Sustainability chief of Drax Group, UK: 'We'll be first carbon-negative power station by 2030'

Sustainability chief of Drax Group, UK: 'We'll be first carbon-negative power station by 2030'

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Alan Knight, Group Director of Sustainability at the Drax Group, a UK-based renewable energy company engaged in power generation, the production of sustainable biomass and the sale of renewable electricity to businesses, joins the VISION by Protiviti podcast. Under Alan’s leadership, Drax is committed to enabling a zero-carbon, lower cost energy future through engineering, technology and innovation, and has set an ambitious goal to be the world’s first carbon negative power station by 2030. His call to action for boards and business leaders? Ask yourself the hard questions… including, would the planet be better or worse off without your company, your product or your service?


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Sustainability chief of Drax Group, UK: 'We'll be first carbon-negative power station by 2030' - Podcast transcript

Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource looking into the future to examine the big themes that will impact the C-suite and executive boardrooms worldwide. Today we’re exploring the future of ESG and its strategic implications for people, process, and the planet. I’m happy to be joined by Alan Knight, Group Director of Sustainability at the Drax Group, a UK-based renewable energy company engaged in power generation, the production of sustainable biomass, and the sale of renewable electricity to businesses. Alan has 30 years experience working with global companies and governments on sustainability and joined Drax about 18 months ago. Drax is committed to enabling a zero-carbon, lower cost energy future through engineering, technology, and innovation and has set a very ambitious goal to be the world’s first carbon-negative power station. Alan, thank you so much for joining me today.

Alan Knight: Thank you. It’s good to be here.

Joe Kornik: So Alan, I talked a bit about the Drax Group in my intro. Why don’t you talk a little bit more about the Drax Group and your role there as Group Director of Sustainability?

Alan Knight: Sure. So Drax, 10 years ago, was a power station in the UK. A very important power station making about 10% or 11% of all the UK’s electricity, but it was being fired by coal. It was located where it was because the coal fields were very close to the power station, but of course with climate change and the pressures on companies to change their carbon footprint, Drax made the decision that, rather than just close down, that it would reconvert its whole power station to use biomass. That project is now completed and it’s now going on the next stage of the journey, which is to combine the biomass generation facility with carbon capture and storage, which—and we can explain this in a bit more detail—will make it one of the world’s first negative-carbon power stations because the biomass is from a forest, so that’s carbon—and inverted carbon’s neutral. We have to be careful of the language we use, but for the sake of this, it’s a fuel which carbon’s being drawn out the sky to grow the biomass which we then use. Therefore, by combining it with that, storing the CO2 underground, it becomes a negative power station. So that’s the core of Drax but Drax also owns other generation facilities in the UK, hydro in particular, and more importantly for us is because we suddenly needed wood pellets, we now have wood pellet making facilities in British Columbia and other parts of Canada and the United States. So we are one of the world’s largest users of pellets. We’re one of the largest makers of pellets. We will be the world’s first negative power station. We’ve got ambitions to build similar projects around the world and we will be one of the biggest retailers of carbon-negative emissions. So from a small power station burning coal, we’re really going places with new technology and new ambitions.

Joe Kornik: Great. As the as the group director of sustainability, I would imagine you’re sort of leading that charge and you mentioned some of those really ambitious goals that Drax has on the table including, as you mentioned, the world’s first carbon-negative power station. It is currently the largest producer of biomass for energy. So if you could, talk to me a little bit about those specific goals and sort of how you achieve them and what will be required to get there to meet those goals?

Alan Knight: So our single most important goal is to be the world’s first negative-power station, so that means building and testing new technology to do that, to capture the carbon and then take it underground, so that’s the first challenge. What we’ve recognized for that to work—of course we’ve got to have biomass and that biomass has to come from well managed forests. It has to meet very strict sustainability criteria. There’s a lot of concerns from environmentalists that an increase in biomass could lead to the loss of forests. We have NGOs saying, “Drax burns forests,” where the opposite is completely true. We use sawdust from saw mills and we use parts the timber industry cannot use, so our sourcing principle is simply we buy it from forest harvested for timber and we use the bits of the forest and the sawdust which the timber sector cannot use. So it’s a byproduct. But of course making sure that happens all the time, making sure there’s enough biomass for us is a challenge. So one of my roles is to oversee that process and to make sure we have very clear criteria and standards to ensure that we do only use the right biomass and that those processes—the processes internally work to make sure we then use that biomass, so that’s another massive challenge.

Another challenge for us will be how do you commercialize negative emissions? Because we know there’s a growing interest as companies think about their net zero ambitions. To be net zero they’re going to want to buy offsets and our business model provides those offsets cause we’re burying more carbon than we produce, so we’re going to sell that to allow other companies to achieve net zero. Great, great opportunity but what are the rules? If you’re a company, what would you need from us to trust us, if you give us money for a bit of paper which says, “This amount of tons have been buried underground and you now own them,” you can imagine the governance and the rules behind that. Because not many people have done this yet, creating that rule book and creating confidence in what we’re doing is another challenge. And then also because we have a value chain like all companies, we still emit carbon. Our biomass goes on ships and they’re shipped to the UK cause they’re coming from America. We ship them to the UK. So there’s still carbon emissions in our system and what we’ve recognized is we’ve got to eliminate those carbon emissions or get them as close to zero as part of this credible offer. So we, like any other company, still got work to do to squeeze out the non-coal carbon emissions from our business.

Joe Kornik: Very interesting and I know that those are pretty ambitious goals but we spent some time looking around the Drax website and some of your other initiatives, and I know there are a lot of other sustainability goals that Drax has for the future. As the Group Director of Sustainability, I’m sure a lot of that falls under your purview. So why don’t you talk to me a little bit about some of the other sustainability goals that you’re focused on right now and for the future?

Alan Knight: Yes. So what I described previously was almost the challenges of our fundamental business model as a carbon-negative company. So how have we extended that to the wider spectrum of sustainability issues? What we’ve said is, our business model, be it the pellet plants in America, the generator facilities in the UK, and whatever we do in the future, not only have to deliver economic returns, they also have to deliver people-positive outcomes, climate-positive outcomes, and nature-positive outcomes i.e. we’re creating a business model which provides value on the environmental and social agenda as well as a pure economic agenda. The challenge for that is, how do we prove that? What do we actually have to do and how do we prove it? What are the metrics? What are the verification? But what we’re doing, which I think is really exciting, is we’re creating a business model whereby the economic returns are coupled with returns for society and nature. Historically, people have talked about the tradeoff between growing your profits and environmental impact. What we’re saying is we are determined to create a business model that as our economic performance grows, so does our positive contribution to people, nature, and climate go. So you have a business model coupled with sustainability.

Joe Kornik: Sure. You mentioned carbon negativity a lot there. That’s an area that I think is a real interest to our listeners. Is there more to say on carbon negativity? Is that where most companies will be striving? We’ve heard so much about carbon neutral or net zero but carbon negativity, at least from where I sit, is a bit of a new concept. Can you talk a little bit more about that and its role in the future?

Alan Knight: Carbon negativity is a new concept, but it actually doesn’t start with the business agenda, it starts with a global agenda/the IPCC agenda, which is to say if we are to achieve 1.5° by 2050, the portfolio of mitigation activities you’ve got—decoupling our economy from fossil fuels, protecting forests, and everything—probably won’t be enough and we’ve actually got to find a way of taking CO2 which is already in the sky out of the sky and burying it underground or doing something with it. The numbers vary depending on the different scenarios, but it’s absolutely clear on all the scenarios, from the best to the worst, that millions of tons of CO2 need to be physically removed from the sky as part of the global ambition to reach 1.5° by 2050. So that then begs the question, “How do you do that? Do we just rely on tree planting?” Which will make a huge contribution. What about technical fixes? There’s this thing called direct air capture or DACs where people are inventing machines and new air conditioning units. Just turn them on and they take CO2 out of the sky, they liquefy it, and you bury it. It works, but there’s challenges with the price cause that’s an expensive machine. What we’re doing is we’re using a natural raw material which is waste products from the timber industry or forestry residues. We’re turning that into electricity which of course is zero carbon electricity which the world needs and it’s decoupling our energy system from energy, and then we capture the CO2 from the combustion or the biomass and we’re putting that underground. So we are providing electricity, we’re supporting forestry, but we’re also creating a product called negative carbon emissions.

So where do most other corporates come in this? Most other corporates are having to set themselves science-based targets, reducing their carbon emissions by a huge amount, but the overall goal is that all companies in the world have to be net zero by 2050. What does net zero mean? It means you reduce as much of the carbon as you can and you buy offsets from the market. We will provide one of those offsets. So for many companies, we’re providing them with electricity. The same companies or other companies we might be presenting them negative carbon emissions so that that’s how they can achieve net zero. So your company, you’ve reduced your carbon emissions by 90%, but that last 10% is just impossible, but you still want to be net zero. That’s when you will go to the market and you’ll buy a product like ours. So that’s where we fit in. There’s another interesting dynamic. Offsets have been sold for years, but they’ve been like avoided emissions—wind turbines and all of that. What we’re doing is, this isn’t avoided emissions, this is carbon removals. So we’re going to be a carbon-negative company and help other companies achieve their net zero ambitions.

Joe Kornik: Right. So interesting and it’s so rare that I get a chance to talk to somebody who’s as deeply embedded in this as you and ask you about the future and where we’re headed and the future of renewable energy and renewable power generation and sustainable biomass. What’s the potential? You’ve touched on it a little bit there, but where do you see it? How do you see it all playing out over the next decade or even much further in the future?

Alan Knight: Well, the energy sector is sort of facing three very important challenges. The war in Ukraine has made everybody a lot more sensitive to energy security. Should we, as an economy, rely on the raw material or the energy from another continent, another part of the world or should we make our own power within our own borders? So that’s one very important debate and very topical at the moment. In the UK and I’m sure it’s true for other parts of world, just the cost of energy is becoming a major challenge, and then the third one is the decarbonization of energy. So an energy company has to work out what is the right business model to be true to those three challenges? More energy security in the countries I serve, keeping prices at a level that people can afford, and decarbonizing. So what I would argue is the business models Drax is working on addresses those three concerns.

