10 years ago the lives of over 1,100 Bangladeshi garment workers were lost when Rana Plaza, a building housing multiple garment factories in Bangladesh’s capital city of Dhaka, collapsed due to structural damage. Garment workers were ordered back to work by factory owners despite knowledge of significant structural issues in the building. This tragedy is a cornerstone of human rights issues in the supply chain, and spurred a wave of backlash against the fashion industry.
A decade later, there have been impactful changes made. The 2021 International Accord for Health and Safety in the Textile and Garment Industry has almost 200 signatories, and it has overseen over 50,000 building inspections and resolved 140,000 occupational hazards found in these buildings. However, the accord only protects workers in Pakistan and Bangladesh. Despite these improvements, there is a lack of top-down solutions such as government regulations. There are several bills that have been proposed to guarantee worker protections and wages such as the FABRIC bill in the United States and the Circular Economy Action Plan in the European Union, but the self-regulation that the fashion industry has been doing for decades is simply not adequate.
In light of such tragedies, companies need to be proactive by ensuring their supply chains are ethical and sustainable. Competent Boards’ best-in-class ESG and Climate & Biodiversity programs help executives and board members address supply chain issues along with a wide range of other topics such as cybersecurity, anti-corruption, diversity, and climate change mitigation.
1. Florida Anti-ESG bill signed into law. A sweeping, first of its kind bill was signed by Florida Governor Ron De Santis last week. Republican lawmakers argue the bill is necessary as investors are increasingly focusing on ESG issues such as climate change and corporate diversity rather than the primary goal of maximising returns. The Florida bill bans the investment of state money into ESG funds. ESG bonds are also banned, which will impact funding for green energy projects. This bill also means that the state of Florida will be losing access to funds that are earmarked for ESG. Ratings agencies expressed frustration over the bill, as it stops them from taking weather and climate risks into account, an especially significant issue in hurricane-prone Florida.
2. The evolution of ESG investing. ESG funds have been losing capital in the first quarter of 2023, falling by over US$160 billion. This is not due to a lack of returns, as ESG funds outperformed the broader market, but because of the growing wave of anti-ESG backlash. Robert Jenkins of Lipper argues that the drop in ESG funding is not necessarily a bad thing, but a natural reaction of the market after the huge wave of support for ESG in the last few years. Companies raced to market their ESG strategies, but this often led to greenwashing. Jenkins believes that ESG-specific investing is dying down in favour of ESG being integrated into the larger investment market as a whole, with ESG investing becoming the baseline standard rather than its own entity.
3. Teck’s struggle to transition away from coal. Last week a landmark proposal by Teck, the largest mining company in Canada, to split the companies operations into two separate entities — one for coal mining, and the other for metals and minerals — failed to garner enough support from shareholders. Some shareholders believed that this was a mockery of ESG strategy, as it would fail to actually decarbonise the company. Teck is also fighting a takeover by Glencore, a Swiss mining giant that has faced controversy in the past over human rights and environmental issues. Teck mines metallurgical coal needed for steel production, but the steel industry is increasingly favouring more environmentally friendly materials. The metals and minerals mined by Teck will be in huge demand as the world transitions to green energy, but the elephant in the room that is their Elk Valley coal mines continue to be scrutinised.
4. More and more CEOs are women for a reason. With growing scrutiny over corporate diversity, equity, and inclusion, more and more women are being appointed as CEO, and they are often internal hires who have had years of experience within the company. Janice Ellig, CEO of a firm that assists companies in executive searches, believes that the success of women CEOs in leading companies through the pandemic has played a large part in this change. These CEOs were flexible and able to lead through the constant uncertainty of the last three and a half years. Gender parity in executive leadership is still far off, as only 53 Fortune 500 companies are led by a female CEO, but the success of women in executive leadership through the pandemic has not gone unnoticed.
5. Six steps for CFOs to drive successful transformations. In light of geopolitical and economic upheaval, organisational transformations are necessary to keep up with this changing world.
- Find a shared purpose to inspire your team and push them towards success. Organisational goals are important, but so are personal goals when driving success.
- Cultivate a method of leadership that shows empathy and understanding alongside the technical knowledge required to oversee difficult transitions.
- Create an environment where employees feel supported rather than one where they worry their jobs may be at risk. According to EY, 46% of CFOs felt they were open to ideas from junior staff, but only 31% of employees felt heard by their CFOs.
- Delegate to empower your employees so that they are an important component of the organisational transformation. Encourage employees to creatively problem solve and develop a culture where risks can be taken.
- Technology often plays a large role in organisational transitions. Ensure employees are clear about the role that technology plays in the transformation. This means going above and beyond a simple training session.
- Finally, collaboration is key. Just under half of CFOs stating their processes foster good collaboration while just 31% of employees feel the same. CFOs must actively seek out input and thoughts from their finance employees.
Ira Srivastava is Competent Boards Program Coordinator. Follow Competent Boards on LinkedInBack To News & Views