Charting the Path to Sustainability: Insights from a Leader in Environmental Stewardship

“The combination of technology and sustainability, whether through the development of new technologies or through their integration into current production processes, can give us enormous satisfaction in the coming years.”

In a world where the balance between environmental, social, and economic factors is more crucial than ever, sustainability takes center stage. We sit down with Jesús De Soto Cardenal , Senior Manager of Sustainability and Climate Change at PwC, to gain valuable insights into his perspective on sustainability and the transformative trends reshaping the landscape of business.

At the heart of sustainability, De Soto offers his profound definition: "I define sustainability as the equilibrium achieved through the proper management of all elements that constitute a society - environmental, social, governance, financial, and operational. It's essential because, without current equilibrium, we jeopardize the future, compromising both society and organizations' viability." This definition underscores the intricate dance required to harmonize diverse aspects of our world for the benefit of generations to come.

Looking ahead, Jesús identifies a pivotal opportunity in sustainability—regulatory transformation. He underscores the significant regulatory changes on the horizon, such as the European CSRD and ESRS. These shifts represent an exciting prospect for holistic sustainability integration, addressing governance, strategy, and risk management. The CSRD, in particular, goes beyond reporting, necessitating due diligence measures and emphasizing the alignment of sustainability with value creation.

Reflecting on his career's early stages, he highlights a significant challenge: a lack of organizational awareness regarding sustainability's importance. However, this landscape has shifted dramatically, driven by regulatory changes, stakeholder demands, and global events like the pandemic. Sustainability has evolved from a mere "tick on the box" to a fully integrated aspect of corporate decision-making.

On proud innovations: driving sustainability from strategy to finance, Jesús takes pride in his role in transformative projects, especially in developing sustainability strategies and fostering the integration of financial and non-financial domains. These projects empower companies to align their long-term goals with sustainability principles, revolutionizing their business models and operations. One standout project involved assessing the health benefits generated by a gym chain, resulting in an innovative methodology and an academic paper.

Emerging Trends: Chain of Value and the Holistic Approach

The emerging trends De Soto highlights are truly transformative. He emphasizes the concept of the "chain of value," which sees organizations as part of a broader system. This perspective ties into concepts like the circular economy, climate risks, biodiversity, and human rights. Each of these concepts is at a different stage of maturity, and their influence on business practices will evolve in the coming years.

On the other hand, he believes that the marriage of technology and sustainability, whether through new technologies or their integration into existing processes, offers great potential. For instance, investments in climate technology have soared, nearly doubling in 2022 compared to the previous year. However, he emphasizes that technology investments must be balanced, considering both economic returns and sustainability contributions.

Embracing the Circular Economy and Regenerative Practices

The integration of circular economy principles into a company's operations presents a multitude of opportunities. This approach, which includes eco-design, efficient waste management, and responsible resource use, strives to find a balance between production and consumption.

It is important to consider the role of ESG data reporting and disclosure: improving transparency.? Effective sustainability reporting and ESG disclosure are vital for transparency and accountability. A recent PwC survey highlighted that 87% of global investors believe corporate reports contain unsubstantiated sustainability claims or "greenwashing." This underscores the significance of building a consistent narrative in sustainability reporting. Jesús stresses the need for a strategic reflection, aligning the company's present and future sustainability aspirations with material concerns, ensuring transparency without overwhelming with information.

The Benefits of Prioritizing ESG and Sustainability: A Multi-Faceted Advantage

Companies that prioritize ESG and sustainability reap diverse benefits, including improved decision-making, better access to financing, enhanced stakeholder relations, and operational efficiencies. However, De Soto points out that the specific advantages can vary significantly depending on each company's unique journey.

To achieve genuine sustainability and avoid greenwashing, he emphasizes the importance of cultural change within companies. This transformation begins with top-level involvement in sustainability-related decision-making, signifying a clear commitment to a sustainable transition. Companies embarking on this journey must understand their starting point, determine material issues for both their business and stakeholders and set long-term goals and clear actions to reach them.

We must highlight that companies can demonstrate social responsibility by integrating sustainability into their daily operations, avoiding treating it as an isolated component. Jesús highlights the concept of "agrivoltaics" as an example, which combines renewable energy production with agricultural activities, creating shared value and optimizing land use.

Challenges in Implementing ESG Legislation: Resource Intensity

The surge in sustainability-related regulations presents both opportunities and challenges for companies. De Soto acknowledges that the sheer intensity of these requirements demands significant resources for compliance. For instance, the CSRD's mandate to treat non-financial information on par with financial data will necessitate robust internal controls—an uphill task for many firms.

Jesús underscores the importance of a materiality analysis to determine key reporting elements. International reporting standards and third-party certifications enhance the credibility of sustainability reports. Additionally, audit firms play a crucial role in reviewing non-financial disclosures, providing assurance of the information's consistency and representativeness.

On the other hand, speaking about the role of sustainable investments, it is important to say that are pivotal in financing the transition to a more sustainable world. Investors' commitment to integrating sustainability criteria into their decisions has strengthened in recent years. Initiatives like the SFDR emphasize transparency, ensuring investors consider sustainability risks in their decisions.

Emerging Sustainability Trends: Circular Economy and Beyond

The circular economy stands out as a trend with transformative potential. De Soto anticipates that this approach will push companies to manage their value chains more responsibly and holistically, fostering a profound shift in business practices. However, it highlights that the greatest challenges to address are Environmental, Social and Governance.

The path to a sustainable future is fraught with complexities. Climate risks, circular economy adoption, biodiversity preservation, and human rights issues pose significant challenges. Collaborative international efforts are crucial to address these matters, ensuring that companies and societies transition to more sustainable, equitable, and resilient models.

As we navigate the complexities of sustainability, Jesús De Soto Cardenal's insights remind us that the journey to a sustainable future demands a holistic approach, cultural shifts, and international cooperation to overcome the challenges ahead. The choices we make today will shape the world we leave for future generations, underscoring the imperative of sustainable practices.