The climate crisis is now the biggest long-term threat we as humans face ‘ and businesses have a vital role to play in tackling this. What was once considered sufficient corporate action against climate change is fast becoming inadequate, with net zero carbon targets no longer optional. As key stakeholders, including investors, employees and consumers, increasingly demand more sustainable business practices and ESG transparency, it is crucial that senior leadership makes credible and authentic climate commitments a top priority.
Creating a layer of authenticity
Organisations that claim to be environmentally friendly but lack comprehensive plans to support this risk uproar from key stakeholders, including accusations of greenwashing. Leaders must make commitments authentic to their purpose and their business goals, rather than half-heartedly reacting to the climate crisis and societal pressures. Without this layer of authenticity, negative scrutiny could potentially cause enormous impact on brand reputation.
Successful leaders should set both near and long-term targets for emission reductions and develop a comprehensive roadmap to reach these goals. Companies must take the long-term approach with a strong growth mindset; moving too fast without a clear direction and board and executive management buy-in is setting the business up for failure.
Split governance
When it comes to ESG governance from senior stakeholders, there is no one-size-fits-all approach. For some businesses, the answer lies in redefining the scope of their existing board bodies. Others decide to create a new board-level steering committee dedicated to overseeing sustainability. Many organisations may look to create a secondary layer of governance, with a committee that governs to day-to-day management of ESG responsibilities.
This committee should be made up of representatives from operations, risk management, human resources, legal and compliance- backed up by concrete metrics for their unit. With both teams working in tandem, they can enable the management and measurement of ESG strategy and performance. For this to prove successful, education is vital: all members must undergo sustainability training to increase their level of awareness.
AI-driven reporting
ESG reporting is a data management and visibility issue. Before a company can report on ESG progress, members of management need to know the current state of play, with enough data for businesses to be able to measure their progress and stay compliant. Unfortunately, ESG data is often unstructured and found across complex supply chains. As a result, integrating and analysing these data sets is resource intensive, limiting access to critical information.
Many organisations have already taken the first step to enabling sustainable reporting by moving technology applications to the cloud. This enables businesses to unify all relevant ESG data that can then be distributed and analysed to meet reporting requirements. Beyond the cloud, there is a wealth of emerging tech for ESG reporting that will transform the space, from AI-driven materiality analysis to tracing payment flows using blockchain.
Moving towards a cultural shift
Employees are an increasingly vocal stakeholder group. With nearly 40% of millennials seeing employer sustainability as a factor in deciding where to work, businesses must move towards cultural change if they are to attract and retain new talent.
Leaders should assess the current extent to which ESG has been embedded within the business, and from this identify areas for development. If awareness levels are low, organisations may look to invest in educating employees about sustainability. This will enable them to incorporate ESG into performance management and training and incentive frameworks. Reward schemes can be a helpful way to align staff satisfaction and retention with their ESG aims ‘ for example, rewarding employees who have made a difference in encouraging sustainable living as part of annual company awards.
Adapting with digital transformation
Meeting ESG reporting requirements is increasingly intertwined with companies’ digital transformation programmes, and leaders should consider them in parallel. It is well known that technology has a critical role to play in the climate agenda, particularly in big-polluting industries like mining and manufacturing. But ESG benefits are evident across all sectors.
Successful examples of AI in the energy sector include using deep mind to predict power generation from wind. In logistics, where a significant portion of global greenhouse gas emissions comes from freight transportation, AI-enabled platforms can chart efficient transport routes. On a smaller scale, by using sensors to track occupancy, employers can understand employee working styles to accurately measure and reallocate space capacity, which can shrink an office’s carbon footprint by 30%.
Embedding ESG and sustainability into organisations requires a holistic and authentic approach. It must be a key priority for senior leadership, but also one implemented from the ground up. Only through clear ownership and accountability can tangible change happen, that will benefit future generations to come.
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