The good old British summer is well within the thick of it, but if there’s one thing the last few weeks has taught us, it’s that climate change needs addressing from all of us. On 18th and 19th July 2022, the UK suffered its worst case on record of extreme heat, as parts of the country reported temperatures hitting 40°C for the first time in history.
Wildfires and reports of public infrastructure literally melting away were greeted with hysteria around the UK, as red alerts and public warnings were boomed out to try and curb the estimated 1000 plus deaths predicted due to the severe heat. Whilst days like these are huge wake up calls to the consequences of climate change, they are usually a flash in the pan. However, the UK Met Office believes the UK will endure its second 40°C day as soon as early August 2022.
Conversations on environmental, social and governance (ESG) matters are bound to increase with extreme weather such as the aforementioned. Translating this though into meaningful change particularly in the boardroom of businesses has become a huge obstacle within itself. We analyse the consensus of businesses prioritising environmental concerns, as well as the challenges faced when aiming to become more sustainable…
The Heat Of The Moment
Consulting firm L.E.K and research firm Longitude, recently released the Global Corporate Sustainability Survey 2022, asking over 400 C-Suite executives in the US, Europe and Asia their opinions on ESG. The survey found that within the private sector, sustainability and ESG was a major priority and had gathered significant momentum. This was evidenced by more than 700 of the largest 2,000 publicly traded companies having claimed net-zero commitments; 60% of the FTSE 100 having committed to net zero by 2050, and two-thirds of the S&P 500 having emission reduction targets.
As well as this, 51% of organisations are using ESG as a growth strategy, whilst a further 20% believe it can be used to sustain innovation within a business. The same percentage, 51%, of executives agree that their company should address ESG issues, even if doing so reduces short-term financial performance with 54% of executives from publicly listed companies confirming this position.
Coincidentally though, this also highlights that 49% do not agree or aren’t interested that their company should address ESG issues. This is a rather high percentage of executives, indicating that despite environmental and climate change awareness continually increasing, a large proportion of businesses and the people who run them still aren’t convinced. Furthermore, 58% of executives said there are ‘significant differences of opinion within the leadership team’ on balancing short-term priorities with long-term ESG goals. Whilst these thoughts on finances come at a time when the world is facing a recession amidst a cost-of-living crisis, it’s rather telling that a huge proportion still are prioritising profit over planet at all costs.
Starting to put real action into place isn’t as hard or cost-consuming as many business owners think, as Nordens’ Chief Sustainability Officer, Steven Brewer, suggests, “A total transformation to ‘going green’ is not an overnight thing and it will take time to implement. Your plan should make considerations around recycling, reducing waste, product sourcing, vehicle emissions and energy reduction. It doesn’t need to be excessive, and no idea is too small if it helps towards the bigger end goal.’
Overcoming The Hurdles Faced
A huge part of planning to achieve and keeping track of ESG targets and goals is by applying KPIs to the process. These not only set accountability and a desired metric to work towards, but they also set a platform to go even further in sustainability efforts. Despite the overwhelming evidence that KPIs positively impact ESG, a mere 27% of companies have any form of ESG KPIs in place, whilst 3% have a full set in place. This statistic is deeply worrying going into the long-term, specifically with the IPCC’s stark warning that global greenhouse gas emissions need to be reduced by 43% come 2030.
The survey indicated that 79% of executives believed their business has more to do to put the essential skills and capabilities in place to achieve sustainability goals. This is even further compounded by the statistic that 48% of respondents stated they do not think their current product and service portfolio of their business adheres to the requirements of a more sustainable future.
John Goddard, Partner at L.E.K. Consulting and Vice Chair, Sustainability, claims ”businesses need to involve establishing a common language with which to develop sustainability goals and begin to understand the strategic choices required to achieve the goals; investing in educational programs and support; engaging the full leadership team in analysing the financial and non-financial strategic choices that might be involved in achieving ESG goals; begin to set measurable goals in order to set KPIs and enable reporting and tracking, and putting in place interim targets so remuneration can be linked to ESG strides.”
Despite climate change awareness growing exponentially over the course of the past few years, this still hasn’t translated to meaningful and purposeful movement from a huge number of businesses across the UK and the world. At Nordens, we pride ourselves on offering advisory on sustainability and ESG through our Strategic department, helping to identify, plan, and offer support when analysing a business’ CSR (Corporate Social Responsibility) and ESG. We will work with you to achieve your sustainability goals, whilst also formulating a cost-effective strategy in working towards net zero and decreasing greenhouse gas emissions. If this sounds of interest, or you’d like to know more information, then get into contact with Steven Brewer at email@example.com.
We hope this has outlined the steps needed in order to combat climate change in a business sense. If you require any further information on sustainability, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.