Guest Post: Connecting Opportunities With Financial Drivers – Why Businesses Must Embed Sustainability Within Corporate Decision-Making Now More Than Ever
By: Simon Weaver, Global Head of ESG Advisory at KPMG International
Previously published on ESG Today
ESG leaders and CSOs are facing challenges today like never before. Externally, the increasing political polarization of sustainability is forcing leaders to find a delicate balancing act between demonstrating a commitment to ESG and explaining why that commitment genuinely matters and the financial rewards it will bring. Internally, with economic uncertainty hanging over the world economy, it’s up to those tasked with driving forward ESG strategies to get results while also ‘speaking the language’ of their boardroom colleagues – from the CEO to CFO and CTO.
Communicating the challenges and opportunities of sustainability and getting C-suite buy-in is becoming a combination of art and science, but getting it right today is more important now than ever before.
For many leaders that message of urgency and importance may seem obvious. The business community is still on a journey, but there’s widespread recognition of the positive and negative impact companies can have if they embrace environmental, social and governance good practice. We’re getting there, but – at times – it can feel like we have one hand tied behind our backs.
From increased regulation to broader corporate acceptance of the issues, sustainability is now a hot topic in the boardroom, yet it continues to often sit in isolation – with initiatives and action plans that look and feel good, but aren’t completely embedded in the wider growth strategy. For ESG leaders and CSOs, the time has come to build a business case for sustainability, ensuring that it goes beyond a ‘compliance consideration’ and shifts into the everyday decision-making processes of all aspects of a company.
In my day-to-day role I work with and speak to thousands of industry leaders who ‘get’ ESG, but there continues to be a gap between recognition and genuinely embedding sustainability into the roles of each and every C-Suite member.
At KPMG, we recently produced ‘Building the Case for Sustainability’ alongside our colleagues at the World Business Council for Sustainable Development (WBCSD). The decision to produce the guide followed the trend of conversations among colleagues and stakeholders in the business world. I’m often asked how to bridge the gap between ESG commitments and financial growth. My answer is clear – if short-term financial pressures continue to be a barrier to your sustainable business model, prepare to fail in the long-term. There may be political discourse and some disagreement, but the reality of the social and environmental challenges we are facing in to mean that companies who fail to fully grasp sustainability within this decade will almost certainly no longer be competitive and risk irrelevance and financial ruin.
Sustainability reporting standards are arriving thick and fast across the planet – used correctly they can be the foundations for the change we need but if they are used badly and they will drive apathy for sustainability action across our global organizations.
The first step for business leaders today – even those who believe they’re ‘getting it right’ – is to interrogate the data and explore how much sustainability is embedded into the wider strategy. That should include analysis of risks and opportunities. What is your company exposed to? What actions can you take to mitigate those risks? And what opportunities for sustainable growth could help your business in the future? The actions should start from the boardroom – with each leader given responsibility and control over aspects of the broader sustainability goals. We don’t hesitate to give leaders stretching targets for financial growth and we should adopt the same principles with sustainability – ensuring that leaders regard the key elements of ESG as inextricably linked to the core functions and strategies of a business.
We’re making progress – as a global business community – in our mission to play our part in shifting toward a more sustainable planet, but there is much more to be done. I’ve personally witnessed the passion and understanding business leaders increasingly have for the subject, but I also recognize in many boardrooms that sustainability targets are starting to be seen as a threat, rather than a challenge – that is a dangerous mindset shift. Businesses have historically been in the firing line, accused of leading the way in driving the climate crisis. We’ve recognized that our actions can make a difference – for better or worse. The political and economic climate may remain uncertain and increasingly polarized, but as the drivers of growth around the world, it’s incumbent on us as business leaders to remain focused on what matters and ensure that sustainability is truly at the heart of everything we do.
