ESG Is A Business Opportunity, Not A Setback

October 18, 2022
Boards and senior executives must get their sustainability strategies right to remain relevant, as environmental, social and governance (ESG) issues emerge as a significant theme at Sibos 2022.

Boards and senior executives must get their sustainability strategies right to remain relevant, as environmental, social and governance (ESG) issues emerge as a significant theme at Sibos 2022.

During the conference, which this year took place in Amsterdam, one attendee joked that their company had cut down on marketing merchandise in a bid to be more sustainable.

This kind of principle was not evident at every stall, with items such as pens, bags and even large metal plaques being handed to passers-by, yet ESG emerged as a common theme on the minds of attendees.

Boards and senior executive teams really must buy into this, said one panellist, Rob Wainwright, while speaking at the session "Keeping up with our ESG commitments – how can we secure a sustainable future?".

The Deloitte senior partner said that firms must own the agenda, “not only accept and understand it, but also drive the necessary strategy underpinning culture to get it in the right place as quickly as possible”.

The good news is that this has become a business opportunity, he continued. “More and more CEOs are seeing it in that way, and this is about having purpose at the heart of this strategy.

“It's not just the right thing to do for society but the smart business thing to do,” he said.

When purpose is put more evidently behind a brand, and in a strategy, companies will be able to attract better talent and a better line of investment, he argued.

“When you spend time in this field, you spend half the time being thoroughly depressed, because you can think of all the things that can go wrong, you also have to be an eternal optimist,” said Solange Chamberlain, NatWest’s chief operating officer for commercial and institutions.

“Whether we get there or not and how we get there, we have to give it our best shot.”

In the ESG field, there always needs to be more done and people always need to move faster, said Chamberlain.

“We’ve heard all of the big numbers, we’ve heard a lot of companies make big commitments. It’s a good starting point,” she said. “It has at times felt uncomfortable. When we speak to our board, we put out our targets without knowing how they’ll be hit. Boards don’t always like that, and as business people, that is not always how we’ve worked.”

With ESG, companies are not always in control and may not be as in control as they usually are with business targets, she suggested, adding that to aid this, companies cannot treat ESG in a siloed manner or as a temporary issue.

Rather, it needs to be in the “plumbing” of an organisation.

Moreover, Chamberlain added that this cannot be a competitive issue for the banks to deal with.

“Collaboration is really important. You’ve got to partner,” she said. “We have to come together, because, as competitive as I am in my professional life, everybody in all the banks has to do it. It is going to have to be a team sport.”

This echoed the sentiment at the event towards the global race to implement the ISO 200022 messaging standard, where one panellist also called for the issue to be resolved in a non-competitive manner to ensure its success.

Mastercard claims the social narrative

At Sibos, although the ESG focus revolved predominantly around environmental issues, Mastercard chose to use its platform in comparison to talk about the "S", with executive vice president Shamina Singh doing a keynote on the topic.

“You can’t succeed in business in a failing world, that’s just a practical reality,” said Singh, echoing former Mastercard chair, Walt Macnee. “Maybe you can deny reality for a little while, but that is not a great business strategy and it’s not a great strategy for building a better world.”

Mastercard’s goal is to build an inclusive, digital economy, she said. “One where people can reach their potential, one where economic growth is equitable and the planet can thrive.”

For example, during the COVID-19 pandemic, the global card scheme expanded its worldwide commitment to financial inclusion by pledging to bring a total of 1bn people and 50m micro and small businesses into the digital economy by 2025.

This commitment included a direct focus on providing 25m women entrepreneurs with solutions that can help them grow their businesses.

Singh said that a key to Mastercard’s success has been connecting its impact strategy directly to its business purpose.

This now means that expanding access to financial services through financial inclusion contributes to Mastercard’s business success. “Including more people in the digital economy increases opportunity and builds stronger economies across the globe.”

This is partly why it made sense to focus on the S in ESG, she said.

“One thing I’d wish I’d known from the start is about making friends with your legal and sustainability teams,” she acknowledged. “That’s been crucial.”

The ESG landscape has raised some complex compliance questions, said Singh.

However, the response to becoming a more sustainable company, for example by linking compensation to net zero goals, has been overwhelmingly positive.

Continuing her focus on the social aspect, Singh admitted that this component is one that too often firms struggle to get correct. “This isn’t a huge surprise, as often it is easier to quantify emissions, rather than inclusion.”

“For many of your companies, donations to things like natural disaster relief, the COVID response, investments in small business growth … those are currently not included in the S measures at all,” she noted.

This means that many socially engaged companies are contributing in this field but the narrative is being lost as it is not being measured, she argued. “If the point of ESG is to measure what matters, then we need to change that.”

Singh’s ambition may remain a market issue for some time, however. For example, it emerged over the summer that the European Commission’s social taxonomy plans had been shelved indefinitely due to difficulties in agreeing on a conceptual framework and measurement system that would work at both the EU and global level.

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