8 years of ESG exploration: navigating the sustainability landscape

8 years ago, I embarked on a journey with the purpose of making a positive impact and aiding organizations in being forward-looking by actively mitigating potential ESG-related risks to ensure long-term sustainability and prosperity.

I’ve worked across three key industries and cultivated a nuanced understanding of the multifaceted challenges within ESG ecosystem. This has empowered me to proactively engage with and resolve pivotal issues that hold strategic importance for business owners. My approach involves not only addressing immediate concerns but also advocating for long-term sustainable practices that integrate resilience and risk mitigation.

Materiality across food and beverage, hospitality & retail, and banking industries!

Each industry grapples with distinct material issues shaped by a variety of factors, including industry complexities, stakeholder expectations, and customer requirements.

Companies across different industries are indeed required to identify key material issues that could significantly impact their ability to create value over the sort and long term. The nature of these material issues may to some extent based on the industry and the specific characteristics of each organization.

1)???? A Glance Into Food and Beverage Materiality ?

For instance, sustainability has become a key focus in the food & beverage industry. A prominent trend will revolve around a growing focus on eco-friendly packaging, sustainable ingredients, water reduction, sourcing ingredients from local and organic producers, and promoting fair labour practices.

Critically, one of the biggest challenges for food & beverage companies when it comes to sustainability is enhancing transparency in their supply chains. Companies are working actively with their 1, 2, and 3rd tiers suppliers to ensure ESG criteria are embedded throughout the supply chain.

Furthermore, water consumption is a critical aspect of sustainability in the food and beverage industry. Challenges include optimizing irrigation techniques in agriculture, minimizing water usage in manufacturing processes, and implementing water-efficient practices in beverage production. Striking a balance between industry needs and responsible water stewardship is crucial to address environmental concerns. ?

2)???? A Glance Into Hospitality and Tourism Materiality

Sustainable Hospitality refers to operating hotels, restaurants, and other hospitality businesses in a way that minimizes the adverse impacts on the environment, supports local communities, and promotes social responsibility.

Implementing Sustainable Hospitality practices necessitates hotels to systematically instils sustainability criteria into every facet of their operations. Such implementation extends across divisions such as housekeeping, food and beverage, engineering, and management. This concerted effort ensures a comprehensive and integrated approach to environmental and social responsibility throughout the hotel's entire operational framework.

The hospitality sector is facing a number of challenges when it comes to sustainability; single-use plastic is a key consideration. According to UNESCO's international research, the hospitality industry annually contributes 150 million tons of single-use plastic, with items including straws, disposable water bottles, plastic bags, bin liners, and cling film ranking among the 'top 10' plastic pollutants.

The hospitality industry’s progress in adopting eco-friendly alternatives to phase out single-use plastics (SUP) is commendable. However, the challenge lies in suppliers finding improved natural alternatives to ensure a closed loop, aligning with the principles of the “Circular Economy”. This ongoing effort is crucial for creating a sustainable and environmentally conscious hospitality sector.

3)???????? A Glance Into Banking Materiality

The global banking sector is at the forefront of promoting widespread adoption of sustainable practices and the reduction of environmental negative impacts across various industries.

Banks can ensure profitability while meeting the preferences of customers and investors by incorporating ESG considerations into their investment, lending, insurance, and other financial products. This approach supports sustainable practices, social causes, and responsible governance.

The substantial hurdle for banks lies in effectively measuring and mitigating Scope 3 emissions, which make up 95% of the average bank's overall greenhouse gas (GHG) emissions. While a majority of the world's largest banks have pledged to achieve net-zero carbon emissions by 2050, less than 5% are currently on track for Scope 3 emissions, as reported by Accenture.

Climate risk mitigation poses an additional challenge for financial institutions. Effectively managing climate risk including both physical and transition risks require strategic planning and proactive measures. Developing comprehensive climate risk strategies, including stress testing and scenario analysis, becomes crucial for financial institutions to assess potential exposures and enhance their resilience against climate-related impacts.

By addressing climate risks, financial institutions are not only protecting their assets but also contribute to the boarder efforts to combat climate change.

The Main take-aways from my last 8 years!

The Role Of ESG

An observed management mistake is the misconception that fulfilling ESG mandates is achieved solely through the disclosure of annual ESG reports. While ESG reporting acts as a communication initiative, it's crucial to recognize that the mere existence of such reports doesn't inherently mean the organization has fulfilled its ESG mandate. True commitment involves concrete actions and sustained efforts toward comprehensive ESG integration and impact. Reporting is a part of the process, but the essence lies in genuine and ongoing commitment to ESG principles that entail continuous efforts to improve environmental impact, social responsibility, and governance practices.

Reporting

Reporting plays a vital role by not only communicating positive stories but also by acknowledging and addressing key material issues that could impact the business continuity in the short and long term. This dual focus ensures a well-rounded and transparent representation of the business's ESG performance and challenges.

Beyond a box ticking exercise

ESG should not be treated as a mere tick-box exercise. Instead, it should be viewed as a strategic imperative seamlessly integrated across business operations, ensuring comprehensive and effective addressing of all ESG issues in the short and long term!

Greenwashing Risk and Net Zero

"Greenwashing" refers to the deceptive practice of making exaggerated or false claims about a company's environmental and social policies, practices, or goods, creating a misleading perception of their commitment to sustainability. Failing to establish a well-defined net zero’s transition plan with both short and long-term targets can result in inadequate efforts toward achieving net-zero goals. Potentially, these hinderances could affect the company's genuine progress in sustainability. According to RepRisk, the world's largest ESG data science company, has found that one in four climate-related ESG risk incidents worldwide was linked to greenwashing – an increase from one in five incidents in last year’s report. ESG risk incidents occur when companies communicate misleadingly about environmental issues!

Time Scale and Expectation

The maturation of ESG concept in the market involves a shift in corporate mindset, regulatory framework, and investors priorities. ESG practitioners need to recognize that the integration of sustainable practices and ethical considerations into business strategies is a gradual process. Hence, they can play a key role in fostering awareness, education, and collaboration to facilitate a smoother transition. Patience and persistence are vital as businesses evolve to embrace ESG practices, ultimately contributing to a more sustainable and responsible global business environment.