The global consensus for strategic ESG builds

26 May 2022 - by Nathan Field

May 2022 has been a busy month for ESG debates with the subject showcased at the forefront of many high profile forums and events. The first summer World Economic Forum has grabbed the headlines and the Net Zero Delivery Summit showed how the oldest financial markets are shifting focus. At the same time, The Moral Money Summit Europe in London, and the Corporate Secretary Summer Forum in New York demonstrated a growing consensus on the strategic importance of ESG.

Mandatory ESG reporting: are companies ready?

The Moral Money Summit’s biggest story was HSBC’s head of responsible Investing, and former FT Lex Editor, Stuart Kirk’s thought provoking presentation on ‘Why investors need not worry about climate risk’. But looking beyond the headlines the highlights included great debates, agreement and a genuine conviction that progress is being made.

Panel discussions asked consistently whether companies are ready for mandatory ESG reporting, with contributors including GRI CEO Eelco van der Enden, suggesting that while there is still work to do some companies are ahead of the game, but geography and progressiveness of boards are still influencing the pace of progress.

The S and the G are still the biggest struggle for businesses with an acknowledgement that quantifying human rights with the same metrics as environmental elements like carbon usage requires a very different narrative approach.

Top Five ESG Topics with voluntary policy development | Datamaran insights

Richard Manley of CPP Investments was amongst those providing the investor stakeholder perspective, highlighting the rapidly changing nature of business risks in this century. How investors expect businesses to be managed are with boards ensuring there is adequate oversight of the executive to ensure all material business risks and opportunities are integrated and considered when setting strategy, operationalising the strategy, and with disclosure to the market.

An interview with Jennifer Motles Svigilsky, chief sustainability officer at tobacco company Philip Morris International was perhaps one of the most surprising, providing an unusual but compelling insight into ESG as a fundamental business tool. For her organization governance is critical to maintain stakeholder buy-in, so the chief sustainability officer reports directly to the CFO. Board education, strategy setting, together with data collection and presentation, are the critical elements that are helping reassure investors about the future of a company undergoing a fundamental transition of its business. 

Boards must take a position on ESG

All companies can learn from this experience. Creating a narrative through data is as relevant to anyone as they face transitioning from fossil fuels, non-sustainable materials or other elements that need to be considered through the ESG lens.

The Corporate Secretary Forum continued the theme, demonstrating that it is critical for boards to take a position on ESG and have timely and consistent information on risk to enable informed decision making.The role of company secretaries to encourage the board to think more broadly about ESG strategy, identifying both exposure to risks and the opportunities.

Looking forward, it was clear that there is an expectation of more mandatory regulations in the future and, the consensus was, rather than attempting to predict the precise requirements, the focus should be more on developing processes, education and insight that allows companies to quickly respond to them when they are implemented.

Authenticity and agility, the critical ingredients

The ability to respond to market and regulatory developments with authenticity was a common theme from contributors to all events. The organizations focusing on delivering the bare minimum to comply with regulations will require a cultural shift to operate successfully. Regulators, investors, customers and, perhaps most importantly, employees are demanding more.

As legislators and standard setters become more proactive, it is refreshing and reassuring to see how positive and determined all stakeholders are to engage with this process, but also agree there is more work to be done to better integrate ESG into business strategy. The role of the board is critical. However, one of the most striking comments came from a business leader that claimed he now had 70,000 activists that expect to hear about their ESG strategy in every company town hall meeting, highlighting how the first and most demanding audience is increasingly your workforce - your most valuable resource.

ESG Policy-Making in 2022: an essential breakdown of climate-related requirements

Companies need to prepare for strict mandatory climate disclosure requirements. That’s why, for the first time, Datamaran is making the latest version of its client-exclusive, quarterly Policy Brief accessible to the wider public.

This Policy Brief provides essential insights for businesses looking to be compliant and stay one step ahead. It features expert commentary from DLA Piper, a Datamaran partner and global law firm.

Download this free Policy Brief to understand what’s changing, when, and how you can respond.

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