Improving ESG Performance Through Decarbonization

The first day of Sphera’s 2023 ESG Virtual Summit was centered around the theme of improving environmental, social and governance (ESG) performance through decarbonization.

Read on for key takeaways from today’s sessions.

Keynote: The Secret to ESG Is to Measure, Then Manage

Paul Marushka, Sphera’s CEO and president, kicked off the first day of the summit by sharing insights on how operationalizing ESG boosts a company’s ability to mitigate ESG risks. Some notable takeaways include:

• Regulators, investors and other stakeholders are demanding that companies report ESG data and performance in a way that is measurable, transparent, actionable and auditable.
• To meet these demands, companies must put together ESG strategies that connect on the enterprise, operational and product level.
• Companies will need software, data and consulting support to measure their ESG performance, report it and improve it.

Ann Tracy, chief sustainability officer at Colgate-Palmolive; Tina Armstrong, Ph.D., global sustainability director, impact and systems, at Arcadis; and Alissa Santucci, director of ESG reporting at Estee Lauder, contributed their thoughts on the topic. They talked about how they collect quality data, calculate a baseline, identify hotspots, set targets and use software to monitor and improve their ESG performance—all while communicating with their most important stakeholders.

What we learned:

• Achieving high-quality disclosures doesn’t happen overnight—it's important to give yourself time to prepare. The longer you wait to start on your disclosures, the less time you’ll have to prepare.
• Whenever possible, using a software solution to automate data collection and reporting can help you improve your reporting over time and make it more efficient.
• Effective training on how to implement systems and processes is key to success.

Keynote: How the Evolving ESG Regulatory Landscape Is Impacting Business

Kim Knickle, research director of ESG and sustainability at Verdantix, began the session by reviewing the latest regulatory developments and identifying the greatest challenges companies are facing due to these changes. Some key takeaways from the session include:

• Voluntary reporting is quickly becoming mandatory, and companies large and small will have to comply with both local and global regulations.
• Having sustainability data that is accurate, auditable, time-relevant and automated (or investor-grade) will be just as important as having high-quality financial data, and time is running out to achieve this level of data quality. Having the right data will be key to communicating ESG performance effectively.
• Companies will need to put in the time to keep pace with changing regulatory frameworks.

A panel of experts then discussed how companies can prepare for and ensure compliance with the alphabet soup of global ESG regulations and disclosure frameworks. Here’s what companies should focus on:

• Develop governance structures around ESG. Get committees at the board and managerial levels involved in the process.
• Conduct a materiality assessment to determine which ESG issues you should focus on.
• Engage customers and supply chain partners. What disclosure frameworks are they using, and what KPIs are they tracking?
• Engage with policymakers. We need a level playing field for regulations/disclosures and an environment that enables ESG reporting.

Moderator: Stefan Premer, principal consultant – global lead climate strategy, Sphera

Panelists: Kim Knickle, research director, ESG & sustainability, Verdantix; Andrea Duque, North America corporate assurance lead – associate partner, ERM; Jeffrey Crawford, VP of sustainability, Sustana; Hannes Partl, director, consulting, Sphera

Panel: Turn Scope 3 Accounting Challenges into Decarbonization Opportunities

Preyasi Patel, director of client services and corporate sustainability for EMEA at Sphera, and Sean Daley, director of sustainability consulting at Sphera, closed out Day 1 of the summit by sharing the best practices of any successful decarbonization program. These include:

• Educate yourself on what Scope 3 emissions are. Scope 3 emissions can account for 80% or more of a company’s carbon footprint and include emissions related to a company’s supply chain—upstream and downstream.
• Identify which Scope 3 categories are material to your organization. You can perform benchmarking and connect with peers in your industry to get started.
• Focus your efforts to obtain data and improve the data quality in these categories. Start with what you have and then work on moving up the data quality maturity curve.
• Engage with suppliers and stakeholders to get data. Try to streamline the data collection process as much as possible and avoid overwhelming stakeholders by asking for data you don’t need.
• Take a life cycle approach ?to understand the environmental impacts of products and processes.
• Strive for improved?data quality. Leverage LCA data for clearer insights into decarbonization opportunities.

Learn More

Interested in learning more about decarbonization? Listen to this episode of the SpheraNOW podcast in which Sean Daley discusses Scope 3 emissions and decarbonizing the supply chain. Or read this article about addressing Scope 3 challenges.

Interested in learning more about the ESG regulatory landscape? Read these Spark articles about some of the current and emerging climate-related regulations and frameworks:

• The SEC Makes Progress on Climate-Related Disclosures – But It’s Just One Piece of the Sustainability Puzzle
• Understanding the EU Sustainable Finance Disclosure Regulation
• Corporate Sustainability Reporting: CSRD Requirements Now Include Non-EU Companies and Independent Auditing
• The ISSB and the IFRS Sustainability Disclosure Standards: Aiming for Comparability in ESG Reporting