Part II of IV, following my earlier blog, “A Perfect Storm For Business: Sustainability, Human Capital Management, and Purpose.”
Got a green building? Check. Solar panels? Check. Recycling? Check. Earth Week volunteers? Check. Awesome! Do you have a sustainability strategy and annual report? Umm…
Once considered “nice to have”, sustainability has evolved beyond aspirational demonstrations and efficiency measures and is starting to influence Boardroom discussions and corporate decisions in a big way. Sustainability is a growing business strategy that addresses Environmental, Social, and Governance (ESG) issues that are material to the business and its stakeholders.
An alphabet soup of high profile organizations have made the news this year, removing any doubt that sustainability is going mainstream. From the UN to the SEC, SASB and FASB, from Blackrock to CalPERS and the DJSI, ESG strategy and disclosure are hot topics right now. Consider these recent developments:
- An historic moment occurred on Dec 12, 2015 when The Paris Agreement was adopted by all 196 Parties to the United Nations Framework Convention on Climate Change. In the agreement, all countries agreed to work to limit global temperature rise to well below 2 degrees Celsius.
- On Feb 1, 2016, Laurence Fink, the CEO of BlackRock, the world’s largest asset manager, sent a letter to the CEOs of S&P 500 companies stating, “Generating sustainable returns over time requires a sharper focus not only on governance, but also on environmental and social factors facing companies today. Over the long-term, environmental, social and governance (ESG) issues — ranging from climate change to diversity to board effectiveness — have real and quantifiable financial impacts.”
- On Apr 15, 2016, the U.S. Securities and Exchange Commission (SEC) announced that it is currently reviewing its disclosure requirements for public companies, including public policy and sustainability matters — in other words, ESG disclosures.
- On Aug 15, 2016, the Board of Administration of one of the world’s largest pension funds, the California Public Employees’ Retirement System (CalPERS), adopted the Environmental, Social, and Governance (ESG) 5-Year Strategic Plan: a six -point plan that is the next evolution of CalPERS’ work on sustainable investing and the Global Governance program.
- Sustainability reporting is exploding. The fifth annual analysis of S&P 500 Index reporting, G&A Institute found that 81 percent of the companies included in their investment benchmark published a corporate responsibility or sustainability report in 2015. This is up from just 20 percent of companies reporting in 2011.
What is causing all of this momentum? Here are a few contributing factors:
- The world is changing faster than ever before. Climate change, competition for finite resources, technological disruption, globalization, and shifting stakeholder expectations are disrupting traditional business management practices and theory.
- Governments across the world are taking steps to reduce their reliance on fossil fuels while building a low-carbon economies.
- Corporate stakeholders are increasingly paying attention to sustainability issues in their purchasing, employment, supply chain, and investment decisions.
Who is doing this well? What are some good examples to follow?
DJSI, Ceres Roadmap, and Newsweek Green Rankings are just a few places to find lists of companies at various stages of their sustainability journey as well as those that have demonstrated leadership among their peers. While many of the top performing companies are Fortune 500 companies, smaller companies like Timberland and Tom’s of Maine are also making waves and solidly investing in sustainability for the long term.
Companies that are outperforming their peers are taking a long-term view and working hard to eliminate short-termism. They recognize that sustainability is about leading a better-run forward-thinking business that demonstrates accountability, transparency, adaptability, innovation, and stakeholder inclusivity. They understand that sustainability represents a shift in mindset from generating profit for shareholders to generating value for all stakeholders. And they are being rewarded for their efforts by appealing to investors who are attracted to investments that provide lower risk and higher return while also uplifting humanity and protecting the planet.
What can you do?
Rather than wait and react to government regulations, market and stakeholder pressures, here are 10 things you can do to prepare your teams to launch and advance your sustainability journey:
- Initiate sustainability conversations at the top of the house (e.g. Executive and Board level discussions).
- Gain Management / Board-level support to launch a sustainability strategy.
- Perform a stakeholder materiality assessment and invite them to be a part of the journey.
- Set up systems to track your operational footprint and identify opportunities to reduce waste.
- Set goals that are material to the business and your stakeholders.
- Select a reporting mechanism for your annual report.
- Build your sustainability narrative and a roadmap for success including metrics, programs, platforms, and policies.
- Train leaders and managers with business sustainability acumen (e.g systems thinking, adaptability, social innovation, collaboration, mindfulness, authenticity, and transparency).
- Design employee engagement programs and platforms to embed sustainability into your culture (e.g. communications, feedback loops, reward and recognition, volunteerism, innovation, leadership development).
- Engage your stakeholders through your engaged employees.
Sustainability is here to stay…are you?
SEED Strategies can help you make sense of sustainability and build solutions that are tailored to your industry, business, employees, and stakeholders. Contact us for your free assessment.
Stay tuned for my next blog of this series on Human Capital Management and more ideas about what you can do to engage your most valuable assets – your employees!