In it together

We take a look at another of our big trends this month – deglobalisation and the implications for supply chains. The topic first came to prominence during the pandemic; now mounting geopolitical instability and superpower rivalry make it even more pressing.

The starting point, however, is to recognise that the global economy is and will remain massively interconnected. Progress on business responsibility and sustainability therefore depends crucially on how extended supply chains are managed, from raw materials, through manufactured goods, to business services. That’s why the European Union is moving forward with its plans to mandate a ‘due diligence’ approach on such issues as forced labour and biodiversity loss. Our briefing this month explains what’s involved and when you need to take action, especially if you are in a high-risk sector such as textiles, food, or metals and minerals.

This month we look at climate solutions and how to go beyond simplistic “net zero” rhetoric, at a time when public scrutiny of green marketing is escalating. In the US, the Federal Trade Commission is extending public comment for its Green Guide review, while in the UK the Advertising Standards Authority was last week reported to be toughening up its act too.

One thing is for sure – simply buying carbon offsets is no longer the get-out-of-jail-free card it was once seen as. However, as my colleagues explain, mitigation does still have a role to play, if done right. Given how far we are off achieving net-zero targets, that is welcome news.

The key is to be directly involved in genuine reduction projects, and our guest contributor this month sets out a useful five-step plan for doing that authentically.

Our topic this month is ESG Backlash, the second of the themes for the year we identified in our Actions for Business Report 2023.

That backlash is coming from two directions, not one. The first source is noisy and grabbing the headlines. It originates in the US political and culture wars, now being echoed on this side of the Atlantic. The second, more thoughtful, source is not external opponents but insiders, those in the sustainability movement worried both about lack of ambition and underperformance, and about overreach, aka greenwashing.

Concern about overclaiming is not restricted to company behaviour. Governments are implicated too, with the UN Secretary-General describing COP climate change targets as having “loopholes wide enough to drive a diesel truck through”. Whatever the aspect, sustainability remains firmly in the spotlight. 

Despite the seeming ubiquity of the term ESG, understanding of one of its key components remains sketchy.

Let’s be frank. For many in the investment management world, S means snooze when it comes to ESG. They’ve more pressing concerns – like pandemic-induced crashes in value or exceptional volatility from the no-deal Brexit cliff-hanger – than to be worried about the soft stuff (as others might define the S).

Anyway, they might think, we understand the E, the environment is mainstream now. Governments are in the driving seat, literally, phasing out the internal combustion engine in less than a decade. Now that’s a big deal, when cars have dominated our lives, clogged our streets and driven economic growth for more than a century. In the UK alone 990,000 people earn their living in the automotive sector according to the SMMT. And maybe there’s an upside to this E. Last year $250 billion worth of green bonds were issued worldwide, linking borrowing to decarbonising the economy and creating new jobs in growth sectors. Some are predicting that will grow to $1 trillion by next year and the UK government is getting in on the act. That’s a serious lot of noughts to win a slice of.

In the middle of the global pandemic, my colleagues and I at Corporate Citizenship took a fresh look out how to conduct an effective process to discern the most important issues facing companies in their sustainability agenda.

2020 was a year of seismic events that had fundamentally changed the business landscape. Never had global challenges – including climate change, cyber risks, Covid-19 and the Black Lives Matter movement – affected so many businesses and sectors, as quickly, and as deeply.

In an hour long webinar, we explored the implications of these challenges for businesses and how companies should re-prioritise their material risks and opportunities. It began with experienced consultants Rupali Patni and Katie Vrylandt sharing their thoughts on how the events of 2020 were shaping the environmental, social and governance (ESG) landscape; the changing views and expectations of key stakeholders and how business is responding.

At about 40 mins in, I joined my Corporate Citizenship colleagues, Amanda Jordan and Peter Truesdale, to discuss the implications and to respond to questions from the audience. View the session from here: https://corporate-citizenship.com/webinars/materiality-2020-time-to-hit-the-reset-button/

“It’s all about the money, isn’t it?” That’s what the CFO of a French conglomerate said to me last week. Phrased as a question, he actually meant it as a statement of the blindingly obvious. Perhaps surprisingly for sustainability colleagues, my answer was a qualified yes – qualified that is by timescales.