There’s other choices as well, but we’re part of that change in the way energy is produced to be true to those three challenges, but there are other challenges as well in this world, like forestry. The world needs forests and the world needs forests not just for carbon, but also for nature, and we also want forests for timber. One of the solutions to decarbonize the build sector is to use more timber. Timber comes from forests and therefore we need to find ways to improve forestry. What we’ve learned recently is by us taking out the thinnings and finding a safe disposal route for things like sawdust and diseased trees, we’re actually helping improve the quality of forestry. For example, you would have seen on the news forest fires. They’re becoming more frequent and they’re becoming more intense. One way that scientists have recognized to reduce the intensity of forest fires is to thin them more. Take out all the undergrowth. It’s the undergrowth in the forest which causes them to explode when they’re super dry. So they’re now taking that material out, but they don’t know what to do with it and we’re saying, “We can make it into pellets.” So we have a business model which is helping create positive outcomes for forestry, positive outcomes for the energy bay in the countries we have, and we’re providing another product for all the corporates in the world to help them achieve net zero. So yeah. As I said, it’s really exciting times.

Joe Kornik: Yeah. Yeah. You talked about some of the challenges and I think you mentioned some of the opportunities, but are there other opportunities that are on the horizon that you’re excited about?

Alan Knight: I would say this concept of nature positive is becoming very exciting. A lot of the sustainability conversation—rightly so—has focused on carbon and it needs to and it must do, but I’m sure many people listening to this have heard this concept of nature positive. For me, I think this is an opportunity as well as a threat if you miss it. Not only if we’ve got to produce business models and supply chains which reduce and eliminate carbon emissions, we also now need business models and supply chains which know their impact on nature, can ensure they don’t do any harm to that nature, but more importantly and new to this debate, can use their business models to enhance and improve nature. Then that’s why I used the example of how us taking that material, the undergrowth from the forest, is helping reduce the chances of forest fire. What a fantastic win-win. We’re getting raw material we need to power the UK economy and at the same time we’re helping British Columbia and Southeast USA reduce the number of their forest fires by just taking the material which causes forest fires. That for me is an example of a nature positive outcome, so I think that’s a really exciting opportunity which is just going to grow and grow. So in the future, businesses will have to prove they don’t have an impact on the climate and prove they don’t have an impact on nature or in both cases, enhancing and restoring it.

Joe Kornik: Right. So I’m curious as to your thoughts on a call to action, if you will, for global business leaders who are clearly thinking about this day in and day out or putting their climate practice, their strategy in place, they’re talking to their sustainability officers or their heads of ESG or whatever the case might be—what should be the steps that they should be taking right now as they look to put their strategic plans forward not just for 2030, but for even a much longer horizon?

Alan Knight: I would say the first thing they need to focus on is the obvious, which is reducing their carbon footprint, but really align with the net zero goal. People are saying net zero by 2050. We’re already seeing other companies saying, “If we’re going to do it, you might as well do it by 2030. Let’s get on with it.” So that one and it’s probably the most obvious on the list, is truly embrace net zero and what does it mean for your company and don’t wait to 2050 if you think you can do it sooner. I think in the second one is do ask yourself the question, “What would it take for us to be a nature positive company? What is our relationship with nature? How direct? Obviously, is if you’re a food producer it’s clearer. If you’re mobile phone manufacturer, it’s less obvious but it’s there. All those mines making those minerals, telephone, masks, and all of that sort of stuff so not only think about, “Where do I do no harm to nature?” It’s, “Where can my business and my value chains actively restore nature to the levels we need to sustain the economy in 2050?” So I think that’s a huge challenge and the question you should ask yourself, but also I think the other question I would ask myself is, “What about my business model and what about my products? Am I still growing my business and minimizing my negative impact on the climate and my negative impact on nature or have I created a product and a business model that as I grow and succeed economically, I’m creating more impact?” Couple your business model and your products with better environmental and social outcomes. Twenty years ago it was about decoupling. “How do I minimize my damage? How do I do less harm and still grow my profits?” That’s yesterday. It’s now, “What is the complete alignment that the more products I sell, the better the climate is and better nature is and better people is?” And it’s such a fundamental question and I wonder how many boards have actually asked themselves that question. Another way of doing that as a teaser for a podcast—our first business leaders, imagine if they were hearing a podcast given by their product and the question the products were being asked is, “Where do you do harm to nature and where do you do good for nature? Where are you helping the climate and where are you making it worse? Where are you helping people and where are you making it worse? What would it take for you to only do good for people, nature, and climate?” and my challenge to business leaders is, “Do you know what that podcast would say?” If you know what it’s saying, why aren’t you doing it?

Joe Kornik: Yeah. Interesting. I think that there’s a lot of boards and business leaders who want to do the right thing and are doing the right thing, but are they doing it for the right reasons? Are there strategic business reasons in place yet to do this or is it still just a little bit of their employees are demanding it or their consumers are demanding it or they don’t want to fall behind the curve in terms of being one of those companies that doesn’t get it or isn’t with the times when it comes to sustainability? Are you seeing that? Are we getting to the point where the business case is more than just pleasing their own employees or pleasing consumers, but there’s a real strategic reason to put the full plan in place?

Alan Knight: I’m seeing it in some companies. Lots of other companies are in the place you’ve described, which is there’s so much pressure, be it investors or employees, to be seen to be addressing these issues, that they’re going through the motions and there’s nothing wrong with that if by going through the motions you start intellectually maturing and you realize there’s more to be done. All journeys start from somewhere. Now even with Drax it was a few years ago it was, “We’ve got to stop using coal.” Fast forward 10 years, they’re reinventing the whole business model and going into places they never imagined. So it doesn’t matter where you start, but the question again of business leaders is be truthful for yourself. Are you going through the motions because you’re trying to answer those surveys from investors and trying to make those back pages in your annual report look right or are you truly thinking about these issues? Yeah? Another way of asking it, going back to that idea for your product, if it talked what would you say? If your business stopped existing tomorrow/overnight, would the planet be better off or would it be worse off? For me, I’ve learned in Drax but all the other companies I’ve worked for is it starts with the honesty of the question being asked at the executive committee and board level. Are you asking yourself these big questions? I’ve teased you with some clever questions, “If your product could talk, what would it say?” Doesn't matter what the question is, but are you asking yourselves deep, deep questions or have you just got a sustainability manager who’s writing the back page for the annual report and filling in those surveys and getting a good enough grade?

Joe Kornik: Right. Right. Well, that sort of brings into our last question, Alan, and that’s asking you—we call this program VISION by Protiviti because we want to talk to smart people and ask them their opinions or thee future and where we think we’re going and the type of impact that future will have on businesses. So if I asked you to look out say to the year 2035 or as far as you’d like to look out, how optimistic are you? Where do you think we’ll be? How confident are you that we are headed in the right direction and are going to meet to meet the challenges, the really big challenges that lie ahead?

Alan Knight: I am very confident that the technology exists to do clever things, things we need to do. I’m also very confident that a lot of these changes are simple behavior changes. It’s not all clever technology, it’s just people’s attitude towards themselves, how they address their quality of life issues. All the right debates have been had. All the right technology is being developed. Short-term economics and short-term needs obviously interfere with that and disrupt that, but fundamentally, with the pressures on the planet and the growing desire for people to have a good quality of life, a modern quality of life, people’s desire to live in a natural system which works, people’s fear and frustrations with climate change now that we’re seeing it. There’s a lot of moving parts there which will make, say by 2050, a truly sustainable outcome for everybody very possible and I believe we will achieve it, but it’s going to be a bumpy road on the way but fundamentally, we can do it, we should be able to do it, and let’s hope that we do do it.

Joe Kornik: Well, thank you for the time. I appreciate the insights and the fascinating conversation, so thanks for joining me today, Alan.<>Alan Knight: Brilliant. Thank you.

Joe Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts and be sure to visit our website at vision.protiviti.com for all the latest insights including podcasts, videos, and articles about the future of ESG and sustainable business. For Alan Knight, I’m Joe Kornik and we’ll see you next time. Thanks for listening.

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Alan Knight has over 30 years’ experience of working with global companies and governments on sustainability. In April 2021 he joined Drax as the Group Director of Sustainability. Drax is the largest producer of biomass for energy, and the company's ambition is to be the world’s first carbon-negative power station. Prior to joining Drax, Knight worked in the steel and mining sector for seven years as the Global Head of Sustainable Development for ArcelorMittal. He was Co-chairman of Responsible Steel and served on the steering board of the Initiative for Responsible Mining.

Alan Knight
Group Director of Sustainability, Drax
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VISION PODCAST

Follow the VISION by Protiviti podcast where we put megatrends under the microscope and look into the future to examine the strategic implications of those transformational shifts that will impact the C-suite and executive boardrooms worldwide. In this ongoing series, we invite some of today’s most innovative and insightful thinkers — from both inside and outside Protiviti — to share their vision of the future and explore how today’s big ideas will impact business over the next decade and beyond.

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Protiviti-Oxford survey shows North America ‘enthusiasm gap’ about ESG’s future impact

Protiviti-Oxford survey shows North America ‘enthusiasm gap’ about ESG’s future impact

A global survey conducted by University of Oxford and Protiviti in the second quarter of 2022 reveals that business leaders worldwide agree ESG (environmental, social and governance) will be either extremely or somewhat important to their business success over the next decade. Executives were evenly split—50/50—on whether ESG would be “extremely important” or “somewhat important” to their business in 2032. No respondent said ESG “won’t be important at all.”


But when you dive deeper into the global numbers, they tell a quite different story about ESG attitudes and the expected impact depending on what part of the world executives call home. In North America, for instance, only a quarter of business leaders think ESG will be extremely important by 2032, while that number skyrockets to 58% in Europe and 71% in Asia-Pacific. That difference highlights a significant disconnect—an ESG enthusiasm gap—between North America and the rest of the world when it comes to executives’ engagement, expected investment and ESG’s overall business impact by 2032.

The data and key findings from the VISION by Protiviti report, “Executive Outlook on the Future of ESG, 2032 and Beyond,” highlights current and future ESG and sustainability trends, revealing a patchwork of engagement, most notably relative to geography.

Download THE OXFORD UNIVERSITY & PROTIVITI survey: Executive Outlook on the Future of ESG, 2032 and Beyond.

Environment is the top ESG risk

Among all global business leaders, 43% place environmental factors as the highest risk, 37% prioritized social factors, and just 20% said they are most concerned about the risk posed by governance factors.

Drilling down into the environmental results, the geographic disconnect continues. Only 7% of North American business leaders would characterize the potential risks posed by environmental factors as “extreme” by 2032, while that number jumps to 23% in Europe and 34% percent in Asia-Pacific. On the flip side, a shocking 39% of North American respondents said they believed environmental risk factors would be “low” in 10 years’ time. That number was just 18% in Asia-Pacific and 15% in Europe.

