Corporate Sustainability: from Awareness to Action
The theme of World Earth Day on 22 April this year was ‘Invest In our Planet’, calling for businesses to shift towards sustainable practices. This movement is expected to change the business climate, the political climate and how organisations take action.
To mark the event, Headspring invited four thought leaders to debate the issues from a leadership perspective. In their discussion they offer reflection and insights on shaping the context, and provide an agenda for where Earth Day should take organisations to achieve corporate sustainability.
Moderated by leading Swiss economist and author, Professor Mark Esposito, the panel brought together:
Isabel Garro, Global Sustainability Leadership Manager at sustainable infrastructure solutions group, Acciona.
Kristina Jeromin, Managing Director of Green and Sustainable Finance Cluster Germany.
Peter Plochan, Principal Risk Management Adviser at business analytics software and services provider, SAS.
Opening the discussion, Mark Esposito observed that society is at a watershed, facing enormous environmental challenges that will come at great economic cost – and we find ourselves partially unprepared for what is ahead. We haven’t yet reached the point where sustainability is imbedded in our organisations, even after two decades of campaigning and activism.
“Earth Day 2022 is an opportunity for us to reflect on the incredible generosity of our planet, how we live within a benign and benevolent system, but how economic and societal systems have been designed fundamentally to transgress the boundaries. So we often find that we are unable to stay within the planet’s capacity, and we’ve been overshooting our limits more and more.”
The solution, says Mark, is not just in adapting our behaviour but in rethinking our business models, our financial systems, and how we position our organisations for corporate sustainability.
Possibilities and opportunities
Inviting Kristina Jeromin to outline the role of sustainable finance, Kristina agrees that our societal and economic systems need to be transformed to deal successfully with challenges like climate change.
“We have seen a paradigm shift in understanding corporate sustainability over the last years … Corporate responsibility has become more and more integrated into the strategic thinking of corporates. New environmental and social governance data has been able to measure the corporate responsibility performance of a company: ESG data is our key performance indicator, which more and more can be integrated into investment, analysis and decision making in the international capital market. And this is not just because of the moral dimension, but because investors have learned that having a holistic view of the value chain of a company gives you the opportunity to forecast its development, to minimise risks and get a handle on the possibilities and opportunities that come with corporate transformation.”
Kristina observes that ESG is an important central pillar within an organisation because it creates a relationship between the corporate and its employees. The people in a business are ambassadors to the outside world, and so involving employees in the discussions about issues such as climate risk helps steer governance structures via reporting lines. “Then you give investors that perfect overview to come to responsible and successful investment decisions.”
According to Peter Plochan of SAS: “There are a lot of implications from the changing environment that are going to impact the business models of financial institutions when talking in particular about sustainable finance. So banks are looking at this as we speak, and there’s a lot of regulation to navigate.”
Peter believes that the reporting of corporate sustainability risk will become even more important for non-financial institutions. “There is an avalanche of sustainability-related reporting frameworks … There is increasing attention to the information that needs to be disclosed – and risk is a big part of what has to be reported. Corporates must disclose the climate and ESG risks they are exposed to. I think this is going to be quite a new domain for lots of non-financial institutions.
“And thinking about the Learning & Development and HR audience: what does it mean for us. Do we need to start thinking about how can we assess those risks? And are there any risks for us? Thinking about my HR, my training strategy, I need to also start thinking how actually we create this awareness within my institutions, within my management board, about the climate risks, and the ESG related to sustainability risks.”
While regulatory targets force companies to look at what is need now and in the near future, how is corporate sustainability playing out within governments? Isabel Garro says: “The hardest part is to really embed that agenda within government. And to be honest, it’s really hard to change the way people think about how they do the work, change minds and adapt to changes.”
And not only at governmental level: “It’s difficult to implement a new agenda that tells you that you have to change the way you do things … I think companies that want to make sure they will survive in the coming years have to accept – as we accepted in the 2000s that digital skills were needed – that it’s absolutely necessary to make sure that your employees have sustainability skills.”
