The Climate Of Business #92: 10 sustainability questions companies must address

Climate Change Reality

• Will El Ni?o on top of global heating create the perfect climate storm? (The Guardian )
• Four North American cities now near worst air quality in the world (CNBC )
• Just Stop Oil protesters disrupt London Pride over ‘polluting’ sponsors (The Guardian )
• 'Washed away': Pakistan's melting glaciers threatens millions with dangerous flooding (Euronews )
• South-east Asia braced for fires and drought brought on by El Ni?o (Financial Times )

• Climate change may force millions to migrate towards poles (Euronews )
• State of emergency declared in Siberia over raging wildfires (Al Jazeera )
• UK weather: hottest June since records began - Met Office (BBC )
• As of June 7, 2023, more than 75 million people in the United States were experiencing unhealthy and even hazardous air quality due to fires burning hundreds of miles away (World Research Institute )?
• Extreme heat 'disproportionately' impacts people with disabilities, human rights watchdog warns (Euronews )

Business Climate Reality

• Brick by brick: the British manufacturers building a better future for birds (The Guardian )
• Why shipping faces a showdown over greenhouse gas (BBC )
• Canada presents sustainable jobs bill for green transition (Al Jazeera )
• Hiring for green roles has outpaced the overall hiring rate globally four years in a row (World Economic Forum )
• Asia must reach net zero before the world can do so, says Petronas CEO (CNBC )

• Spanish strawberry farming will 'devastate' wetlands, warn scientists (Euronews )
• China urges developing countries to oppose ‘unrealistic’ shipping levy (Financial Times )
• Fossil fuel reform can finance our future (Al Jazeera )
• Japanese industry steps up ammonia push in efforts to cut CO? (Financial Times )
• Greenhouse gas emissions from global energy industry still rising – report (The Guardian )

Reality Check

As the economy undergoes green transition, sustainability is becoming a crucial consideration for all sectors and businesses of all sizes. As environmental, social and governance (ESG) regulations and sustainability-oriented policies increasingly pose vast financial and non-financial risks to businesses, consumers are increasingly prioritising sustainability in their purchasing decisions. Therefore, businesses who wish to build trust, remain competitive and pave the way towards a sustainable future must make sustainability a strategic focus within their wider business strategy.?

As such, this week’s newsletter will explore the top ten sustainability questions that companies must address to ensure they are able to successfully navigate the ever evolving landscape of sustainability in order to safeguard their long-term success.?

1) How does sustainability tie into the wider purpose of our business??

Business leaders must define their mission through gaining clarity on the purpose of the company beyond profit maximisation. In doing so, leaders should articulate how sustainability aligns with their overall mission. Through understanding how sustainability ties into their core values and objectives, businesses can drive meaningful change whilst ensuring that sustainability is placed at the forefront of their strategy.

2) Will prioritising sustainability undermine the company’s competitiveness?

Business leaders must assess whether sustainability is enabling value-creation within the business. Companies and organisations who take a holistic approach to sustainability, rather than solely focussing ESG performance, will ultimately be able to create value through striking the right balance between shareholder value creation and sustainability. Whilst many corporations fear that an excessive emphasis on ESG could harm a company’s competitiveness; taking a sustainability-oriented approach as such ensures that trade-offs are not made with the company’s growth, market share and profits.

3) Is risk management aligned with the business’ sustainability strategy?

Leaders on business and sustainability must assess whether risk management is aligned with the business’ sustainability strategy. Businesses who comprehensively engage with the risk factors relating to sustainability from an early stage will be able to better align efforts with sustainability, their business value, and risk mitigation interventions. Research by Sustainalytics found that high to severe ESG incidents lead to 6% loss of market capitalisation on average - further emphasising the importance of aligning risk analysis with sustainability strategy in order to mitigate the vast financial and non-financial risks associated with sustainability and ESG.?

4) How do our operations impact the environment?

Businesses must identify and understand the multitude of ways and areas in which their operations impact the environment. Accordingly, leaders on sustainability must account for the business’ wider operations to acquire an understanding of where, and how, their operations contribute to energy consumption, greenhouse gas emissions (GHG) , waste management, pollution, and resource usage. In doing so, they will have a solid basis for understanding which parts of their operations are most carbon-intensive, and how they can implement strategies to reduce their impact.?

5) How is sustainability and ESG performance being measured?

Companies must assess the efficiency and effectiveness of the methodologies they are employing to measure their performance on sustainability-related topics. A key component to measuring a company’s environmental performance is carbon accounting, which can then be used to calculate a company’s corporate carbon footprint (CCF).?

