Building a sustainable business with credible climate commitments-November 2021

Andrew Duncan at Infosys Consulting looks at how an effective approach to sustainability ca drive real business change

With the ‘unequivocal and unprecedented’ climate crisis now the biggest long-term threat we face as humans, net zero carbon targets are no longer optional for businesses.

What was once considered sufficient action against climate change could soon become inadequate. Investors, employees, and consumers are demanding more sustainable business practices and greater transparency in ESG performance.

Thus, as we re-set our businesses in the aftermath of COVID-19, senior leadership will have to ensure they establish credible climate commitments that are authentic to their purpose – or risk accusations of greenwashing.

In this second article in my ‘Building back better’ series, I consider five actions that organisations can take to get ahead of the challenge and achieve the benefits of a net-zero business with credible climate commitments.

Authenticity is key

Many business leaders have already set an ESG vision for their company. However, organisations that claim to be environmentally friendly but lack a comprehensive plan to support their claims risk wariness, scepticism, or outright suspicion from key stakeholders.

Leaders must make commitments authentic to their purpose and their business goals, rather than a knee-jerk reaction to the climate crisis and societal pressures.

Without this layer of authenticity, their policies will be first to receive negative scrutiny from investors, consumers, employees and even activists. This will also have a potentially enormous impact on brand perception and reputation.

To that end, leaders would be wise to set both near-term and long-term targets for emission reductions and develop a comprehensive roadmap to reach these goals.

To be successful in sustainability, companies must take the long view with a strong growth mindset; moving too fast without a clear direction and board and executive management buy-in is simply setting the business up for failure.

Two layers of governance

Ownership and accountability for ESG must come from the top. However, when it comes to ESG governance from senior stakeholders, there is no one-size-fits-all approach.

For some businesses, the answer lies in redefining the scope of their existing board bodies. Others decide to create a new board-level steering committee dedicated to overseeing sustainability.

Many organisations may look to take this a step further and create a secondary layer of governance, with a committee that governs to day-to-day management of ESG responsibilities. This team will likely be made up of representatives from across the business, including operations, risk management, human resources, legal and compliance - backed up by concrete metrics for their unit.

Together, these two governance bodies can work in tandem to develop, manage and measure ESG strategy and performance. For both bodies, education is critical: all members must undergo sustainability training to increase their level of awareness and to support their duty of care.

Data-driven reporting

At its core, ESG reporting is a data management and visibility issue. Before a company can report on ESG progress, members of management need to know the current state of play, with up to date and qualitative data to track ongoing progress and compliance.

Unfortunately, ESG data is often unstructured and found in disparate business silos and across complex supply chains. As a result, integrating and analysing these data sets is resource intensive, limiting access to critical information.

Many organisations have already taken an initial step to enabling sustainable reporting by moving technology applications to the cloud; the cloud enables businesses to unify all relevant ESG data in a single source of truth, that can then be distributed and analysed to meet reporting requirements.

Beyond the cloud, there is a wealth of emerging tech for ESG reporting that will transform the space, from AI-driven materiality analysis to tracing payment flows using blockchain.

Nurturing the right culture

ESG awareness and accountability must also be reflected in the organisational culture to deliver value responsibly and sustainably long term. Employees are an increasingly vocal stakeholder group, with nearly 40% of millennials citing employer sustainability as a factor in deciding where to work.

As a first step towards cultural change, leaders should assess the current extent to which ESG has been embedded within the business and identify key areas for development. If awareness levels are low, organisations may look to invest in educating employees about sustainability; this will enable them to incorporate ESG into performance management and training and incentive frameworks.

Throughout their long-term roadmap, senior leadership must communicate progress on ESG on a regular basis to make it easier for employees to integrate sustainability into their business decisions. Incentives and reward schemes can be helpful ways to align staff satisfaction and retention with their ESG aims; for example, ‘naming and faming’ employees who have made a difference in encouraging sustainable living as part of annual company awards.

Committing to sustainability is not just about one-off actions; it is about making cultural shifts to ensure that any change remains long-lasting.

Consider in parallel with digital transformation

Meeting ESG reporting requirements is increasingly intertwined with companies’ digital transformation programs, and leaders would be wise consider them in parallel. It is well known that technology has a critical role to play in the climate agenda, particularly in big-polluting industries like mining and manufacturing.

But the ESG benefits are evident across all sectors. There are many examples of the successful use of AI in the energy sector, including using deep mind to predict power generation from wind. In logistics, where a significant portion of global greenhouse gas emissions comes from freight transportation, AI-enabled platforms can chart efficient transport routes.

On a smaller scale, by using sensors to track occupancy, employers can understand employee working styles to accurately measure and reallocate space capacity, which can shrink an office’s carbon footprint by 30%.

As organisations across the globe look to transform themselves in these difficult times, focusing on their sustainability goals is a priority that cannot be underestimated. Embedding ESG within a business requires a holistic and authentic approach, led from the top, and implemented from the ground up.

Only through clear ownership and accountability can we create tangible change that will benefit future generations to come.

Andrew Duncan is a Partner and UK CEO at Infosys Consulting

Main image courtesy of iStockPhoto.com