must meet expectations.
Directors will assist in assessing and communicating the company’s sustainability goals regarding ESG projects. Companies that quickly understand ESG risk and opportunities have the advantage of crafting and controlling delivery of narrative and transparency.
ESG players have a key influence in many aspects to achieve goals:
External players
Stakeholders
Provide information data, business intelligence for each of the areas involved in order to ensure the right deployment and impacting positively.
Investors and shareholders
Investor and shareholder interests have led to an increase in the attention companies are giving to ESG disclosure and transparency.
Once an investment takes place, investors use ESG information to monitor performance, much in the way they use financial information.
In addition to investment due diligence and performance monitoring, investors exercise their influence and execute their ESG strategies through proxy voting and shareholder proposals.
Stock exchanges
Nasdaq published its ESG reporting guide16 to encourage disclosure and offer support to companies navigating the evolving disclosure standards. The guide is intended to help companies across geographies and market capitalisations with their ESG reporting efforts.
Guidelines are key as a result of the increased investor demand for ESG information and stock exchanges transparency.
Central regulators and policy makers
Promote and rule on non-financial reporting and requirements to disclose information.
Depending on the specific requirements, information must be disclosed about environmental performance, social and employee matters, human rights performance, and anti-corruption and anti-bribery matters.
Customers
Consumers support companies that align with their values. They have begun or deepened a business relationship because they perceived a company’s products or services to have a positive impact on society or the environment.
Internal players
Governance
On a yearly basis, the governance needs to verify ESG programme performance, asking the key questions to verify the mission, goals and objectives are aligned with the guidelines.
Key questions:
- Does the board understand the risks and opportunities and how sustainability-related risks and opportunities impact the company’s strategy?
- Who inside the corporate is responsible for ESG management and performance and what is the internal governance and finance structure?
- Does the entire corporate understand what types of ESG disclosures attracts investors and other stakeholders, and how is the board and the company responding to these expectations?
- With ESG reports, how often is the channel and type of content of that reporting revisited to modify changes and reflect current trends?
- Is the ESG strategy the responsibility of the full board, or is it delegated to one or more internal committees? Audit and finance committees could play an important role in reviewing and assessing the disclosure of material ESG matters. With increasing investor attention and reliance on ESG disclosure, the audit committee will likely also play a role in overseeing how ESG information is presented to investors.
Employees
Many now seek to work at companies that reflect their expectations with regards to purpose, culture, and professional development. Companies that deliver alignment on those expectations may be
Employee commitment
ESG disclosure can serve as a differentiator among companies and can enhance an employee’s confidence, trust and loyalty, across generations.
What is expected from teammates?
- To embrace the ESG culture.
- Apply a risk framework and quality assurance.
- Be ethical and responsible in behaviour and handling of information.
- Be social media-responsible, aligning with the defined corporate culture.
