How to Start Corporate Sustainability
The desire to commit to a purpose that helps business create positive value was the agreed vision for corporate sustainability at Williams Hall’s round table in November. But how to define that purpose, where it fits within other ESG activities and how to realise it was the subject of deep discussion amongst the Chief People Officers (CPOs) in attendance.
Our round table attendees represented a wide range of sectors, from industrial products and building materials to FMCG, hospitals and health. The ambiguity over what sustainability is for individual companies means most organisations represented on the day were in the process of actively defining their approach.
Our hosts John Lydon, co-chair of The Australian Climate Leaders’ Coalition and former McKinsey & Co ANZ managing partner, and Lynette Ryan, former Group Head of Sustainability at SunRice, facilitated a wide-ranging discussion.
Lydon said the relationship between people, profit and the planet had never been easy. For a long time, people and the planet have been instruments for achieving profit. Shareholders have long benefitted from this approach, but is it right? And will those same resources continue to be readily available in the future?
The group agreed that some executives and directors may see ESG as a trade-off and not an essential business outcome. But the recent Royal Commissions into financial services and aged care are examples of sustainability in action. And soon, carbon reduction targets will be a legal requirement for all Australian businesses, meaning ESG will cease to be optional.
Responding to sustainability is complex and the context matters, according to Lydon. He outlined four stages of sustainability and noted the journey between the stages doesn’t need to be linear.
Compliance. Or, as Lydon says, “don’t do bad stuff”. Emissions, poor customer service, late supplier payments and industrial accidents all fall in this category and CPOs have a responsibility to ensure they don’t happen.
Start to do some good. This is about companies having a purpose and doing good for the world. Charitable foundations and pro bono work are typical activates in this stage and it’s often a side-of-desk effort at many companies. But if these activities and policies aren’t integrated across the business, then bad things can occur. In recent years we’ve seen mining companies and large banks with foundations blowing up land with significant cultural value or enabling cultures that ignored anti-money laundering policies.
Integrate ESG and purpose. This takes sustainability from strategy into the DNA of an organisation. Critical commercial decisions, like how to allocate capital, forecasting the long-term carbon price and aligning remuneration to hard ESG targets and social impact fall into this stage.
Collaboration. This is essential because not many organisations can achieve environmental or sustainable outcomes on their own. Working with customers, suppliers, NGOs, the government and beyond will achieve a bigger outcome. It’s important for companies to recognise when they can’t do it alone.
Lynette Ryan noted the journey through these stages wasn’t linear, and that most organisations would have activities of some form in each of the stages. The important thing, she said, was to just start doing something. She also stressed the importance for every business to understand their role in the sustainability evolution and to play to their core business and be fast followers for downstream activities. For instance, a clothing manufacturer could focus on guaranteeing fair and safe conditions for its workers in its sustainability strategy. But it could partner with distributors with commitments to emissions reductions.
Our CPOs agreed compliance was fundamental to creating a sustainability culture and could help direct their organisations’ energy and resources into starting the journey. Eventually, ESG compliance and reporting will be compulsory; customers and suppliers will ask for evidence of policies and compliance. CPOs can help organisations prepare by ensuring a specific role or function has this responsibility.
Our CPOs also agreed that embedding ESG into the entire business had cultural and organisational parallels with digital transformation many decades ago. The digital transition was originally viewed as a niche belonging to technology. But now, digital operations form every part of an organisation. Cyber and tech discussions are firmly on the agenda of executables and boards. ESG, and particularly sustainability, is no different. Acting now means CPOs can lead on embedding ESG into their organisation’s culture and accelerate the broad acceptance of sustainable practices. The four stages outlined above provides a constructive framework for the journey.
All attendees agreed their sustainability journeys would be different because of the diversity of the industries they operate in. The round table finished with a strong sense of optimism that creating impactful ESG policies and cultures would have a positive impact on both people and the planet.
To paraphrase Winston Churchill, we need to be optimists because there isn’t a lot of point in being anything else.