Carbon accounting , or "greenhouse gas accounting", refers to the systematic methodologies, measurement, and monitoring used to evaluate and quantify how much carbon dioxide equivalents (CO2e) an entity or activity emits. Carbon accounting measures emissions of all greenhouse gases and includes CO2, methane, nitrous oxide, and fluorinated gases. Gases other than carbon are expressed in terms of carbon equivalents.?

Utilising carbon accounting technology - such as Plan A’s comprehensive sustainability software - will allow companies to calculate their Corporate Carbon Footprint (CCF). CCF represents a reporting company's direct and indirect carbon dioxide equivalent emissions within a defined time period (usually a single year). Plan A's carbon accounting methodology for calculating a company's CCF is based on the GHG Protocol Corporate Standard and has been certified by TüV Rheinland.

6) How is sustainability and ESG performance being reported on?

Companies must ensure that they make sustainability and ESG reporting a strategic priority. Companies which establish clear metrics and reporting frameworks to communicate their progress on sustainability and ESG initiatives will not only be able to demonstrate accountability, but also ensure they are compliant with relevant reporting requirements - such as the Corporate Sustainability Reporting Directive (CSRD) . Accordingly, companies should adopt globally recognised reporting standards, such as the Global Reporting Initiative (GRI), or the Sustainability Accounting Standards Board (SASB), to ensure credibility and comparability of sustainability performance.

Read more on the 6 key steps to ESG reporting .

7) How can stakeholders be managed most effectively within the net-zero transition?

Given sustainability is a collective effort, businesses must ensure that internal and external stakeholders are accounted for when undergoing sustainable transition. Companies should actively engage and collaborate with stakeholders, including employees, customers, suppliers, investors, and communities. Establishing transparent channels of communication and involving stakeholders in decision-making processes fosters a sense of ownership and bolsters the effectiveness of the company’s sustainability strategy.

Read more on how to manage your stakeholders in the net-zero transition.

8) How can a budget be allocated to sustainability with limited resources?

Due to pressure on resources, time, and budget, some businesses can find it difficult to convince stakeholders that budget allocation to sustainability is a must-have and not a nice-to-have. C-suite leaders who allocate even limited resources towards sustainability through understandinding how to effectively structure a sustainability budget will be able to realise the vast potential of sustainable transformation.

Prioritising a limited budget to develop a sustainability team or strategy requires a strategic and systematic approach. Some steps that a company can follow to prioritise the right actions against a limited budget include:

• Identify your sustainability goals
• Evaluate the cost-benefit of a sustainability team or strategy.
• Start small with a pilot program to gradually build momentum.
• Licence sustainability software.

?Read more on how to prepare a sustainability budget in 2023 .?

9) How should leadership on sustainability be structured?

Whilst there is no ‘secret formula’ to allocating leadership on sustainability issues; the leadership structure utilised is a paramount factor as it dictates reporting lines, cross-functional management and partnerships, thus reflecting how executive leaders value sustainability and ESG progress. To ascertain which leadership structure best suits a company or organisation (e.g. employing a CSO), the general counsel or executive must assess the following questions with the organisation's purpose and mission;

• Does sustainability play a central role in the company or organisation's corporate strategy? If yes, how will oversight and accountability be effectively implemented?
• If an individual is to be tasked with overseeing this, does the leader have the capacity to take ownership and oversee this portfolio?
• What does the future look like for the company or organisation?
• What kind of leaders are required to get there?
• How are the company’s competitors structuring the management and oversight of ESG and sustainability issues?

Read more on sustainability leadership and the evolving role of the chief sustainability officer (CSO)

10) How should companies keep up-to-date with the ever-changing landscape of sustainability and ESG regulations?

Businesses who wish to mitigate the vast non-compliance risk associated with ESG regulations - along with the immense financial and non-financial risks associated with unsustainable business practices - must upgrade their sustainability toolkit immediately. Utilising sustainability technology such as a comprehensive carbon accounting and decarbonisation platform to ensure they are up to speed with the latest changes in the sustainability and regulatory landscapes will be central to navigating the ever-evolving world of sustainability and ESG. Furthermore, utilising sustainability software allows companies to collect and streamline emissions data, measure and analyse scopes 1,2 and 3 of carbon emissions, and report on sustainability and ESG performance.?

Ultimately, businesses which place the aforementioned sustainability questions as a strategic priority will be able to not only contribute to a greener economy, but also leverage the strategic opportunities associated with implementing a sustainability strategy.

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