Among all business leaders, 64% expect an increase in corporate spending on managing environmental risks. But seen through the geographic lens, an overwhelming number of executives in Asia-Pacific (81%) and Europe (79%), anticipate an increase in spending on the horizon. Meanwhile, 61% of North American business leaders predict their company spending related to environment risks will remain about the same or even decrease.

And here’s one stunning statistic to consider: Most executives in Europe (81%) and Asia-Pacific (88%) believe their corporate greenhouse gas emissions will decrease by 2032, but in North America, that number drops to just 37%. Stunningly, 10% of North American executives admit their company’s corporate greenhouse gas emissions will increase by 2032. The remaining 53% say they will stay about the same.

64%

Among all business leaders, 64% expect an increase in corporate spending on managing environmental risks.

ESG goes mainstream

In addition to the geographic findings, the survey responses revealed the ESG approach to business practice is becoming more mainstream, as almost three-quarters of business leaders report they have established a dedicated ESG or sustainability post. Younger C-suite executives, those who are under 50 years old, are even more apt to buy in on ESG: 60% of them trust ESG will become extremely important to their business strategically over the next decade.

Most business leaders surveyed believe that customer demands and regulatory requirements will be the main drivers of ESG strategy over the next 10 years. The overall picture is driven by the respondents from North America and Europe, where regulatory requirements and customer demands rank firmly as the two main drivers of ESG. In Asia-Pacific, customer demands and public perception/PR took the top spots.

When it comes to potential business growth related to ESG, business leaders rank environmental factors as the most promising in terms of opportunities, and governance factors as the least opportune. Older C-suite executives prioritize environmental opportunities, while their younger counterparts focus more on social factors. Only in Europe do governance-related business opportunities appear to be more significant than social ones.

60%

Younger C-suite executives, those under 50 years old, are even more apt to buy in on ESG: 60% trust ESG will become extremely important to their business strategically over the next decade.

Social and governance

The future risk posed by social factors is ranked as being moderate to low by most of the business leaders surveyed, with a slightly higher risk being attributed to social factors in Europe and Asia-Pacific. Over the next decade, most companies will be focusing on diversity, equity and inclusion (DEI) and on human rights as the two chief social priorities. Notably, both younger and older business leaders share these priorities.

In terms of governance, 78% of business leaders believe ESG reporting will become mandatory over the next decade. Importantly, most of the respondents consider this development to be extremely likely. This perception of forthcoming regulatory change is prevalent amongst younger business leaders, as well as the top managers and owners in Europe and the Asia-Pacific. Only in North America do the majority of board members and C-suite executives (51%) believe ESG reporting will continue to be a voluntary exercise.

Conclusion

There is an international awareness that ESG will be an essential driver and component of profitability and sustainable business by 2032. One of the main survey takeaways is a recognition of the costs of, and need to, implement ESG policy and practice by all business leaders. While leaders across the globe acknowledge the growing importance of ESG for their businesses over the next decade, North American leaders show lower engagement with the level of this importance. Across the board, younger business leaders are more attuned to the growing importance and necessity of active ESG business leadership and commitment as they look toward an uncertain future, but certainly a future where all business will be operating in the context of climate crisis.

Download the Oxford University & Protiviti survey: Executive Outlook on the Future of ESG, 2032 and Beyond.

There is an international awareness that ESG will be an essential driver and component of profitability and sustainable business by 2032.

Dr. David Howard, Director of Studies, Sustainable Urban Development Program, University of Oxford and a Fellow of Kellogg College, Oxford. He is Director for the DPhil in Sustainable Urban Development and Director of Studies for the Sustainable Urban Development Program at the University of Oxford, which promotes lifelong learning for those with professional and personal interests in urban development. David is also Co-Director of the Global Centre on Healthcare and Urbanization at Kellogg College, which hosts public debates and promotes research on key urban issues.

David Howard
University of Oxford
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Dr. Nigel Mehdi is Course Director in Sustainable Urban Development, University of Oxford. An urban economist by background, Mehdi is a chartered surveyor working at the intersection of information technology, the built environment and urban sustainability. Nigel gained his PhD in Real Estate Economics from the London School of Economics and he holds postgraduate qualifications in Politics, Development and Democratic Education, Digital Education and Software Engineering. He is a Fellow at Kellogg College.

Nigel Mehdi
University of Oxford
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Dr. Vlad Mykhnenko is an Associate Professor, Sustainable Urban Development, University of Oxford. He is an economic geographer, whose research agenda revolves around one key question: “What can economic geography contribute to our understanding of this or that problem?” Substantively, Mykhnenko’s academic research is devoted to geographical political economy – a trans-disciplinary study of the variegated landscape of capitalism. Since 2003, he has produced well over 100 research outputs, including books, journal articles, other documents, and digital artefacts.

Vlad Mykhnenko
University of Oxford
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The strategy of CSR with Mario Abreu, Global Head of Sustainability for Italy’s Ferrero Group

The strategy of CSR with Mario Abreu, Global Head of Sustainability for Italy’s Ferrero Group

Mario Abreu is Global Head of Corporate Social Responsibility and Sustainability for the Ferrero Group, an Italian multinational manufacturer of branded chocolate and confectionery products. Its brands include Nutella, Kinder, Ferrero Pralines, and the breath mints Tic Tac, among others. In the VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Abreu to discuss his role, the firm’s corporate social responsibility efforts and vision for the future, as well as why Ferrero doesn’t use the term “ESG” when it discusses sustainable businessLinks to the firm's annual sustainability reports can be accessed in the transcript below.

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ABOUT

Mario Abreu
Head of CSR and Sustainability
Ferrero Group

Mario Abreu has been the Head of CSR and Sustainability for the Ferrero Group since April 2020, leading the firm’s global sustainability efforts. A Brazilian and Portuguese citizen who currently lives in Luxembourg, Mario has a degree in mechanical engineering and has been working in the fields of sustainability and the environment for over twenty years while living and working in Belgium, Brazil, Canada, Portugal, and Sweden. Mario has a post-graduate diploma in Environmental Decision-Making from The Open University and has undergone extensive training in Climate Leadership, Business and Sustainability with the University of Cambridge Institute for Sustainability Leadership. Prior to his current position with Ferrero, Mario was the Vice President of Sustainability for the Tetra Pak Group in Lund, Sweden.

Video transcript

Joe Kornik: Welcome to the VISION by Protiviti Interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource looking into the future to examine the big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of ESG and its strategic implications, and I’m happy to welcome Mario Abreu to the program. Mario is Global Head of Corporate Social Responsibility and Sustainability for the Ferrero Group, an Italian multinational manufacturer of branded chocolate and confectionary products. Its brands include Nutella, Kinder, Ferrero Pralines, and the breath mint Tic Tac. I can tell you we’ve got at least two of those products in our house right now.

Mario, thank you so much for joining me today.

Mario Abreu: Thank you very much for inviting me, Joe. Happy to be here.

Joe Kornik: Mario, you’re head of Corporate Social Responsibility and Sustainability for the Ferrero Group. Talk to me, if you could, a little bit about your role there, both day-to-day and where you’re focused for the future.

Mario Abreu: Absolutely. Yes. This role of head of CSR and Sustainability here is relatively new. It was shaped about three years ago. The idea was really to bring sustainability up in front into the strategy of the group. I report into the Chief Strategy Officer under the staff of the executive chairman, and the responsibility here really is to set up the long-term direction for the company. As I’m joined by a team with me, I work very much in collaboration with the rest of the organization that has more of a mandate to implement.

In my role, most of my day is about external engagements. We need to understand what is happening around the world, what the external stakeholders are expecting, what are the new trends, what are the latest in science that we need to be aware about. Combining that with internal collaboration because, as we set out a long-term direction, a long-term strategy for the group, it is important to collaborate and support my colleagues who are, on the day-to-day, driving the activities, driving the projects that really make the positive effect that we are looking for.

Joe Kornik: I know a lot of our viewers are probably familiar with the brands that I mentioned in our intro. Tell me a little bit about Ferrero Group, the company, in terms of its global reach and its size and its scope.

Mario Abreu: Yes. Ferrero has been a growing business. We have done a lot of organic growth since the beginning of the company in its origin in Alba, in the north of Italy. In the past few years, we have also acquired a few new businesses so that allowed us to expand from what was mainly an European-based operation and outreach into having a much larger footprint today, for instance, in North America, but also growing in Asia and some other markets. We are more than 35,000 people right now in the company. We have many brands. Besides the ones you have mentioned before, we have acquired or developed a few other ones like Butterfinger and a few other companies that we have acquired, for instance outside the more traditional chocolate business in regards to cereal bars like Eat Natural. The company is expanding, and this is one of the very interesting things of the job, as well, is to bring in new companies, understand where they are in their, let’s call it, sustainability journey and help them convert towards the path that we have been setting here.

Joe Kornik: Right. Especially, as you grow, I know Ferrero takes sustainability very seriously. I know it’s a big part of your company’s culture. I was taking a look at your annual sustainability report that you have published on your website, and we can put a link to that in the video. I know that sustainability report measures everything from environment and how you source ingredients to responsible consumption and empowering your people. Can you walk me through some of the highlights of that report because I think it’s a really interesting look at the company?

Mario Abreu: Yes, absolutely. As you said, we try to put our information available there on an annual basis in the sustainability report. We have been doing even a bit more than that. We have been publishing on our sustainability website, ferrerosustainability.com. We have been publishing a lot of other documents as well that we believe stakeholders are interested to see. For the report, as you said, we have now a history of publishing some of these reports. We are more of the type of company that talks about the work then walks the talk. We try to avoid over or under promising, and we try to focus on delivering and reporting transparently on things that we have achieved.

We have, for instance, this year reached a very important number for us which is regarding sustainability of cocoa. 100% of all of the cocoa resource is now sourced through independent programs. We maintain our palm oil certification for 100% of the palm oil resource. All of our volumes are segregated and certified according to their own table of sustainable palm oil. We are progressing in terms of packaging. About 84% of our packaging is now recyclable or designed for recycling or proposed for reusable. Another 84% number there because we have reached it now, 84% of renewable electricity for all the electricity that we source ourselves across the world. We have a number of initiatives in regard to our own staff. We report the total amount of hours, for instance, that we have in regard to training which is consistently growing as well.

We try to be as broad as possible in regard to the report, looking at the four pillars of our sustainability approach today. I hope the reporting is interesting for the readers. We know it is still a long report. It’s almost 100 pages, and we would like to make it more precise. At the same time, there is a lot there. There is a lot of information there. We try to also bring in some case studies. We have very interesting collaborations ongoing on the ground in Turkey to protect human rights for hazelnut farmers. In Ivory Coast and Ghana, also in regard to protection of human rights for the farmers, the small holders, who source a lot of the cocoa we consume in our plants. All of this makes it for a long report, but I hope an interesting one anyhow.

