Amid a growing wave of environment, social, and governance (ESG) backlash, Andrew Winston, a member of Competent Boards’ global Faculty, implores business leaders to ignore the negative attention and politicisation of ESG. Like it or not, companies around the world are increasingly expected by the general public to take a stand on social issues they previously were able to remain neutral on – necessitating the tuning out of the negative attention associated with ESG, while remaining consistent on their ideological and political stances. More than ever, business leaders will need to lead courageously, whether that is in regards to climate, diversity and inclusion, or LGBTQ and women’s rights.
Leading courageously in the face of immense external pressure can be daunting, especially since the world of climate action and ESG is always evolving. Competent Boards’ best-in-class ESG and Climate & Biodiversity programs can help guide business leaders and board members through these tumultuous times.
1. Wind and solar energy production breaks records. In 2022, renewable energy supplied 12% of the world’s electricity according to a report published by renewable energy think tank Ember. This historic milestone “is the beginning of the end of the fossil age”, says Małgorzata Wiatros-Motyka, lead author of the report. Despite the uptick in coal usage fuelled by the Russian invasion of Ukraine, Ember forecasts that renewable energy such as wind and solar power will supply all of the electricity to meet additional demand in 2023 with overall fossil fuel usage expected to fall. Renewable energy met 80% of the new electricity demand around the world in 2022, while coal usage only increased by 1.1%. Additionally, Ember’s analysis found that more than 60 countries rely on renewable energy for at least 10% of their energy demands with Denmark, Lithuania, and Luxembourg topping the list.
2. New European Union law to crack down on greenwashing. As environmental issues related to the climate crisis have come to the forefront of public discourse, corporations around the world are scrambling to market their sustainability and energy transition strategies. However, without regulation and transparent disclosure standards, these claims can be falsified. An assessment conducted by the European Commission in 2020 found that “53.3% [of companies] provided vague, misleading, or unfounded information” on the environmental impacts of their goods and services. The new law seeks to end greenwashing by creating clear, consistent, and easily enforceable rules and labels for products. Companies will be required to back up any claims they make about the sustainability, recycled content, or materials used in their products and packaging with scientific information. While this law is a step in the right direction, environmental activists raised concerns that corporate lobbying watered down the language of the proposal.
3. Which ESG framework to use? ESG reporting can often be a confusing alphabet soup of standards and disclosure frameworks. The most widely-known standards are International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards which will replace the Sustainability Accounting Standards Board (SASB) and Climate Disclosure Standards Board (CDSP) frameworks, the Global Reporting Initiative (GRI) Standards, the Carbon Disclosure Project (CDP), the Task Force on Climate-related Financial Disclosures (TCFD), the United Nations Global Compact (UNGC), and the Workforce Disclosure Initiative (WDI). When deciding which framework to use, look to both industry peers and competitors to get an idea of how your industry is managing its reporting and disclosures. Consider who the target audience of your disclosure is — will you be reporting to investors, employees, customers, or another group? Finally, follow regulations in your country of operations to see what requirements are coming down the pipeline.
4. Corporate sustainability is losing momentum. A new Sustainability Survey released by Google Cloud found that senior executives are less concerned about sustainability now than they were a year ago. In 2021, corporate sustainability was the #1 most important issue executives were focused on, but in 2022 it dropped to #3 on the list. Economic uncertainty due to the Russian invasion of Ukraine, inflation, and a global cost of living crisis is one of the driving factors of this drop in importance. Additionally, over half of surveyed executives admitted that they exaggerate or make inaccurate claims about their companies environmental strategy. Almost 90% of executives pointed to the lack of standardised ESG reporting and data collection methodologies as the reason they were unable to set climate and ESG targets.
5. Fears over petrochemical industry lobbying interfering with plastic pollution treaty. Excessive plastic usage is one of the most pressing environmental issues the world faces, with usage in G20 countries expected to double by 2050. In May, a new round of negotiations will begin in Paris for the United Nations Global Treaty to End Plastic Pollution. The first session, held in Uruguay at the end of 2022, failed to achieve significant progress. The petrochemical industry wields huge lobbying power, and 25 companies generate 50% of the world’s plastic pollution each year. Activists and environmental organisations such as Greenpeace are concerned that the involvement of private companies such as Dow Chemical and Imperial Oil in pollution legislation and international treaties risks watering down any agreements signed.
Ira Srivastava is Competent Boards Program Coordinator. Follow Competent Boards on LinkedIn.Back To News & Views