Natural progression: stepping towards a greener future

  • 7 June 2022
  • Blog | Green Finance | Blog

With ESG increasingly in focus, newly appointed Institute Advocate, Elisa Moscolin, Executive Vice President for Sustainability, Sage, shares her thoughts on the important role the Institute can play in shaping operational and strategic change.

The days when the business of businesses was just to do business are over. But we’re also moving rapidly away from the mentality that businesses can operate at the expense of society and the environment, and then give some money back to fix it. If we truly want to move towards a more sustainable future, we need to challenge prevailing business models and integrate sustainability into our operations.

This can be achieved in five ways:

1.  A strategy anchored by robust data and insight. Approach it as you would any commercial strategy, by undertaking thorough market research, understanding which topics are most material to your business, and what priority areas you should focus on.

These priorities should reflect areas that affect your business – so for a bank, that may be stranded assets or business resilience and continuity related to climate change – and how your business affects those issues. In banking terms, that could be how you can support the transition of capital towards low-carbon technologies, for example.

2.  Adequate resources. Sustainability isn’t something you can do in between other tasks, so ensure you have a team and the money to deliver on your strategy.

3. Capability. You wouldn’t ask your Comms team to run IT or your IT team to run your Comms, and the same applies to sustainability. You want experts in a central sustainability team, but you also need to build expertise across the business. That’s why the work the Institute is doing is absolutely crucial in helping educate members through its Centre for Responsible Banking, for example.

4. Strong governance. You need to elevate the topic of sustainability in the business and make sure that it sits in the right place and receives the right attention within the organisation.

Education is key to ensure the board asks the right questions and can lead the business. Levels of oversight will depend on the maturity of the organisation and how far along its sustainability journey it is.

5. Targets and incentives. Having long-term targets and KPIs that support a roadmap to deliver your strategy is crucial. These are not easy to establish, especially when trying to set them for the long- term but it is important to ensure they are credible and an integral part of the core business objectives.

There’s a proliferation of frameworks, which provide guidance but lack consistency. Entities such as the Institute can help advocate and empower the business community to navigate these frameworks and understand which ones are the best to support the delivery of businesses’ ambitions and strategy.

As businesses move from the ‘why’ to the ‘how’ phase in response to growing stakeholder awareness and pressure, these building blocks of integration are becoming increasingly important. In pursuing these, there are also a number of potential pitfalls or challenges that businesses should be aware of. These include:

1.  Quickly versus properly. As people have woken up to sustainability in recent years, we’ve seen a rush to find quick solutions. The natural tendency of businesses presented with a five- year plan is to try to achieve it in six months, but that doesn’t work when it comes to climate change or social issues – there are no quick wins. The risk is that you’ll end up with a campaign that feels good but has no long-term substance.

2. Giving back. Ask yourself what are you giving back that you weren’t supposed to take in the first place? Sustainability is about creating more value than you take out. Organisations will not succeed if they erode the human and natural capital on which they heavily rely on.

3. The PR and brand trap. Many businesses see this as a rebranding exercise, but if there’s no substance behind your actions, you’re better off saying nothing. The reality is that this is a journey and even those companies that have been doing it for a long time, or are born to it, aren’t perfect.

4. Emotion versus facts. These are emotive issues, but decisions and actions must be based on facts, data, science, business insights and macro trends.

5. Measurement. It’s not easy, particularly when it comes to the S of ESG, but looking at the impact and how you’ve made a difference, rather than how many people you reached, how much money you spent or how many policies you have is a good start.

6. Industries and geographies. Sustainability topics will vary according to geography and global companies need to be sensitive to that. The challenge is to deliver a consistent approach or strategy while still providing customisation. Providing freedom within a framework could be one answer.

7. Making time. ESG is not a nice to have and it isn’t something you do on top of everything else, it should be how you do everything. If you truly want to integrate sustainability into your business, you need that holistic approach.

The Institute already plays an important role in engaging with leaders in the financial sector and business community, and in encouraging them to ask the right questions regarding sustainability. It also challenges us all intellectually to think about what we should be doing and how we can make a difference.

“If we truly want to move towards a more sustainable future, we need to challenge prevailing business models and integrate sustainability into our operations.”

I can’t emphasise enough how important education is. Companies will make far greater strides if they have to spend less time exploring what sustainability is and why it’s important, and more time solving problems. This can be achieved only by raising awareness and upskilling all employees, so they are empowered to support the companies’ ambitions.

As an Institute Advocate and Trustee, I am very excited about the role the Institute can play by empowering the business community with the skills and capability to shift the needle towards a more sustainable world and financial sector.