Joe Kornik: No, it is, absolutely. I spent some time with it, and it is thorough and it is long, but it’s really interesting. A lot of that report focuses on the progress that the company has made or is making. But some of it also is a vision statement on where the company is going or wants to go. Can you talk a little bit about some of Ferrero’s goals for, let’s say, 2030 and beyond?

Mario Abreu: Yes, sure. Joe, as I mentioned, we like to talk about what we have been doing and avoid promising too much, but one of the responsibilities that I had right in here was to start setting these ambitions towards 2030, right? One of the first things we did was to get our climate goal, approve it by the Science-Based Target Initiative. We have aligned our emissions in terms of Scope I, 2, and 3 through the IPCC curves according to the recommendations of SBTI. We have a target for reducing our carbon footprint of all the energy we produced, all the electricity we buy by 50% between 2018 and 2030 despite growth, and we are growing at a reasonable pace. That requires not only that we go for a renewable electricity, but also that we produce energy ourselves with the lowest possible carbon footprint.

We have goals for packaging for 2025. We have goals for sourcing cocoa, hazelnut, palm oil, sugar for 2025 as well. Now, what we’re trying to do in regard to 2030, and the longer perhaps horizon there, is to use some of the ambitions we have now been able to put in place for 2030 and use that as some kind of backcasting. If we have a vision of where we want to be in 2030, and we take account of where we are today, then we start influencing what the next two years will give. With that, we’ll reach 2025 for which we have already some goals as I mentioned, packaging materials, et cetera. That already starts to give us an opportunity to think about what are the next steps beyond 2025 that we’re going to have to implement to be able to reach the ambitions for 2030. Because at the end of the day, as we see with climate change, the conversation has been mostly to reduce emissions, mitigate emissions.

Now, we see that climate change is all over. We see that on a daily basis. Then we have to continue working on mitigation and we have to continue working to minimize and avoid emissions as much as possible, but we also have to increase the resilience of the business to adapt to the changes that we cannot avoid anymore. That, for me, is one of the key important parts of being able to look into the future. It’s to be able to increase the resilience of our business, and not only about making promises. It is about ensuring that whatever comes our way in the next five, 10, 15 years, we’re going to be ready to continue developing the business in a sustainable way from a perspective of profit generation, of providing environmental protection, and creating social justice. If we don’t do all of these at the same time, we know we’re not going to be successful.

Joe Kornik: Right. No better lessons certainly than what we’ve gone through the last few years in terms of not knowing what’s around the corner or what the future may hold and being resilient. A lot of what you discussed sounds like ESG. That’s where we’re focused on with this content initiative, the future of ESG. I know Ferrero prefers to focus on sustainability and corporate social responsibility rather than ESG. I’m just curious as to your thoughts, why is that?

Mario Abreu: Joe, very interesting question. I think for most of laymen, it might not make any difference. At the end of the day, it’s all about sustainability. I think ESG has become a bit more, should I say, fashionable in the past few years because the investors have really started to be quite conscious about the impact of sustainability on return on investment of businesses because of risk, because of unwanted consequences of business practices. I think that it’s great that if companies have not been looking at a more science-based, human, people-based sustainability, that now they are addressing sustainability indicators or attributes to reduce the risk for investors, so that is good.

For Ferrero, what has been working really well is we come from a heritage of, as you said, corporate social responsibility, which, looking back over time, fits very well with the intention of a family-owned business. We’re still privately-held. From the early days, the founding fathers of this company, they always believed that they needed to give something back to society. Giving back to society, whether we call it philanthropy or corporate social responsibility, is a good thing. It’s about making sure that you are supporting, where you work, the people that work with you, the people that are in your supply chain to be able to give something back.

Now, as we start talking about resilience, as we already did, we need to make sure that we understand what science tells us as the right way to go, at least, in terms of environmental protection. For that, that’s kind of how we bring the word sustainability. Is this environmental protection based on science? But also on the acknowledgement that without social justice, we cannot be able to leverage on the people we need, on the people that are working in our factories, working for our suppliers, working on the farms and the fields. Combining social justice, environmental protection, and return on investment, this triple bottom line, that’s how we address sustainability.

Joe Kornik: Right. No matter what you call it, I think it’s clear that Ferrero is clearly ahead of the curve when it comes to sustainable business or the business of sustainability, even putting up that annual report that we talked about earlier for 14 years and clearly you’ve been thinking about it longer than that. I guess I’d be curious to hear your opinion how you think other businesses are doing when it comes to sustainability and tie that back to the consumer, right? I mean, this is not just an initiative to do good and do well, which would be great, but there’s a real strategic business reason for sustainable business.

Mario Abreu: Yes, Joe, I believe so. There is a reason and I think more and more businesses are seeing that reason. If you ask how businesses are doing, it’s very open, very difficult question to ask. Nevertheless, I believe that more and more companies are seeing the opportunity to work on sustainability. I still believe there is probably, generalizing a bit, but there are probably two types of approaches. One approach is fixing yourself on one specific attribute and make sure the consumer understands you are very good on it. It takes something like, I don’t know, let’s take carbon. Then all your communication and a lot of your effort is put into your carbon footprint, reducing your carbon footprint, and being good on carbon.

You may not have a 360-degrees approach. You may not be doing right in the number of other important attributes of sustainability, but you focus on that one and you try to get your consumers to recognize you for the efforts you’re making there. There are companies that probably are more mature in the journey, and they try to do everything or, at least, they try to understand what are the main aspects, main attributes that should be part of their strategy, and they go towards a handful, a dozen, whatever, of important attributes that are encompassing of all your business. I think the companies that are looking at one specific attribute, I think at this point in time, they are able to connect with the consumers, but I don’t think they have the full picture of the long-term resilience.

Joe Kornik: Any advice for those businesses that maybe aren’t so far along? What steps could they be taking or what steps could business leaders be taking to set them up for a successful and sustainable future?

Mario Abreu: Yes. I think, first and foremost, you have to have someone in your organization who is spending enough time to think about sustainability, who is empowered to not only hear your external stakeholders, but also interact with your internal stakeholders and start deciding what are the key elements to be the priority focus. You cannot just go from zero to 100 in a couple of seconds. You have to be able to shift your gears as you move forward. You have to be able to understand where are the pressing points, the hotspots. Start listening to your business partners, your consumers, and start creating both the internal—not necessarily the organization, but the internal group of people that will feel empowered, that will feel capable of starting to work on sustainability attributes. Then also start reaching out to consumers or to your end customers and be aware of what is it that they want to get from you. I think everybody has to understand. It’s complex and it’s a journey. I think this is one of the key aspects that we have to keep in mind all the time about sustainability.

Joe Kornik: Thanks, Mario. Last question from me, and it’s bold-prediction time. I’d like to ask you to look out to 2035, let’s say, and predict a couple of things for me. One, where the Ferrero Group would be at that point in time? Two, where do you think we’ll be as a planet? I mean, do you think it’s a better world in 2035? How optimistic are you?

Mario Abreu: Carefully optimistic. I think we have to have a better world in 2035. I don’t think we can afford not to. I mean, if we care about our children and their children, we have to have a better world in 2035. We cannot wait for 2050 to start changing things. We have to start changing things today. Where the Ferrero Group will be, well, hopefully, that’s what we’re here to do, is to guarantee that we will continue to have a reliable supply chain, continue to make products that our consumers are delighted to taste and to savor, and be able to be resilient no matter what will come our way. I think that’s where we’re trying to head, again, to be more resilient in our strategy. I think we know enough about the path that we are taking, and hopefully, Ferrero is going to be, if not stronger, as strong as it is today in 2035.

Joe Kornik: Thank you so much for the time today, Mario. I really appreciate the insight and the look inside the Ferrero Group.

Mario Abreu: Thank you, Joe. Thanks for inviting me. Thanks a lot.

Joe Kornik: Thank you for watching the VISION by Protiviti Interview. I’m Joe Kornik. We’ll see you next time.

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CEO of NEPAD: Agenda 2063 provides ‘blueprint to transform Africa into a global powerhouse’

CEO of NEPAD: Agenda 2063 provides ‘blueprint to transform Africa into a global powerhouse’

Nardos Bekele-Thomas is CEO of the African Union Development Agency (also known as NEPAD, the New Partnership for African Development). Endorsed by African Union heads of state and government, including 33 prime ministers within Africa, Bekele-Thomas became the first woman to lead the African Union’s development agency when she took over May 1. NEPAD aims to transform Africa with a mandate to facilitate and coordinate the implementation of regional and continental priority development programs and projects. The eight priority areas of NEPAD are: political, economic and corporate governance; agriculture; infrastructure; education; health; science and technology; market access and tourism; and the environment. Previously, Bekele-Thomas was the Resident Coordinator of the United Nations in South Africa. Bekele-Thomas sat down with Joe Kornik, Editor-in-Chief of VISION by Protiviti, to discuss ESG and Africa’s future.


ABOUT

Nardos Bekele-Thomas
CEO
African Union Development Agency

Nardos Bekele-Thomas is CEO of the African Union Development Agency (also known as NEPAD, the New Partnership for African Development). Endorsed by African Union heads of state and government, including 33 prime ministers within Africa, Bekele-Thomas became the first woman to lead the African Union’s development agency when she took over in May of 2022. NEPAD aims to transform Africa and is mandated to facilitate and coordinate the implementation of regional and continental priority development programs and projects. Previously, Bekele-Thomas was the Resident Coordinator of the United Nations in South Africa.

Kornik: Can you tell me a bit more about the African Union Development Agency (NEPAD), its overall goals and how you plan to lead the organization into the future?

Bekele-Thomas: This partnership called NEPAD came about as a result of the recognition by the African Union heads of state, including 33 prime ministers within Africa, that the partnerships we had in place previously weren't in the best interest of Africa. So, we wanted to develop an organization where the priorities are set by African governments, where Africans would lead their own development and determine their own partnerships. The African Union initially came up with some priority areas of interest, such as infrastructure, security, education and several others that would be developed over time. But it realized that it didn’t have a vision to tie them all together, so it established what’s called Agenda 2063, Africa’s blueprint and master plan to transform the continent into a global powerhouse of the future. It is Africa’s strategic framework that aims to deliver on its goal for inclusive and sustainable development for Africa. It is ambitious and unique; no other continent has such a framework. It was adopted in 2015, but the African Union realized it needed an implementation plan, a way to respond to all the aggressive priority areas outlined in Agenda 2063. That led to the creation of the African Union Development Agency in 2019.

