Board buy-in, executive compensation ties and Scope 3 considerations are among the hallmarks of a legitimate sustainability policy, members of Protocol's Braintrust say.
Good afternoon! In today's Braintrust, we asked the experts to weigh in on the hallmarks of a good corporate sustainability policy and identify the actions that companies take that let them know a company is serious about the mission. Want more on climate and sustainability? We launched Protocol Climate last week, so if you want the latest on how tech is tackling climate change, you can sign up for the newsletter here.
Chief Policy Officer at Sunrun
An important sign that a company is serious about its sustainability goals is engagement from its board of directors and top executives. Sustainability should not be a special project, or one intended primarily for an external audience. Instead, it should be imbedded in the company's operating and risk management models and processes. This can best be reinforced by direct involvement from senior executives in the company's ESG strategy and implementation with oversight from the board of directors.
While board and executive leadership are prerequisites, another essential ingredient for achieving sustainability commitments is for employees to see the sustainability goals as core to the company's mission and critical for success in their jobs. This can be accomplished by including relevant sustainability metrics in employee performance goals, and encouraging employee-led sustainability initiatives, such as "green teams" and affinity organizations. Employees should not just hear about their companies' sustainability goals when the annual sustainability report is released, but rather should be contributing to and learning about relevant sustainability initiatives during the normal course of their jobs.
Co-founder at Watershed
There are plenty of empty climate pledges in the world today — vague commitments to address a company’s carbon footprint by some year far in the future. These PR pledges put off the hard work of coming up with real plans to begin cutting carbon today.
Companies that are serious about the impact of their climate programs have detailed plans with three major hallmarks:
First, their carbon footprint and related goals include their supply chains. Emissions from suppliers, termed “Scope 3,” often make up 80% or more of the whole. If companies aren’t taking them into account at all, they’re only working on a very small part of the problem.
Second, high-impact plans focus on deep, near-term emissions reductions — this decade and this year. These plans may call for purchasing carbon credits, but only as a complement to aggressive action on rooting out carbon from every corner of the business.
Lastly, these plans aren’t based on arbitrary reductions targets. Leading companies are increasingly turning to standard-setters like the Science Based Targets initiative (SBTi) to understand what their fair share is — and to make sure their plans are up to the task.
Rachael De Renzy Channer
Leader, Global Sustainability Practice at Egon Zehnder
Sustainability cannot be a one-person show, although a recent global study conducted by Egon Zehnder found that is the case in nearly seven out of 10 companies. While the CSO (Chief Sustainability Officer) may lead the sustainability journey within the organization, responsibility must be shared across the executive team and integrated in each executive domain. Some quick indications of taking it seriously are representation of this topic at the board level, sustainability key performance indicators included in executive compensation packages and transparency in reporting.
A cultural element to screen for is values-based leadership. Are the values embedded or are they merely aspirational statements on the company website? And it is not just the executive leadership team that should be living these values. An indication of whether sustainability is core or peripheral to company strategy and culture is the ESG competency, experience and oversight by board members, who are the stewards of the long-term business. Fortunately, 82% of executives in our study are confident in their boards' ability to monitor sustainability threats and opportunities.
Lastly, is the company set up to welcome challenge and disruption, develop rising leaders (many of whom have sustainability mindsets) and empower teams to deliver on the sustainability agenda over time? This type of long-term planning ensures that the progress companies are making today will help to create the foundation for a better world for future generations.
CEO at Emex Software
When a company prioritizes sustainability, internal goals, processes and KPIs, it reflects three irrefutable truths:
1. Create impact through focus
Pick one goal, not 20. Companies that focus time, resources and efforts on areas where significant progress can be created have the biggest impact on ESG and sustainability.
Businesses that spread themselves too thin won’t be able to change the communities in which they operate.
2. Drive top-down adoption
Hold the C-suite accountable. If they aren’t pressuring themselves to drive meaningful change, the company won’t make meaningful progress — no matter how hard the broader team pushes.
Many organizations have set KPIs and balanced scorecards that weigh financial performance higher than non-financial performance. They therefore lack the weightage and ability to drive significant change when conflicts arise between the two.
3. Commit to transparency
Say what you’re going to do, then do it. Companies that develop KPIs based on accurate and timely data sets leveraged by smart technology will make more impactful and informed decisions.
Additionally, the third-party nature of those data sets lends credibility and integrity to a company’s efforts, further validating performance and garnering greater trust. Transparent reporting should tell the full story —admitting both weaknesses and strengths. We audit companies’ financial statements; why would ESG data be treated any differently?
In sum, a company that creates ironclad internal policies — focused around strengths, with real financial implications for top brass and tethered to independent data and review — is a company that is serious about its sustainability goals.
CEO at BlocPower
Because they have committed to decarbonizing their real estate assets and supply chain, and all functions in their area of control.
Partner & Head of Growth Equity at Generation Investment Management
Generation is a pure-play sustainable investment manager. We’ve spent the best part of two decades researching sector trends and corporate practices around sustainability, and investing based on those insights.
We look at sustainability on two levels:
First, an analysis of “what” a company actually does. As a company earns more revenue, how does it contribute to a net-zero, prosperous, healthy, fair and safe society? We monitor a number of metrics here, including CO2 emissions and waste reduction, health outcomes or broadened financial access and earnings. To gather, analyze and understand all this data requires constant engagement with companies. But it ensures that we are able to make truly system positive investments.
Secondly, we look at “how” a company operates. This includes its management practices, culture, governance structures, pay equity and EDI across the organization. Where possible we use best practice disclosure frameworks (such as the SASB Standards, the starting point for the new International Sustainability Standards Board). We also look at companies’ targets relative to thresholds for what constitutes sustainable. For example, has the company set a net-zero commitment backed up by science-based targets for a 1.5 degree world?
Underpinning our analysis is a simple principle. A company cannot survive, grow and thrive without a sustainable organization underpinning it. We believe when you get the “what” and the “how” right, and you understand the broader shifts towards sustainability that are taking place across all sectors of the economy, you can unlock value for investors, society and companies themselves.
Kareem Yusuf, Ph.D
General Manager, AI Applications at IBM
Companies are increasingly prioritizing sustainability initiatives, due to not only external pressures from consumers and regulators, but also the need for more efficient and resilient business operations in the face of climate change. Despite this focus, many don't know where to start. Data and AI technologies are able to play a significant role in helping organizations improve sustainability, but organizations need to first set their goals and desired outcomes, and then identify the right solutions to help them put strategies into practice.
Sustainable operations are about much more than reducing emissions. Businesses need to set 360-degree sustainability goals that focus on areas like intelligent asset management, intelligent IT infrastructure, resilient and transparent supply chains, climate and weather insights, the analysis and reporting of ESG data, the impact of their business on the community and more.
Once those goals are set, businesses need to outline pragmatic actions, based on data, that can drive impact. With AI-driven technologies, companies can more easily collect and analyze the vast amounts of sustainability data scattered across their business and automate feedback between operational endpoints and corporate sustainability initiatives. Technology is able to help businesses move beyond capturing and reporting data to improving operational performance, turning data into insights that help them make smarter, more sustainable decisions every day.
Companies that are serious about sustainability and the role technology can play will not only be greener, but they’ll be also more streamlined and profitable in the long term.
See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated March 23, 2022).
Jonathan Douglas ( @jondouglas27) is an enterprise researcher and growth manager at Protocol, based out of Washington, D.C., Before joining Protocol, he worked as a customer solutions manager at AWS, where he helped enterprise companies adopt cloud technology. He graduated from Brown University with degrees in computer science and political science.
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
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