- While companies may currently be feeling overwhelmed by ESG reporting regulations, standardisation should be on the way.
- When it comes to effective reporting, being joined up is crucial – financial and non-financial reporting need to be telling consistent stories in a way that makes sense to readers.
- There’s no one-size-fits-all solution to the governance of sustainability, but the creation of a sustainability committee merits careful consideration.
- Boards and governance professionals may need to seek out experts or training to ensure that they keep abreast of ESG requirements.
- Biodiversity will be relevant to the value chain of any organisation, mapping out the interface and dependent industries can help to identify the ecosystem services upon which your organisation is reliant.
- When it comes to EDI, inclusion is just as important as diversity – an inclusive culture welcomes and creates a positive experience for everyone.
As Peter Swabey, Policy and Research Director at CGIUKI, succinctly framed it ‘ESG is hard. And there are conflicting issues.’ We attempted to address some of these on Thursday 2 May, when we hosted our ESG Summit, a one-day event where governance professionals from all sectors came together to discuss current ESG issues and look ahead to what’s next on the ESG agenda.
After a welcome from Sara Drake, CEO of CGIUKI, the keynote address was given by Catherine Howarth OBE, CEO of ShareAction. Catherine discussed ESG pushback – a movement that started in the US but has spread across the globe − resulting in what she described as a ‘stewardship recession’. She called on governance professionals to support the Stewardship Code which is currently under review and underscored the vital role that governance professionals play in the management of ESG to create resilient and financially successful organisations.
It is widely recognised that the E of ESG has generally enjoyed the spotlight and, to an extent, that was true of the Summit’s programme which included sessions on current and incoming reporting requirements and environmental sustainability committees. Perhaps predictably for a CGI event, the role of governance in underpinning the E and S of ESG was also high on the agenda, with one delegate remarking, ‘Institutional investors are increasingly seeing the G as the key to unlock the doors of S and G.’
ESG reporting
In what many will have found to be a reassuring session, Mike Ashby, Head of Sustainability Reporting Policy at the Department for Business and Trade (and CGIUKI member) acknowledged the volume and complexity of existing environmental reporting requirements and outlined the hope that these might be consolidated through the UK's endorsement of the inaugural standards of the ISSB (International Sustainability Standards Board).
Until that consolidation takes place, the panel session on Taking the sting out of ESG reporting provided practical advice from a variety of perspectives, including a FTSE 100 Company Secretary, a proxy adviser, a partner at a law firm and the Chair of the GC100. The panel highlighted the importance of taking the audience into consideration when reporting on financial and non-financial issues, as well as being specific when it comes to oversight of these matters. It’s not enough to say that you’re doing it, proxy advisers and investors are looking for information on how you’re doing it.
This advice was supplemented later in the day with insights from Nico Aspinall from Newton Investment Management, Archie Cage from Tribe Impact Capital and Andrew Ninian from the Investment Association. They provided a wish list for non-financial reporting which included standardisation; recognition that TCFD (the Taskforce on Climate-related Financial Disclosures) is a process, not a report; telling your organisation’s story in context; and identifying risks and commitments, and how they are being met and managed.
ESG oversight
The oversight of ESG was something into which Emily Ford, Policy Adviser at CGIUKI, delved in her session launching our new thought leadership paper: Governing Sustainability: Are sustainability committees the answer? Emily explained how extensive research had led to the conclusion ‘it depends’. The session covered different ESG oversight models that have been adopted across sectors and several event delegates were spotted photographing the closing slide which featured our ten top tips for sustainability committee success.
Oversight of ESG was also pertinent to the session on Plugging the ESG competency gap. Delegates were encouraged to identify areas where governance professionals and the board need to upskill. Consistent themes included the importance of collaboration across the business and knowing where to find experts even if they’re not on the board.
Diversity – in nature and of thought
The first afternoon session at any event is often jeopardised by the ‘post-lunch slump’, but not this time. Zaneta Sedilekova and Jasmin Fraser from the Commonwealth Climate and Law Initiative hosted a lively workshop in which delegates worked in groups to identify industries that interface or depend on ecosystem services. This exercise was a challenging first step in shifting thinking from the financial economy to the ‘real economy’ and provided a useful framework to take back to boards of directors to help them to grasp the relevance of biodiversity to their organisations.
The session on equality, diversity and inclusion looked at new frontiers. There was broad acknowledgement that while gender and ethnic diversity have tended to be the focus of diversity efforts, they do not guarantee diversity of thought. It was also interesting that much of the conversation centred around the creation of an inclusive (rather than specifically diverse) environment which creates positive impacts for all and can help to remove perceptions of ‘winners and losers’ when it comes to EDI initiatives.
The value of ESG
The days’ discussions were captured well by panellists in the session looking at ESG challenges and trends, risks and benefits. When asked whether ESG was a business cost or a source of competitive advantage, the consensus seemed to be that it’s a bit of both. Catherine Howarth OBE reframed this as a question of mindset when looking at ESG as a cost versus an investment, and encouraged a long-term view of future returns on money spent on ESG now. Daniel Valentine, Head of Communications at CGIUKI, echoed the importance of ESG delivering value: ‘Pushback and cost pressures mean that ESG needs to provide evidence of value. Value is also a key part of working out which ESG pathway is right for your organisation; there are many routes to ESG performance and organisations need to design a route which is right for them and their stakeholders.’
It should be remembered though, that the value of ESG should not be seen in purely financial terms – even if that has historically been the language of the boardroom. Emily Ford summed this up with her reflection on the day: ‘Whilst companies battle with an ever-growing laundry list of ESG reporting requirements, climate scenarios and transition plans, social pressures and investor expectations, we must fight not to lose sight of the reasons why these things matter. ESG isn’t there just to make companies’ lives harder. Ultimately, it aims to make sure that companies play their part in ensuring a liveable future for us all. Central to this is a timely transition to net zero and, as our keynote speaker Catherine Howarth OBE highlighted, transitioning early just makes good economic sense.’