Kornik: Agenda 2063 is very ambitious, for sure. Can you talk about your specific goals that you have for the next several years?

Bekele-Thomas: Agenda 2063 is a visionary document and there are certainly some priority programs that are relevant and important, but what is most important for Africa is not just having the vision but the action. The implementation is critical, but in order to implement programs you need two things: One is resources; we need to mobilize the necessary resources to help us implement the program. So, resource mobilization is one of my focus areas. The second focus area is to build capacity. Not just capacities at NEPAD, but national capacities at all levels as part of a 10-year implementation plan so we can monitor our progress and hold governments, civil society organizations and the private sector accountable, if necessary. The problem we have all over Africa is that our inaction is leading us to crisis. COVID-19 in Africa was a result of the inaction by our governments. We have many paradoxes in Africa, and one of the paradoxes I see is, we’ve got many of the skills other parts of the world have, but here, they're often frustrated; they’re despondent, they're dependent, and they find themselves frustrated by inaction. Transformation requires an all-in approach, and sometimes that is lacking in Africa. So, reversing that trend here is critical to our future success.

Agenda 2063 is Africa’s blueprint and master plan to transform the continent into a global powerhouse of the future.

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New African Union Commission headquarters building in Addis Ababa, Ethiopia
The New African Union Commission headquarters building in Addis Ababa, Ethiopia

Kornik: You mentioned skills, I know one of the goals of NEPAD is to build human resources on the continent…

Bekele-Thomas: Absolutely. In Africa, we are crying for more skilled labor. What we would like is to train young people with skills and have them join the public sector, even more so than the private sector, to be frank. We need governments to change; we need governments to be modern; we need governments to be effective and efficient. And skilled young people could lead the way for Africa, especially when it comes to technology. They are wired differently than us, Joe. This would help Africa keep skilled young people here. How do we do that? It's really just putting our heads together and making sure there is proper training and a commitment and coordination among governments in Africa.

Kornik: When you look at the eight priority areas of NEPAD, almost all of them fall under traditional aspects of ESG. Is there one area of ESG you think will take precedence on the continent over the next decade?

Bekele-Thomas: Whether we are talking about the public sector or the private sector, ESG should be the foundational principle in everything we do. We have just one planet. We have population that is growing very quickly—that’s particularly true in Africa—and we really need to make sure we live in harmony and not in conflict. The three areas of ESG are so intertwined and interlinked. There is no way we can segment them, and a siloed approach to problem solving will not work. This has brought us to where we are today. We have to look at these three areas in a very interdependent manner. And we must make sure that we tackle the three issues at the same time.

Kornik: NEPAD specifically calls out the environment, climate, water and food security, human rights, agriculture and education. Do you think NEPAD can make significant progress in Africa in these areas over the next decade or so?

Bekele-Thomas: Let me say this: We are trying to correct the past; we are trying to meet the challenges of today and we are trying to build the future all at the same time. We have big challenges in Africa, but we believe we have bigger solutions. We have got specific programs that address the past, but we are also building our programs to make sure that Africa’s future is sustainable and prosperous. And that means things like food security and a comprehensive continental agricultural program that we’ve put in place. But we only get one chance, so we have to make sure this comprehensive agriculture program is implemented correctly. And we're pushing all governments to make sure they are ethical and acting with integrity, to make sure that their actions are citizen-centered and people-focused. Human rights remain a big issue in Africa. And again, we are addressing the past but focused on the future. We are focused on the environment, climate and water scarcity… huge issues for Africa. We have land restoration, for example, which is very critical and very important for agriculture. Healthcare and our health systems are about human rights. All these issued are intertwined and getting the governments of Africa to cooperate and coordinate on a response is very challenging. Integration is that much more difficult with our current infrastructure challenges. That’s why we have a comprehensive program on infrastructure development, on roads, railways and rivers. Many of these programs are ready for investment, so we must get them moving.

Whether we are talking about the public sector or the private sector, ESG should be the foundational principle in everything we do.

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Local African woman harvesting tea leaves
Local African woman harvesting tea leaves

Kornik: You touched on a lot there and how important it will be for Africa to tackle those problems for the success of the continent in the future. How optimistic are you? Where do you think Africa will be on the global stage when it comes to some of the sustainability and ESG initiatives in, say, 2035?

Bekele-Thomas: I think it's very important that we are optimistic because that’s one way we can galvanize our energy to do better, right? I am extremely optimistic. I know Africa cannot do it alone. We are all interconnected; it’s a collaborative effort. We share the same planet, and I see Africa having a bright future. Africa is rising. I believe if we just do the right things and harness all this positivity in Africa, we will be fine. Africa has what it takes to be better in the coming years if we implement our Agenda 2063, which is a very inclusive, very comprehensive, very visionary document. But like I said, good intentions will not be enough. We need to have the processes; we need to have the foresight; we need to have the strategic scenario-planning in place. We need to accelerate implementation. And it’s important that we have the private sector support the implementation of Agenda 2063—that will lead to economic advancement in Africa. And the better the economy, the more stakeholders we have, which will lead to prosperity and less poverty. My dream for the future is to see a connected continent and an integrated Africa; a resilient and self-reliant Africa; a continent that celebrates it natural resources; an Africa that is growing and economically viable; an ethical Africa with no inequality. That is my vision for Africa, and I believe it will become true.

My dream for the future is to see a connected continent and an integrated Africa.

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Future of sustainability and ESG standards with Janine Guillot, Value Reporting Foundation CEO

Future of sustainability and ESG standards with Janine Guillot, Value Reporting Foundation CEO

Janine Guillot is CEO of the Value Reporting Foundation, a nonprofit that helps businesses and investors develop a shared understanding of drivers of enterprise value. Prior, Janine was CEO of the Sustainability Accounting Standards Board foundation, or SASB. Under her leadership, SASB and the International Integrated Reporting Council merged in 2021 to become the Value Reporting Foundation, and on August 1, 2022 the Value Reporting Foundation consolidated into the IFRS Foundation and became a part of the International Sustainability Standards Board, or ISSB. Bob Hirth, a senior managing director with Protiviti and former vice chair of the SASB, interviews Janine about what’s on the agenda of the ISSB and the future of ESG standard-setting and reporting.


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Future of sustainability and ESG standards with Janine Guillot, Value Reporting Foundation CEO

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource looking into the future to examine big themes that will impact the C-suite and executive boardrooms worldwide.

Today, we’re exploring the future of ESG and its strategic implications for people, process and the planet, and I’m excited to welcome in Janine Guillot, CEO at the Value Reporting Foundation, a nonprofit that helps businesses and investors develop a shared understanding of drivers of enterprise value. She’s also a special adviser to the ISSB chair at the IFRS Foundation. Prior, Janine was CEO of the Sustainability Accounting Standards Board foundation, or SASB. Under her leadership, SASB and the International Integrated Reporting Council merged in 2021 to become the Value Reporting Foundation, and on August 1, the Value Reporting Foundation consolidated into the IFRS Foundation and became a part of the International Sustainability Standards Board, or ISSB.

Today, I’m going to hand off the interviewing duties to my Protiviti colleague Bob Hirth. Bob is a senior managing director and vice chair of the SASB standards board. Bob, I’ll turn it over to you to begin.

Bob Hirth: Thanks, Joe. Janine, it’s great to have you with us today. Thanks for taking time to talk about this very important topic.

Janine Guillot: Thanks, Bob. It’s great to be here.

Bob Hirth: I know your background, of course, because you’ve worked at SASB for about five years or more, but I’d like to have you give the audience a little thumbnail of your background and experience, because as I think about it, all of the different things you have done in your career have built to create this role you have around sustainability and ESG, your role at the SASB, the Value Reporting Foundation and now the ISSB.

Janine Guillot: Thanks, Bob, and thanks for saying that, because I do feel like what I’m doing today collectively builds on everything I’ve done. If I go all the way back to the beginning of my career, I started as a CPA, as an accountant, did auditing, and then spent years in technical accounting, accounting policy, commenting to accounting standard-setters. That was the beginning of my career, and then I broadened into CFO roles, broadened into chief operating officer roles and investment management, and finally, was at CalPERS as chief operating investment officer in pension funds.

And it was really that I got very interested in sustainability, because I led the development of our investment beliefs, and those investment beliefs laid out the concept that we wanted to integrate sustainability, or ESG, into investment decision-making, because we believe they impact long-term risk and return. And the challenge was, we didn’t have the data or the information to do that in any kind of a rigorous or scalable or cost-effective way, and that’s what led me to SASB. SASB brought together the interests in integrated sustainability and decision-making with my chief operating officer roles, with experience with information and data and technology, with my ancient experience in accounting and auditing.

Bob Hirth: Great. Thanks. I know that as you’ve been involved in those roles and with the SASB and the Value Reporting Foundation, you’ve seen an evolution of sustainability, corporate social responsibility, ESG. Take us back through some of your observations about the milestones that have occurred in this evolution.

Janine Guillot: I’ll talk about that from two directions: the milestones in the investment side, and then the milestones in the reporting landscape side. On the investment side, the most fundamental shift in the last 10 years has been large-scale acceptance of the idea in the investment community that sustainability factors impact risk and return, and that in order for a company to succeed over the long term, that company needs to manage sustainability factors effectively—and I mean sustainability very broadly: human capital, community relationships, environmental—and have strong governance over all of those issues, and that if you’re a long-term investor and you’re trying to evaluate a company, you need information beyond what you’d get traditionally out of financial statements. You need a broader information set about how a company is managing ESG factors. That’s been a massive change in the last 10 years.

On the reporting-ecosystem side, SASB gets a lot of credit for this: Our founder, Dr. Jean Rogers, her vision was that you could take the discipline of accounting standard-setting and apply that same discipline to sustainability disclosure, and what that ultimately results in is putting sustainability information on an equal footing as traditional financial information in terms of importance, and we’ve seen that shift in the last two to three years, Bob.

Bob Hirth: You talked about the investor. We’ll call the investor a stakeholder, but today we know that there are other stakeholders. Can you talk about who some of those other stakeholders are and why they also have an interest in this topic in addition to the traditional stakeholder, the investor?

