Change now: three industry leaders weigh in on ESG

  • Culture
  • Solutions
  • Cameron MacQuarrie
  • 2022
02 February 2022

three industry leaders weigh in on ESG

ESG is a topic on everyone’s radar. While the concept is perhaps simple, actually implementing the changes our world needs to see is another matter.

That’s why I hosted a roundtable at our recent Now at Work event aimed specifically at addressing how we can drive real change on the ESG front – and had the privilege to be joined by three industry experts on the matter.

The overall message was clear: change needs to happen now, but we need to take steps to facilitate this change: the right processes, technology, and conversations.

Here’s some of what we discussed at the event.

1. Financial services will drive the transition to a green future – but they need the data to do so

The ESG conversation is particularly topical in the wake of this year’s COP26 event.

And it’s of significant importance to Mike Zehetmayr, Financial Services Risk, Compliance and Regulatory Technology Leader at EY – and erstwhile glaciologist. Mike is clear, however, that this conversation started some time ago:

“The journey in Glasgow really started post financial crisis, when the Financial Stability Board was set up to identify the existential risks to the financial services industry, but also the wider economy.”

Of course, addressing a challenge as vast as the climate risk require ambitious changes. While the fundamentals of risk mitigation are the same, from what Mike is seeing on the ground, we will need to fundamentally change how capital investment supports businesses.

“Central bank regulators are now saying, as of the beginning of next year, you need a formal way to assess climate risk. Businesses looking for short term loans or socially linked bonds will need to evidence how they’ll use that money, what the carbon emissions are, and so on – it can’t just be used for any purpose.”

And this need for proof goes beyond just emissions that individual businesses are responsible for themselves.

“If investment goes into the supply chain, you’ll also be asked what the emissions are there, too. As part of Scope 3, providers need to disclose the percentage of money lent that will create emissions, wherever it goes – and that includes things like carbon emissions in the supply chains, remote workers using gas boilers at home, and so on.”

The solution here is, in Mike’s words, “to address the immediate challenge in the market, which is data. We need to share data. The context in which you operate is not just your own ‘island’, but the whole archipelago of islands of organisations and ecosystems around you.”

This data is not just for the purposes of sourcing and tracing polluters, however; it also helps in effectively pricing offset costs for businesses in the midst of green transitions, as well offering preparedness for ‘stress tests’ like the one being run by the European Central Bank in 2022.

Ultimately, whatever environmental commitments financial services organisations want to achieve or enable, having access to the right data will be key. And for businesses who need the support of financial services organisations to drive change, being able to provide this kind of data will be essential.

2. Businesses must put social causes at the heart of their business

The environment is, however, just one part of ESG. What about the other letters?

Declan Watson, HR Transformation Partner at Deloitte and EMEA Practice Leader for ServiceNow HR, is clear that to really succeed with ESG initiatives, we need to put our humanity at the heart of decision-making.

“Humans at our core are essentially social beings at heart and we like to engage and interact with one another. Experiences are at the heart of the human condition: experiences are how we live, how we learn, and how we make connections. Great experiences build strong connections, and strong connections build loyalty, and loyalty helps drive better business results.”

But while Declan notes that 80% of decisions we make on a daily basis are emotional in nature, we fail to build tech to account for this.

In Declan’s words, “We’ve been throwing tech at the workplace and the workforce, but not really looking at the work itself. We focus on quicker, faster, more efficient, rather than really making stronger connections with our workforce and customer base.”

You only have to look at the pandemic to see the difference the latter can make. Many businesses have built up significant customer loyalty from their ability to connect authentically with customers during what has been an immensely difficult time. Meanwhile, hybrid work models that have supported employees personally as much as professionally over the past two years have been key to keeping employees – and therefore businesses – on track.

“The end result is that leadership is changing to one of connection and empowerment: not just mandating policy, but really involving and connecting with employees,” says Declan.

So for those businesses looking to secure the S in ESG, the answer is effectively: ask your customers and employees, and action their feedback. There’s an increasing momentum with the ‘Rise of the Social Enterprise’ (as outlined in the Deloitte Human Capital Trends Report 2018) - This shift reflects the growing importance of social capital in shaping an organization’s purpose, guiding its relationships with stakeholders, and influencing its ultimate success or failure.

3. The importance of different perspectives – and taking a moment to pause

As for why that is, I’ll turn to Osama Rabbani, Director of Risk Consulting at KPMG.

“Social issues impact our decision making in very different ways. Research shows baby boomers, for example, make decisions primarily financially. Millennials will make decisions based on a balance of social and financial issues; finally, Gen Z will compromise financially for the benefit of social considerations.”

Osama admitted he had faced the reality of this divide when discussing his shopping habits with a new graduate at KPMG.

“She was taken aback by some of the cheaper brands I shopped at. She asked me: don’t you care about the working conditions of their employees?”

In reality, this disconnect takes place on a much wider scale. There are countless examples of businesses facing backlash among certain demographics for accidentally wading into difficult topics. This underlines the importance of not just taking a single opinion on an issue, but really reaching out to as wide a sample as possible.

“It’s really important to understand the different perspectives we all have,” says Osama. “From different ethnicities, gender identities, sexualities, to other differences. There is no single ‘right’ answer.”

Of course, while we all want solutions to these issues, it’s not something we businesses can rush. According to Osama, we need to set out solid foundations and processes that bring about effective, lasting change. Often, that requires taking a step back and pausing for thought.

I’ll leave the last words to Osama:

“We have to step back, pause, and reflect. That means considering: what are the problems? What are the metrics for these problems? How do we monitor them? And then, how do we implement change? Without this, organisational change simply will not come.”

Learn more about how to activate ESG across your organisation.

Watch the ‘Examining the Big Issues’ session and more from our Now at Work 2021 event on the content hub.

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