How do the panellists see these changes happening within organisations? According to Isabel Garro: “It’s been clear at Acciona, an infrastructure company that also produces renewable energy, that the only way to stay in the market in the coming years is not just to implement CSR initiatives, but actually deeply transform the company. That’s what we’ve been doing for the last 15 years.”
Her approach is three-fold: “Making sure that you understand the risks ahead, and really make commitments to cover those risks.
“The second step is to adopt a resilient mindset. And to be resilient you have to change the whole company, you have to change the processes, you have to change the leadership model, you have to change everything that’s within your company. Recently we changed our policies and our codes of conduct to make sure the company is going in the same direction that the world is heading, to give responsibility to all the different stakeholders … and you have to really embed that within the company.
“And because this is ‘only paperwork’, and you realise that people find it difficult to change, we embedded the sustainability department within the financial department … You might call sustainability non-financial, but it’s actually financial. We merged our audit commission and the sustainability commission to make sure we cover all our risks.”
Acciona’s third step is not only to avoid risks but to implement a regenerative strategy, to identify new opportunities ahead, and seek out competitive advantages: “To compete and provide a positive impact in the new world that we’re living in.”
External and internal dialogue
Mark Esposito observes that Kristina Jeromin has held responsibility for internal and external communication. How, he asks, did she navigate the conversation and engagement on sustainability?
“Providing your carbon footprint to your stakeholders will always be an important point in your sustainability reporting – but is it really material?” suggests Kristina. “Is the success of your company impacted by this information? Maybe not. What is really material, and this depends on the sector your company is based in, is going through the external and internal stakeholder dialogue and then developing a first set of KPIs of ESG factors. And here you have a lot of voluntary but also some mandatory standards.”
“But as well as establishing this dialogue with external stakeholders, it’s also important to implement responsibility at executive and advisory board level, setting targets and implementing a sustainability committee within the company that has a direct reporting line to the CEO.”
Mark Esposito asks the panellists how achieving sustainability squares with shareholders’ and markets’ expectations on financial growth.
“We’ve redefined the concept of growth in our company,” says Isabel Garro. “We might expect a 20% increase in sales, but we’ve told our employees that at the same time we have to diminish the amount of our CO2 emissions. So it’s not only growth, growth, growth in terms of money any more: it’s growth, but making sure that the impact diminishes – or at least it’s positive.”
How is this achieved? “We have set a new compensation framework for our workers. If they reach their sales revenue goals that’s fantastic … but if they do so by increasing the amount of CO2, they don’t get the [bonus]. What has resulted is people are excited to find new ways to reach their goals and that’s the only way forward. It’s challenging but it’s super fun.”
And what are the skills now required in a company to achieve sustainability goals?
“In terms of self-leadership skills,” says Isabel, “It’s pretty obvious that we’re working within a system where we need an adaptative nature and a systemic view of what’s going on. Working in silos is no longer going to be permitted. A worker needs to exhibit critical thinking, creative thinking and a constant learning attitude for him or herself.
“And it’s very obvious that we’re not going to solve all the problems we have ahead without setting collaboration between all the stakeholders … We have to realise that the world is no longer predictable. We have to be ready and able to embrace uncertainty and feelings of vulnerability, but still be able to keep providing value to the organisation.”
Summarising what has been a discussion full of ideas and approaches, Mark Esposito says: “We are not only at a watershed but at a moment of opportunity for businesses to take sustainability to the next level as part of their value chain and value proposition – rethinking their strategies, making sure they are no longer paying lip service to sustainability but making it much more integrated into the core.
“We’re learning that finance is critical to making sure that we get serious about sustainability and getting to next-level thinking. How do we calculate value? How do we define economic indicators versus non-economic indicators in a way that is no longer creating just tension but creating positive, constructive models; rethinking our entire concept of impact that we can really measure.
“And resorting to technology for what technology is fundamentally designed to do – it is meant to augment humans, and if we have a challenge with the climate, we should use technology to try to address these challenges.
“All of this is possible because of the skills that we see arising more and more in our field of work, because of the people that are currently taking the grey areas and shaping them into what will most likely become the future of tomorrow.”