Janine Guillot: If you think about traditional corporate reporting—if you think back 20, 30 years—the primary user of corporate reporting was fairly homogenous. Let’s call them, broadly, investors and other providers of financial capital, or underwriters of financial risk. They’re the primary users of much corporate reporting. Today, it’s a very different world. Today, employees are interested in corporate reporting, civil society and NGOs, customers, communities, regulators, a much broader array of regulators than what may have been traditionally interested. So, corporate reporting has gone from having this one relatively homogenous user—traditional users of financial statements—to being something that is of interest to a much broader array of stakeholders.

Now, I am a big believer in one size doesn’t fit all. I don’t think that information that’s targeted at investor users is necessarily going to be the information that a customer wants to see or that an employee wants to see. Companies have to think about reporting just as a communication strategy, and you need to tailor your communications to the user, but it is important to acknowledge that there’s a very broad array of stakeholders for corporate information now.

Bob Hirth: Great. Thank you. Janine, your background has included being the CEO of the Sustainability Accounting Standards Board foundation, the CEO of the Value Reporting Foundation, which was a combination of several organizations, and now, as we look at not your background, but your future, you’ve recently been appointed as what I’ll call a special adviser to the International Sustainability Standards Board. What does that entail, Janine, and what’s your view of what’s been accomplished, what they’re trying to accomplish, or what’s on your agenda for this ISSB?

Janine Guillot: The reason I am transitioning into that adviser role is that the Value Reporting Foundation is going to merge into the IFRS Foundation to help establish the ISSB. So, that means that the SASB Standards and the Integrated Reporting Framework will become part of the IFRS Foundation and tools that the ISSB can use, and what the ISSB is trying to do, we’re trying to be responsive to market demand. We’ve heard market demand for years for simplification and consolidation of the sustainability disclosure landscape. For a long time, it’s been a voluntary world, it’s been a lot of innovation and it’s been a lot of different organizations that have naturally developed to meet different needs.

So, like all things, you often think about that change curve where you go through innovation to maturity and scale, and that change curve is what we’re going through right now in the sustainability-disclosure landscape. And so we always felt strongly, going all the way back to the SASB days, that ultimately, to be responsive to market demand for simplification, entities would have to consolidate, and so that’s what’s happening. Several entities are consolidating to support the International Sustainability Standards Board, and the goal of the International Sustainability Standards Board is to establish a global baseline of sustainability-disclosure standards that can be used by companies and investors around the world, and used by regulators in multiple jurisdictions, so investors have access to comparable information.

Bob Hirth: Janine, as a reference point for our audience, to people who want to learn more about the International Sustainability Standards Board, where would they look for more information?

Janine Guillot: The IFRS Foundation website. The ISSB has a LinkedIn presence. You can sign up for ongoing updates, and then you should also go to SASB.org, make sure you sign up for ongoing updates around the SASB Standards, and those communications will be coordinated going forward.

Bob Hirth: Great. The way that you laid this out—and you’re so articulate about this—it seems so well-organized and so easy, but we know that’s not true. What do you think the challenges are? What are the obstacles or the hard points going to be about this ESG and sustainability journey, standard-setting, and so on?

Janine Guillot: Bob, you being a former SASB Standards board member, probably understand one of the biggest challenges better than most. One of the things that is unique about sustainability disclosure is that it is very important to think about sustainability disclosure through an industry lens, and that’s because the issues that are relevant to financial performance and the resilience of a business—the issues vary by industry.

Water is a great example of that. Water is an inherently very significant issue in the agriculture industry or in the beverage industry. Water may be a less significant issue in the consulting industry, and so when you think about sustainability disclosure, it’s important to think through an industry lens.

As SASB, particularly, which has always developed industry-based standards, merges into the ISSB, the accounting-standards infrastructure and regulatory-disclosure landscape historically has not been built around industry-based standards, and so investors value industry-based standards—they’re cost-effective for companies—but it is a very significant education effort around shifting the thinking of traditional accounting standard-setting and regulation of financial disclosure to include an industry lens. That is relatively new and different.

Bob Hirth: Yes, I completely agree with you—very important. Janine, with your background, do you think about yourself as Janine Guillot, business consultant? You’re out talking to companies, and you’re presenting to the boards, and with your seniority and experience, lots of companies would like to talk to you. If you went out there, what advice would you be giving them? What should they be doing, or focused on, to ensure that they succeed in this arena?

Janine Guillot: Probably the most important thing is to not think about sustainability as a silo. Ultimately, this is not to think about it as a silo or not to think about it only as about disclosure. It’s much deeper than that. How is sustainability integrated into business strategy, into governance, into risk management? Then, disclosure becomes the outcome of those processes once it’s clear how sustainability is relevant to your business and your industry, and how it’s integrated into strategy and risk and governance, and it’s how to disclose the relevant information that’s relevant to your business.

Bob Hirth: Very good. Thanks. Our program here at Protiviti is called VISION, so you might look at that there’s a forward-looking connotation to that. So, as you look forward—and let’s go out x years, or a decade—what is your vision for this topic? What do you think is going to happen? What would you like to happen? Where would you like this to go?

Janine Guillot: We often use the analogy to financial accounting standards, which we all take for granted now, but the reality is, they haven’t existed forever. Generally accepted accounting standards have only come into being since the late 1930s, when people even started to talk about them for the first time, and it’s been decades for them to mature.

What we’re ultimately trying to accomplish is generally accepted sustainability-disclosure standards, and what financial accounting standards did is, they created a common language between companies and investors to communicate about financial performance. And what we’re trying to do with sustainability-disclosure standards is create a common language for companies and investors to communicate about sustainability performance, but very important is that it’s not disclosure for disclosure’s sake. It’s disclosure to improve decision-making. That’s decision-making by companies and decision-making by investors, and that will be the ultimate test of success: Can we develop standards that communicate decision-useful information in a cost-effective way?

Bob Hirth: Janine, again, thanks so much for your time, and I know you’re a busy traveler with all your new responsibilities, but, again, we really appreciate your time today and your insights.

Janine Guillot: Thanks, Bob.

Joe Kornik: Thanks, Bob, and thanks, Janine, for that great conversation, and thank you for watching the VISION by Protiviti interview. For Bob and Janine, I’m Joe Kornik. We’ll see you next time.

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Janine Guillot is CEO of the Value Reporting Foundation, a nonprofit that helps businesses and investors develop a shared understanding of drivers of enterprise value, including how value is created, preserved or eroded over time. Prior, Janine was CEO of the Sustainability Accounting Standards Board Foundation (SASB). Under her leadership, SASB and the International Integrated Reporting Council (IIRC) merged to become the Value Reporting Foundation.

Janine Guillot
Value Reporting Foundation
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Bob Hirth is a Senior Managing Director at Protiviti and provides a broad array of senior leadership and counsel in the areas of internal control, internal audit, people development, client relationships and revenue growth. Bob was one of the founding managing directors of Protiviti at its inception in 2002. He was appointed to the standard setting board of the Sustainability Accounting Standards Board (SASB) upon its formation in 2017 and serves as a vice chair of the board. He currently heads SASB’s Technology and Communications sector committee.

Bob Hirth
Senior Managing Director, Protiviti
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Investing in ESG: A conversation with Sharadiya Dasgupta, founding partner of Blue Dot Capital

Investing in ESG: A conversation with Sharadiya Dasgupta, founding partner of Blue Dot Capital

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Sharadiya Dasgupta is a founding partner of Blue Dot Capital where she leads the firm’s strategy, client partnerships and industry engagement and advises CEOs, CIOs and family-office principals. Blue Dot is a sustainable-finance consultancy that partners with financial services firms to support the end-to-end development and execution of ESG and impact-investing programs, capabilities and products. Joe Kornik, Editor-in-Chief of VISION by Protiviti, talks with Dasgupta about the firm’s goals, projects and impact on the future of ESG.

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Sharadiya Dasgupta is founding partner of Blue Dot Capital where she leads the firm’s strategy, client partnerships and industry engagement, as well as advising CEOs, CIOs and family-office principals. Blue Dot is a sustainable finance consultancy that partners with financial services firms to support the end-to-end development and execution of ESG and impact-investing programs, capabilities and products.

Sharadiya Dasgupta
Founding Partner, Blue Dot Capital
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VISION PODCAST

Follow the VISION by Protiviti podcast where we put megatrends under the microscope and look into the future to examine the strategic implications of those transformational shifts that will impact the C-suite and executive boardrooms worldwide. In this ongoing series, we invite some of today’s most innovative and insightful thinkers — from both inside and outside Protiviti — to share their vision of the future and explore how today’s big ideas will impact business over the next decade and beyond.

Podcast transcript

Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource looking into the future to examine the big themes that will impact the C-suite and executive board rooms worldwide. Today, we’re exploring the future of ESG and its strategic implications for people, process and the planet, and I’m happy to be joined today by Sharadiya Dasgupta, founding partner of Blue Dot Capital, where she leads the firm’s strategy, client partnerships and industry engagement, as well as advising CEOs, CIOs and family-office principals. Blue Dot is a sustainable-finance consultancy that partners with financial services firms to support the end-to-end development and execution of ESG and impact investing programs, capabilities and products. Sharadiya, thank you so much for joining me on the podcast today.

Sharadiya Dasgupta: Thank you so much for having me, Joe. Looking forward to the conversation.

Joe Kornik: So, you’re a founding partner, as I mentioned in my introduction there, of Blue Dot Capital. Can you tell me a little bit about Blue Dot and what it does, and how it’s helping to shape the future of ESG?

Sharadiya Dasgupta: We are indeed, as you’ve so elegantly described in your introduction, Blue Dot Capital. We are an ESG and impact-investing consulting firm, and we have a narrow and deep focus on serving the asset management community. We work with investment management firms investing across public and private markets, and support the development of their in-house ESG and impact-investing policies, strategies and program capabilities.

In terms of shaping the future of ESG, well, that’s a great aspiration to have. We are starting out, and it’s not just us as a firm that’s starting out. I think the whole ESG space has so much room to grow in rigor and sophistication, and so much evolution will happen, so it will be prematurely self-congratulatory for me to say if we are shaping the future of ESG. We aspire to. Time will tell. Also, if we do succeed in earning that validation, I want that recognition to come from our clients and partners, and not self-certified, so I won’t comment on that right away.

Having said that, we are fortunate to work on a range of interesting ESG projects with our clients, some of which have pretty novel components, so let me share a small subset with you and your listeners. We are currently working with the investment team of a private market-investment platform to explore and understand, what does a sustainable mobility strategy look like? Sustainable mobility is a big field that involves multiple industries, so we are trying to understand, what are the impact objectives that a private-market investment firm can try if they launch a sustainable-mobility fund? What should be the hierarchy of those objectives and themes? What are some of the unintended consequences that we should be guarding against when designing this investment strategy?

