These days Madrid Talked About Sustainability

The second edition of the ESG Summit Europe 2024 was recently held at Teatro Albéniz in Madrid, gathering business leaders, investors, regulators, rating agencies, consultants, academics, and other key stakeholders to discuss and promote sustainable practices.

The event provided fresh insights for those interested in leading the transformative ESG journey. Participants engaged in discussions about current challenges and the technical and technological innovations in ESG that require our urgent attention.

It was noted that we will face further changes, not all of which will be positive, often related to factors beyond our control, such as the pandemic, conflicts in the Middle East, and the situation in Ukraine. At the corporate level, it is crucial to shift from a focus on shareholder value to a system-centered model. This approach enables companies to address societal needs holistically, fostering progress toward a more prosperous future.

In this context, it is essential for companies to reflect on their ultimate purpose, with the Sustainability Report serving as a tool to measure and communicate progress – contrary to what many organizations believe. The true purpose of this tool is to inform the company’s strategy and facilitate access to the necessary data for making informed and effective decisions. The ESG strategy should be integrated with the company’s overall objectives, guiding actions, and decisions to achieve a positive and sustainable impact.

An intriguing concept discussed was regenerative thinking, which goes beyond traditional sustainability by focusing on restoring and regenerating natural and social systems. This idea suggests that companies should not only minimize their negative impacts but also create positive effects by regenerating resources and communities. Integrating regenerative thinking into ESG strategies can lead to innovations that benefit both the environment and society, promoting a virtuous cycle of sustainable growth.

A critical aspect of the ESG conversation is value chain emissions, which play a significant role in the implementation of ESG practices. Leading organizations in ESG – typically large corporations – must not only optimize their internal operations but also ensure that their suppliers and partners adhere to sustainable practices. Integrated socio-environmental management of the value chain involves negotiations and compromises with various economic agents, ensuring that the entire chain contributes to ESG goals. This extensive work should be approached collaboratively, focusing on mutual support rather than competition.

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Frederick Royan, Global Practice Area Leader for the Sustainability & Circular Economy practice at Frost & Sullivan, EUA, provided an excellent framework for defining an ESG strategy, known as the 6Ps: Policies, Products, Processes, People and Personas, Partnerships and Platform.

Policies: Establish clear guidelines that align company operations with ESG principles.

Products: Develop products that minimize the environmental impact during their lifecycle and invest in R&D to create new eco-friendly and efficient offerings.

Processes: Optimize processes to reduce waste and emissions. Implement technologies that enhance the efficiency and lower environmental impact.

People and Personas: Train human resources to understand, engage with and apply ESG principles. Encourage active participation in sustainable initiatives and foster an inclusive and diverse work environment.

Partnerships: Form partnerships with organizations that share similar ESG values. Engage with local communities to promote sustainable practices and collaborate with suppliers who adopt responsible practices.

Platform: Utilize technology platforms to monitor and report ESG performance. Adopt recent technologies that supports sustainability and circular economy.

When these elements are effectively developed and integrated, they can significantly enhance a company’s ESG strategy, creating a positive impact both internally and externally.

For the professionals in this area, it is crucial to understand that the path is being shaped.

The course refers to the strategic pathway we must take to achieve ESG objectives. Which involves setting clear goals aligned with the organization’s values and purpose.

The rhythm indicates the speed and consistency of EGS initiative implementation. Maintaining a steady pace is essential for ensuring continuous progress and avoiding setbacks.

Margarida Louro

CFA Associate Partner | ESG Department

[email protected]