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The climate crisis is now the biggest long-term threat we as humans face. What was once considered sufficient corporate action against climate change is quickly becoming inadequate, with net zero carbon targets no longer optional –and businesses have a vital role to play. With key stakeholders, investors, employees and consumers increasingly demanding more sustainable business practices and ESG transparency, senior leadership is under pressure to ensure they establish credible climate commitments. These must be authentic to their purpose – or they risk accusations of greenwashing.
So, what steps should organisations take to achieve net zero, and the benefits that come with this?
1. Climate commitments with authentic purpose
Many business leaders have already set an ESG vision for their company. However, organisations that claim to be environmentally friendly but lack a comprehensive plan to support their claims risk wariness, scepticism, or outright suspicion from key stakeholders. Leaders must make commitments authentic to their purpose and their business goals, rather than a knee-jerk reaction to the climate crisis and societal pressures.
Without this layer of authenticity, their policies will be first to receive negative scrutiny from investors, consumers, employees and even activists. To that end, leaders would be wise to set both near-term and long-term targets for emission reductions, and develop a comprehensive roadmap to reach these goals. To be successful in sustainability, companies must take the long view with a strong growth mindset; moving too fast without a clear direction and board and executive management buy-in is simply setting the business up for failure.
2. A secondary layer of governance
Ownership and accountability for ESG must come from the top. However, 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 take this a step further and create a secondary layer of governance, with a committee that governs the day-to-day management of ESG responsibilities.
This team will likely be made up of representatives from across the business, including operations, risk management, human resources, legal and compliance - backed up by concrete metrics for their unit. Together, these two governance bodies can work in tandem to develop, manage and measure ESG strategy and performance. For both bodies, education is critical: all members must undergo sustainability training to increase their level of awareness and to support their duty of care.
3. Cloud-driven reporting
At its core, 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 up to date and qualitative data to track ongoing progress and compliance. Unfortunately, ESG data is often unstructured and found in disparate business siloes and 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 an initial step to enabling sustainable reporting by moving technology applications to the cloud; the cloud enables businesses to unify all relevant ESG data in a single source of truth, 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.
4. Nurturing a sustainable company culture
ESG awareness and accountability must also be reflected in the organisational culture to deliver value responsibly and sustainably long term. Employees are an increasingly vocal stakeholder group, with nearly 40% of millennials citing employer sustainability as a factor in deciding where to work. As a first step towards cultural change, leaders should assess the current extent to which ESG has been embedded within the business and identify key areas for development. If awareness levels are low, organisations may look to invest in educating employees about sustainability. This will enable them to start integrating ESG into performance management and training and incentive frameworks.
Throughout their long-term roadmap, senior leadership must communicate progress on ESG on a regular basis to make it easier for employees to integrate sustainability into their business decisions. Incentives and reward schemes can be helpful ways to align staff satisfaction and retention with their ESG aims; for example, ‘naming and faming’ employees who have made a difference in encouraging sustainable living as part of annual company awards. Committing to sustainability is not just about one-off actions; it is about making cultural shifts to ensure that any change remains long-lasting.
5. ESG reporting intertwined with digital transformation
Meeting ESG reporting requirements is increasingly intertwined with companies’ digital transformation programmes, and leaders would be wise 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 the ESG benefits are evident across all sectors. There are many examples of the successful use of AI in the energy sector, including 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%.
Globally, organisations are looking to adapt and transform during these difficult times. 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.