The second example is related to supply chain. As we all know, supply chain continues to be the topic du jour, so we are working with a very large global data company that’s working on developing the blueprint of what an ESG-informed supply chain financing might look like, and we are doing that in partnership with a consortium of leading lenders. So, we do have a front-row seat to see how the ESG conversation is evolving, and we are excited about that.

Joe Kornik: Yes, it sounds like it, and those are some really interesting examples that you just brought up, which is really interesting. And you are in the forefront of the investment that’s happening in ESG, and there’s been a real rush of money into that space—into ESG investment funds—certainly, since the pandemic. Sustainable business has come of age in the last few years. Do you think that movement toward ESG investing is real and lasting, and where do you see it today, and where do you see it going in the future?

Sharadiya Dasgupta: Climate change and the need to decarbonize and enhance our resource efficiency, that’s a business imperative. That will require businesses to adapt and innovate, and I do not see any intelligent tenable resistance to that any longer. At best, it’s a matter of time. It’s your choice as business leaders whether you start acknowledging it now and you’re taking strategic action, or you could buy yourself a little more time and delay by another few years, but there will be some tradeoffs for doing that, but it’s just a matter of time. I don’t think there is a question of whether you need to do it or not.

Parallelly, there are also some immense demographic and socioeconomic shifts happening that have implication for consumer preferences and buying habits, again, that impacts the bottom line and that impacts investment-allocation decisions. To answer your question, the practice of incorporating ESG into business decisions and into investment decisions, that will continue.

However, some of the ways of incorporating ESG and some of the mechanisms that we have practiced will have to evolve and will have to mature. For example, we often hear people—including, if I’m not mistaken, some of your guests on your earlier episodes, have talked about the problem of ESG data. You hear people often complain about the lack of quality ESG data. Regulators, and to a certain degree, market forces will take care of that. Regulators are already setting disclosure regulations for publicly listed companies, for asset management firms. All of that will end up fixing this problem to a large degree.

However, the problem that is not often talked about enough is the lack of education within investment management firms to analyze and draw meaningful insights from the data, because traditionally, the paradigms of investment management do not really have room for a more critical examination of some of these risks and opportunities that we are now talking about.

There has to be reorientation within investment management firms that force them to take a more expansive view of risks and opportunities. I hope that over the years to come, there is greater sophistication in how investment management firms analyze the ESG data that’s coming their way, and this cannot just be led by the ESG functions in the investment firm. This has to be truly cross-functional. There has to be buy-in from investment teams, and investment teams will also have to develop this capacity to analyze and critically examine this data. There has to be a cross-pollination between disciplines happening here. This cannot just be the responsibility of the ESG and climate teams of companies.

That’s one prediction as to how it will evolve, and my other prediction is that there has to be a disaggregated examination of ESG. ESG is convenient. It’s a convenient acronym and a convenient way to organize information. But E, S and G are such broad topics, and an expression like ESG can end up being reductive, so now there will be a trend away from using ESG as a catch-all, and sophisticated investment firms will have to develop capabilities and research functions that have the capacity to do a more critical and nuanced examination of the components of ESG and the subcomponents that are relevant to their investment theses and their investment philosophies. The gist is that the investment management profession will have to become more sophisticated in how they dissect and examine ESG information.

Joe Kornik: Interesting. I feel like both aspects of that answer did talk about talent and skills and capabilities, and I’m wondering: You mentioned that more rigorous analysis of the data is necessary. Do you think that’s just a tweak to reposition some existing professionals in these firms, or do you think that’s systemic? Are we not developing those skills and capabilities even at the B-school level or university level? Do you see a skills gap, I guess, is what I’m getting at around data and analysis as we move through the next several years.

Sharadiya Dasgupta: It’s a skills gap. You say that correctly. There is a skills gap, and the skills gap would have to be bridged. It cannot be just the conventional financial analysis–led conversation. It has to be a bigger table, and we need folks with an understanding of some of the operational aspects of ESG, folks with a sophisticated understanding of climate risks and their implications for economic growth and financial performance, so it is a skills gap.

But the good news is that there are enough initiatives already afoot that are tackling this problem of a skills gap. I know universities that have launched multicollaborative research efforts that have participation from the financial services industry, that have participation from academia and some of the other disciplines needed that we just talked about to broaden and deepen our understanding of the interplay of ESG and financial performance. Institutions like the CFA Society and CAIA, they will increasingly take a bigger role in making sure that investment management firms have the tool kit needed to continue to future-proof their investment decisions. A lot more is needed, but we are off to a good, promising start.

Joe Kornik: I mentioned in my introduction that Blue Dot also advises CEOs and CIOs, so I’d be curious: What’s the advice? When you advise business leaders on sustainable investing, for instance, what are some of the biggest challenges they’re facing? What are their needs, what are their questions and what is your advice to those business leaders on overcoming or navigating those challenges?

Sharadiya Dasgupta: One of the challenges that leadership teams are facing is how to balance the now with the 2030 or the 2050 goals, and it’s not easy. Just with the geopolitical developments and uncertainty, the energy-transition conversation now has connotations about energy security, etc., so a number of CIOs and business leaders have had to reevaluate their stance on fossil fuel investing and how they still continue to be an enabler in the decarbonization process that has to happen. Is it just a momentary hiccup? Does it have ramifications for medium-term plans?

It sounds sprawling and messy, and it is sprawling and messy, so we do not always have neat answers, and we are lucky to have clients who understand that there are no silver bullets, so the advice that we give our clients is to make sure that they are budgeting for and they are accounting for the long-term trends and that, as stewards of capital, they’re not taking their eyes off what are the long-term directional trends, but then, in that short to medium term, they are adjusting for some of the variability that we just talked about. That’s the biggest challenge that business leaders are facing.

Joe Kornik: You mentioned long-term quite a few times there in your answer, and you led me into my final question of the podcast, which is, if I were to ask you to look out a decade or more — this is VISION by Protiviti, so we like to bring smart people to the table and ask them to give us their vision of the future and where we’re headed in a decade or even more. We could even go all the way out to 2035, which is a nice, round number. What do you see in the investment space? How much progress do you think we’ll have made, or where do you think we’ll be, or what kind of world do you think we’ll be looking at in this space in, let’s say, 2035?

Sharadiya Dasgupta: Let me shift the timeline to 2030—2030 is a major milestone and we have a major climate milestone for collective humanity’s sake we should be able to reach, and I do want to be optimistic about it. We have to halve emissions by 2030, and I hope that we have achieved that, or we are not perilously away from achieving that goal by 2030. Some of the technology needed to take us there already exists. It’s a matter of scaling that technology. It’s a matter of making sure that the capital continues to flow toward those technologies.

And then, in some cases, we do not have the technology ready, but our human ingenuity can definitely come into play, and there is so much innovation that has just happened in the last decade or so. There is no reason to not expect that to continue. So, the trifecta of politics, policy and capital, hopefully, will get us to that critical halve-our-emissions milestone by 2030. That’s my overarching big hope, and investors and the financial system, more broadly, have to play a critical role in making that happen.

I also hope that by 2030, the elements of equity are fundamentally entrenched in the climate-change conversation. The climate-change discourse has major implications for equity, and the ideas of equity within countries—even within, let’s say, the United States. Predominantly, or to a large extent, the most brutal impact of climate change will be felt by the historically disadvantaged communities. So, again, you cannot have effective climate policy if you are not taking into account those considerations, but it’s not only within countries. Globally, again, the climate-change conversation has major ramifications for the capital flow into developing countries and to frontier economies.

So, I hope that, as I said, the trifecta of policy, politics and capital gets to a point by 2030, whereby these considerations of equitable growth are just inextricably entrenched into the climate-change conversation. Those would be my hopes and goals for 2030. To tie it back to how we are shaping the future of ESG, I hope that Blue Dot, along with all our peers and the financial services industry and other professional services firms like Protiviti, that we all play a role in making that happen.

Joe Kornik: You sound optimistic. Do you think that we’ll get there? Do you think we’ll be in a good spot in 2030?

Sharadiya Dasgupta: I woke up and chose hope today. You’ve caught me on a good day, so, yes, I am choosing to be hopeful today. As ESG professionals, it’s not always easy to hang on to hope. Obviously, there have been a few curveballs, especially on the political and policy-making side of things, which has been disappointing, but as professionals in the space, if we don’t hold on to hope, it will difficult for us to focus on action. Sometimes, the change and the progress feels incremental, but hopefully, it will all add up and we will be doing whatever it needs for us to get to that 2030 milestone or, as I said, at least in the ballpark so that we are not in for a major climate calamity for us and the future generations.

Joe Kornik: Well, hopeful seems like a really good place to end this podcast. Thanks, Sharadiya. This was fun and informative.

Sharadiya Dasgupta: Thank you, Joe. Thank you again for having me.

Joe Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to check out Vision.Protiviti.com to view all of our insights and content around the Future of ESG theme that we’re currently working. On behalf of Sharadiya, I’m Joe Kornik. Thanks for listening. We’ll see you next time.

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Pulse check on the planet: Inside The Economist’s global ESG rankings with Lyndsey Anderson

Pulse check on the planet: Inside The Economist’s global ESG rankings with Lyndsey Anderson

Lyndsey Anderson is Global Head of Research and Insight at The Economist Intelligence Unit (The EIU), the research arm of The Economist Group. The EIU offers insight and analysis of the economic and political developments in a complex global environment, identifying opportunities, trends and risks on a global scale. Anderson joins Joe Kornik, Editor-in-Chief of VISION by Protiviti, to discuss The EIU’s latest ESG Rating Service report, which measures the environmental, social and governance scores of 150 countries.

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ABOUT

Lyndsey Anderson
Global Head of Research and Insight
The Economist Intelligence Unit (EIU)

Lyndsey Anderson is Global Head of Research and Insight at The Economist Intelligent Unit (EIU), the research and analysis division of the Economist Group. In this role, she manages the global country and industry research teams and is responsible for overseeing the business' research output, ensuring that it meets the requirements of The Economist’s diverse customer base. She is passionate about the power of data, research and analysis to improve decision making and focused on ensuring that customers can easily get the insight they need. Lyndsey joined the EIU in 2020 from Fitch Solutions — the business information division of The Fitch Group, where she was Global Head of Research for the Country Risk and Industry Research business.

