The world passed a major “milestone in human development” this week, as the global human population soared past the eight billion mark. Astonishingly, according to the UN, the latest one billion was added in just 12 years.
Of that, India has added 180 million people and is expected to overtake China as the world’s most populous nation in 2023. Although longer life spans due to improvements in medicine, public health and nutrition are positive outcomes, this surge in humanity will put increasing pressure on the natural world, as humans compete with nature for food, water and space.
This surge in population growth is another complex environmental, social and governance (ESG) topic that companies and communities have to wrap their heads around. There is so much to learn, but our ESG and Climate education programs have many of the answers you will need at your fingertips.
1. Perception gaps. The new EY Global Corporate Reporting and Institutional Investor Survey has highlighted a real disconnect between companies and investors around sustainable growth and reporting. Although more than three-quarters of investors (78%) surveyed believe companies should make ESG-relevant investments, even if they dampen short-term profitability and performance, only 55% of finance leaders at companies agreed with that view. In terms of data, 76% of investors surveyed say “companies are highly selective in what information they provide to investors, raising concerns about greenwashing”. Further to that, 88% of investors believe that “unless there is a regulatory requirement to do so, most companies provide us with only limited decision-useful ESG disclosures.” More than half (53%) of the large companies surveyed (revenues of more than US$10 billion per annum) feel that they “face short-term earnings pressure from investors, which impedes our longer-term investments in sustainability”. EY surveyed 1,040 senior finance leaders at the companies issuing reporting and 320 institutional investors as users of those disclosures for the report.
2. Future planning. The Transition Plan Taskforce (TPT) in the UK last week unveiled a climate transition plan framework for private sector companies gearing up to adapt to the incoming new disclosure rules. This plan should form a core part of companies’ overall strategic planning and be part of the global push for reducing greenhouse-gas emissions. The TPT recommends that the plan should cover:
- Companies’ high-level ambitions to mitigate, manage and respond to the changing climate and to leverage climate transition opportunities
- Short-, medium- and long-term actions that companies plan to take as well as details on how those steps will be financed
- Governance and accountability mechanisms that support delivery of the plan and robust periodic reporting
- Measures to manage material risks to, and leverage opportunities for, the natural environment and stakeholders such as the workforce, supply-chains, communities or customers
The Disclosure Framework and Implementation Guidance are open for public consultation until February 28, 2023.
3. Green shoots in the EU. In a positive step towards a European sustainability reporting system, the European Parliament last week formally adopted the Corporate Sustainability Reporting Directive (CSRD) for multinational companies. This has set the stage for new reporting regulations to be implemented by the start of 2024. Companies now face more detailed reporting requirements on their impact on the environment, human rights and social matters.The Parliament also spelled out that companies will be subject to independent audits and certification, in order to make sure they provide reliable information. These rules will come into force as follows:
- From January 1, 2024, for large public-interest companies (with more than 500 employees) already subject to the non-financial reporting directive, with reports due in 2025
- From January 1, 2025, for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026
- From January 1, 2026, for listed SMEs and other undertakings, with reports due in 2027; SMEs can opt-out until 2028.
4. Charting pollution. It’s now easier than ever to see major sources of pollution around the world, thanks to a new interactive map developed by Climate TRACE. The emissions map made by the global non-profit coalition highlights more than 70,000 major sources of climate pollution in sectors such as agriculture, energy production, heavy industry, transportation and waste. For example, for oil and gas fields (big polluters), Climate TRACE used data modelling including oil and gas volumes, production techniques and satellite images showing gas flaring and leaks. At large cattle farms, which can be a massive source of methane, they measured the facility and then estimated the number of cattle. The map is derived from a huge, detailed database of global greenhouse-gas emissions.
5. Asian asset concerns. A new report by Ninety One has highlighted the key focus areas for Asian asset owners. More than two-thirds (68%) say that dealing with climate change is one of their strategic objectives, which is higher than North America (60%) and Western Europe (56%). This reflects the concerns of many of their stakeholders, with parts of southeast Asia such as Thailand, Vietnam and the Philippines suffering the worst effects of extreme weather caused by the climate crisis. However, only 47% saw using transition finance as a major business opportunity, which is lower compared with North America (60%) and the UK (56%). Many respondents cited low expected returns as the main disincentive. Ninety One surveyed 300 senior asset owners and advisors for the report.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.