The Climate of Business #32: How ESG and climate action entered the boardroom and are here to stay.

I have been observing the dynamics around the Twitter takeover with a lot of curiosity and a bit of frustration. The whole discussion has been revolving around Musk taking over a few percent of Twitter, some days later making an offer to take over the whole company and eventually winning by getting the approval to buy it, making headlines worldwide. If you read all the press releases it sounds as if Musk sat down on a chair, picked up his laptop and sent an email to inform the other shareholders he is taking over. And all of this over the course of days.

Storytelling is a key attribute to human existence. We are ready to pay a premium for a drink in a bar which was once visited by the president, we (or your kids) are happy to queue up for a day for a limited edition of sneakers because a favourite rapper designed them, all in all we are happy to be told a story which will keep the thrill and make an experience more meaningful.

So is the story with the Twitter takeover. Behind all of the headlines stand hundreds of hours of research, a lot of humans, a solid press team and the vision of a man. It didn't happen overnight or over the course of the 2 weeks this topic dominated our media headlines.

How does this matter to climate change and businesses?

We need to get over the idea there is one single factor to decision making in big business. A country's net zero agenda is not weak or strong because of the person on top, it is because the consensus within the leading party and the engagement and pressure from any other parties, alongside the loudness on the topic from citizens. A business is or is not sustainable because the CEO does or doesn't care, it is because the management has or has not dedicated resources and the employees and the consumers have or have not asked for any climate and ESG commitments.

The reason why sustainability and ESG is taken seriously in a company depends on each and every single individual within but also outside the organisation. Board members, C-levels, sustainability professionals, green enthusiasts have all a part to play and the only way the world will decarbonise is if all of is simultaneously push for the same - a healthy planet and a sustainable economy.

Elon Musk might have woken up one day and thought "I will buy Twitter." but the machine behind him then had to work for this to happen.

Climate Change Reality

Dimming the sun could be climate science’s trolley problem (The Atlantic)

Yes, you can actually do something about climate change (Vox)

Climate crisis could lead to rise of smaller bees, study finds (The Guardian)

Warmer winters are erasing Alaskan native traditions in the Arctic (Time)

Unprecedented water restrictions ordered as MWD declares water shortage emergency (Los Angeles Times)

Climate change is shrinking animals, especially birds (Scientific American)

Business Climate Reality

The wish to respond to climate change (The Economist)

Fight against climate change takes on national security implications (NBC News)

Investors at top US banks refuse to back climate proposals (Financial Times)

Brazilian meat giant JBS a bigger emitter than Italy, study estimates (DeSmog)

Citi investors reject oil, gas loan limits as climate activists gather at HQ (Bloomberg)

Musk says you can't save planet and short Tesla; ESG investors disagree (Reuters)

Russia tried to sell a huge slug of oil. Nobody wanted It. (The Wall Street Journal)

Germany nationalising energy firms? Here's how it could work (Reuters)

Twitter bans ‘misleading’ ads about climate change (The Verge)

Reality Check

I meet on daily basis C-Levels and board members who take sustainability seriously. I also meet many who don't care but are knowledgeable enough that if they ignore the topic today, tomorrow their bottomline will be hurt.

Still it seems necessary to talk about the reasons why you should take your company on a sustainability journey. Not only to equip you with argumentation for the next chat you have with anyone who thinks "ESG" and "climate action" is just a hype, but also to enable you to think about resource distribution in your organisation as you are setting up your sustainability and ESG strategy.

What happens if you don't take action on sustainability?

• Employees - A key stakeholder that is watching every move of your company are your employees. They have values and they want to work in a company which respects these values. Numerous studies show employees are willing to switch companies if their current employer isn't with a clear vision on climate.

• Clients - There is a race on the market to offer sustainable products worldwide and the reason why is people buy these products. If you haven't yet created a sustainable line, your competitors most likely did and they will tell the story of the product in an emotional, engaging manner. The market is still young so starting to transform your offerings now can offer a competitive advantage.

• Investors - Two newletter editions ago I dedicated the newsletter to the growth in ESG investing. Have a read here. Bottomline - investors are starting to diversify their portfolios. Money is still the king (or queen) and if your company is making good returns they will call you back, but companies without a clear ESG and sustainability agenda are not the preferred option.

• Regulators - CSRD, EU Taxonomy, TCFD, the new proposal by SEC, NFRD... just to name a few. The governments are doing their bit to put the assessment of the climate state of the economy in order which means all these new regulations will fall as a burden on your team to take care of. It is important to develop clarity on how to manage this workload now, before many of these regulatory frameworks become a mandatory requirement in January 2023.
• Loss of revenue - If you combine lower employee retention due to lack of climate agenda, regulatory risk and investor risk, the likelihood of revenue drop increases significantly.

How can you make money through becoming more sustainable?

• Be the first - The market is still young which offers an opportunity to any business leader. Many sustainability avenues have not been explored and if you and your team start thinking about your sustainable value propositions, you have the chance to lead the way for your industry. Taking this step today will secure market leadership tomorrow. Just make sure you don't seek to find shortcuts - greenwashing is looked down upon and a claim made prematurely and without science backing might destroy your credibility.
• Bring others onboard - Being a sustainable and ESG-compliant company is the result of a lot of collaboration with your stakeholders. You have to bring along the net-zero and ESG journey your employees, suppliers, shareholders, partners. You will build loyalty and create unseen engagement. It has been proven.
• Stay calm - It can be really stressful to be constantly bombarded with ESG and climate action talk. All the pledges, net zero targets, initiatives create an unhealthy feeling of panic in many. If you already have a plan, don't compare yourself to others in your industry - your own targets, level of engagement of stakeholders and actual achievements are the true reference points for your success. If you don't have a plan, don't worry. Many don't. If you kick the work today and push sustainability to top of the agenda, you still have a chance to claim market leadership in your domain. Just make sure there are no shortcut - big announcements without a plan are considered as greenwashing.

How much time do you have?

None really. The regulations are changing rapidly and are becoming more frequent and detailed. If you miss the train on preparing now, you will have to catch up fast and in the meantime your competition would have already developed a sustainability value proposition, as well as engaged your employees and clients.

It is not a matter of "if", but "now".

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