We were talking about the ESG factors – environment, social and governance issues that investors are increasingly tracking – which boards whether in France or elsewhere should address when considering “le développement durable”.

In that context, if the timescale is this quarter’s earnings, then no: focusing only on the money is not the answer. But if we’re talking about business success that endures, then yes, it is about the money and we should get better at talking about it. For that, we need accountants on board to help. And that’s why, at the start of the year, we cited CFO fluency in sustainable business as one of Corporate Citizenship’s top ten trends for 2019 – and predicted a change in allegiance among finance directors from foe to friend.

My perspective on this question is as a chartered accountant. None of this was covered in my original training, but thankfully, that’s changing. Fifteen years ago my institute published the definite 100+-page guide to the part accountants should play in measuring, reporting and assuring sustainability. (Sustainability: the role of accountants ICAEW 2004)

Mike Tuffrey, Co-founder of Corporate Citizenship, reviews a personal account of the inner workings of corporate sustainability at one of the world’s most recognisable brands.

A “sustainability page-turner” is not a description one often finds associated with books in the usually heavy-going world of corporate responsibility.  In the case of The Battle to do Good: inside McDonald’s sustainability journey, just published in hardback by Emerald Publishing, the marketing claim rings true.

Bob Langert, the book’s author, takes us on his 25 year journey from being given a “temporary environmental assignment” in the late 1980s to overcome opposition to the polystyrene clamshell, then littering America’s streets, to his retirement in 2015 as McDonald’s first ever vice president for sustainability.  Along the route we learn about chicken welfare standards, the infamous McLibel trial, Amazonian deforestation, childhood obesity, workers’ rights, much more on packaging, and many other topics too.

This journey started in denial, morphed into reactive harm-reduction on individual issues, then grew into a formal corporate strategy first agreed in 2010, and ended with a five year plan, the 2020 Sustainability Framework, with pillars around sourcing, planet, food, people and community.  That’s a journey many large companies have travelled in parallel, although few so much in the public spotlight and with so many individual customers intimately involved – 3.8 million every day served in the UK alone.

Latest research shows companies are still falling short on the SDGs, while investors move to close the funding gap. That means 2019 is the year to ratchet up the corporate act.

As the year draws to a close, the clock is still ticking loudly towards the deadline for achieving the Sustainable Development Goals – described as the closest thing the world has to a ‘strategy’. Following on from the UN Millennium Development Goals, they were ratified by 193 countries in September 2015 and have 17 goals, with 169 specific targets, covering every aspect of life on planet earth, together providing an ambitious agenda for a better world, all to be achieved by 2030.

I’ve been critical of the approach so far adopted by too many companies towards them. See ‘Let’s stop playing SDG bingo’  where I argued that simply mapping existing activity against the 17 goals to show a contribution is little more than ticking off each in turn and calling out ‘full house’. Companies should move on from this ‘pick-and-mix’ approach and show how the business is changing as a result of addressing the Goals, either in response to market trends and public policy stimulus or so as to increase the intended sustainability impact.

That said, I’m now seeing a slow up-tick in the number of companies who are going further and taking their SDG mapping back into the business with a change agenda. My test is whether they are re-engineering their own product or service portfolio to achieve greater impact or engaging with their partners across their value chain to do the same.

Progress by companies is proving patchy towards achieving the Global Goals. In a recent webinar, I discussed the need for them to embrace the logic of the business case and stop their pick-and-mix approach.

The clock is ticking towards 2030 – the deadline for achieving all 17 of the Sustainable Development Goals, unanimously adopted by world leaders exactly three years ago at a historic UN summit in New York. That may feel a long way off, but at time of writing it’s only 146 months away.

This summer’s UN progress report showed just how far there still is to go. To pick only one, the first on poverty, one in ten of our fellow citizens lives on less than $1.90 a day – the official poverty line – even if that has fallen dramatically from one in four at the start of the millennium.

Over 100 governments have now produced voluntary national reviews to report on progress at country level. However some are so late in preparing theirs – step forward the United Kingdom – that the voluntary sector has taken the initiative to produce its own stock-take: see UKSSD’s Measuring Up report issued in July.

My colleagues and I at Corporate Citizenship have been tracking what companies are Continue reading →

The government is rightly making firms report more about their employees. However big changes are underway in how companies organise their whole labour force, which the new approach misses, as well as the longer term trends towards automation.