Video transcript

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource looking into the future to examine big themes that will impact the C-suite and executive board rooms worldwide. Today, we’re exploring the future of ESG, and I’m thrilled to be joined by Lyndsey Anderson, global head of research and insight at the Economist Intelligence Unit, to discuss its latest ESG rating service report, which measures the environmental, social and governance scores of 150 countries.

The Economist Intelligence Unit, the EIU, offers insight and analysis of the economic and political developments in a complex global environment, identifying opportunities, trends and risks on a global scale. Reviewed quarterly, the ratings identify the markets that are laden with reputational and compliance risks, as well as those that provide supportive environments for ethical operators. Lyndsey, thank you so much for joining me today.

Lyndsey Anderson: Thanks, Joe. It’s really nice to be talking with you.

Joe Kornik: The EIU gave each country a ranking in each category—the E, the S and the G—and that creates one overall ranking. The results are pretty eye-opening. Let’s start with the positive. Europe is far and away the big winner here, led by the Scandinavian countries in continental Europe. Eight European countries, and Australia and New Zealand, make up the top 10. Only 12 countries received an A rating, and 10 of them were in Europe. Why is that? What’s the driving force behind that success in Europe?

Lyndsey Anderson: It is quite stark in terms of that European outperformance, and it is particularly the environment, so it’s particularly the E strand that’s driving this and, in particular, its environmental policies are a major reason why so many European countries rank so highly. Governments in the European Union have invested significant funds into promoting the uptake of global energy sources. EU members also have strong common regulation when it comes to things like protection of water quality, waste disposal, forestry protection, etc.

It’s worth noting some outliers in that E pillar there, that environmental pillar. It’s not just richer, more developed countries that completely dominate that E pillar. The U.S., for example, trails emerging economies such as Chile and Costa Rica and others. If we look at the other two pillars, the social and the governance pillars, that trend is similar. European countries generally fare very well. One aspect of that is, the larger resources have allowed for the more effective regulation of some of these issues—things like corruption, labor conditions, civil rights abuses, etc. That contributes to Europe’s all-around strong showing in the rankings.

Joe Kornik: I’m going to ask you about the U.S. in a little bit, and I do want to dig a little deeper into that, but now I want to go to the flip side. China, Vietnam and Saudi Arabia were among some of the worst-performing countries. It seems we’re not going to be able to make too much progress for the planet without China coming along, so what were the biggest problems for these poor-performing countries? Was it the E, the S, the G, or a little bit of all three?

Lyndsey Anderson: Yes, it is a little bit of all three. China ranks 119th out of 150, Vietnam 122nd, Saudi Arabia 126th. These are low-ranking markets, and it is generally a weaker showing across all the three pillars, so they fall toward the bottom of the rankings for the E, the S and the G.

Vietnam gets its weakest score for the governance pillar. China and Saudi Arabia get their lowest scores for the social pillar. There is a fair bit of nuance within that. Both China and Saudi Arabia score badly for things like freedom of association, freedom of expression. Saudi Arabia performs worse on things like female labor participation and gender equality, whereas China performs worse for some of the labor rights indicators. None rank highly in terms of environmental performance, and that’s due to a limited transition away from fossil fuels, weak protection of domestic ecosystems, etc. It is a very mixed picture for these markets, and there is no one thing pinning them toward the bottom of the ratings, or an obvious area where they could improve and jump up.

Joe Kornik: The report illuminates for me—and maybe this is obvious—that climate and environment, and, specifically, decarbonization is where we still have a lot of heavy lifting to do. Do you also see those findings, and how do we get there? I know the report highlights some dire global situations, like drought in Africa. These are big problems, so I’m curious about how we tackle them. Is there a role for business leaders in solving some of these biggest ESG challenges that we have in front of us?

Lyndsey Anderson: Yes. That’s spot-on in terms of climate and the environment. The environment remains the worst-performing of the three pillars in our ESG ratings. We’ve got only four countries—Denmark, Estonia, Latvia and Lithuania—that received an A rating for that pillar, compared to 16 markets that received an A in the social pillar, 30 markets that received an A in the governance pillar.

And, returning to Europe, the European Union is a good example of how rapidly business investment can respond to ambitious decarbonization, ambitious broader environmental policies. EU countries have been some of the quickest adopters of renewable energy. They have significantly expanded the areas of legally protected ecosystems, made progress with reforestation efforts, and this has all contributed to these highest scores. In terms of how we tackle the issues, other large economies that currently perform far worse on environmental issues, on that E pillar, can learn a lot from the EU. The likes of the U.S., India, China can probably achieve quite rapid change if stringent environmental regulations were even gradually put in place because of the business investment that could then follow.

Notably, of course, the implementation of these regulations can then have global ripple effects, global knock-on impact. For example, sticking with the EU, the minimum standards that have been applied on all sorts of environmental issues, ranging from ethical sourcing of minerals to food quality, they’re forcing suppliers in non-EU countries to align their own products with these higher EU practices. High standards in these larger, better-performing economies can have positive ripple effects on the rest of the world.

In terms of the role of businesses and business leaders, businesses have an enormous role to play in terms of addressing these challenges. A discussion on regulation and policy can sometimes dominate when we’re trying to think in general terms about what progress is being made and what kind of issues are still outstanding. But business leaders and, of course, consumers, the customers of businesses, have a huge role to play in terms of bringing about change. An advantage that many businesses have is that they are often able to be more flexible and more nimble. They can change strategy more quickly in response to emerging challenges than governments often can be, and a lot of very big corporations are also operating in a global marketplace. They’re maybe less constrained by needing to respond to ESG challenges in a way that has to serve a specific national interest.

A crucial first step in terms of the role of businesses, naturally, where a lot of progress has been made, is to ensure that businesses understand the challenges, understand the diverse range of risks that these challenges pose to their businesses. That’s ranging from reputational and compliance risks posed by operating in certain markets to actual physical and infrastructural risks associated with the environmental pillar in particular, with climate change—things like the potential for political instability rise as a result of ESG factors, which can obviously have a very destabilizing effect on businesses at a local level.

Of course, there is an enormous amount of research and data that demonstrates the value creation that a proper strategy for addressing these sorts of ESG challenges can have for businesses. That’s across that whole spectrum, from reducing these sorts of operating risks to missing against potential reputational damage to reducing costs by investing in efficient technologies. Businesses have the potential to be complete partners in addressing these challenges rather than being led by regulation.

It’s not to suggest that contributing to solving some of these ESG-related issues is not without its challenges for businesses, because as you say, Joe, these are big problems, and solving them might necessitate things like more collaboration between businesses that are historically used to being in competition with each other, for example. So, there is this corporate cultural-change challenge that we’ll need to follow on in some areas from this—more ready acknowledgment that individually tackling these things just makes sense in terms of risk mitigation, reputational management, the ability to attract investment, etc.

Joe Kornik: When these business leaders look out a decade or a more, it’s pretty clear that climate and environment are the front-burner issues for a lot of them. Where do you see social and governance globally a decade from now? Where do you think that they will rank? Do you think that the environment will still be the big thing that will be on our plates, or where do you see social and governance in a decade

Lyndsey Anderson: With that time frame, the environment is likely to remain the most relevant aspect of ESG analysis, and that’s due to the increasingly visible impact of climate change and environmental degradation on the world and, obviously, the urgency in terms of the need for action. I mentioned earlier, we’ve got four markets that score an A in that pillar, so that also shows you the amount that still needs to be done. We’ve got a situation where many countries have set this net-zero goals for 2050, and to achieve those, they’ll have to accelerate their energy transition markedly over the coming decade, and that will just increase the prominence of environment on the agenda.

It feels like social issues have come into prominence a little bit more gradually, but we would expect them to continue to advance. So, particularly with things like gender equality and minority rights, they will continue to advance up the agenda and grow in importance. This just feels like a less well-served area in terms of the availability of data to track and measure progress. Maybe less uniformity in terms of agreeing what constitutes good, but the growing calls for this information do support the view that it is going to continue to advance as an issue, albeit, possibly over the next decade, secondarily to the environment. Governance is more complicated. Of course, it remains important, but the increasing size and importance of autocratic economies to the global economy—most obviously China—does complicate the advancement of democratic governance ideals and progress and pushing this up the agenda.

Joe Kornik: One way to think about the future is to take a look at some of the scores and rankings in emerging economies. Uruguay, Chile, Costa Rica did very well, but some of the emerging manufacturing hubs, like Morocco, India and China, did not. When you look at those two sides of the coin, what does that tell you about the future of ESG in 2030 and beyond?

Lyndsey Anderson: As we discussed already, ESG issues are evidently an increasingly important consideration for businesses. Operating in countries with weak performance in aspects of ESG, whether that’s environmental protection or labor rights, can carry significant reputational damage or compliance risks. These considerations do have the potential to slow investment into these weaker-performing markets to the benefit of those economies that could pose lower reputation or compliance risks. Now, of course, manufacturing hubs do tend to have a large energy consumption. Unless this hub that is drawing investment away has a clean-energy matrix, more investment in manufacturing and better-performing markets risks just pushing up emissions and in turn worsening that country’s environmental rating.

The energy mix of those markets that could draw some of that manufacturing investment away is an important thing to consider if we think about that decade-long investment trend. On the flip side of course, the emergence of manufacturing investment going elsewhere does have the potential to drive positive reform in some of the emerging manufacturing hubs that you mentioned. Places like Morocco, Vietnam, Ethiopia help facilitate and drive regulatory change over time, and that brings me back to this earlier point I made about the role of business leaders in choosing where to invest. Businesses can contribute to change, and that is from both the impact-investing standpoint and in terms of encouraging and driving reform.

Joe Kornik: You mentioned earlier political unrest when we talk about the S, the social. There are plenty of alarming findings in this report, but one of the biggest, or one of the most alarming, at least as far as I’m concerned, is the decline of democracy that the report points out that we’re seeing worldwide. What do you make of that? What does that mean for the future of the planet and people on the planet?

Lyndsey Anderson: The scores for governance in our ESG rating, they do echo a trend in the EIU’s annual democracy-index report, an annual report that we produce looking at the state of democracy globally. There’s been a trend for several years how that the world has been experiencing this democratic recession since around 2015. The pandemic, COVID-19, has accelerated that in many ways. That’s raised the power that the governments have over people’s lives, which, in some cases, has led to the erosion of individual freedoms. There have been more country-specific setbacks for democracy, as well as coups on the African continent in 2021, particularly in West Africa.

Probably the biggest trend we see, or the biggest determinant of how democratic values could evolve over the next decade, is something that our analysts have termed the China challenge. China’s economic performance over the past 40 years has created this formidable competitor to the U.S. China’s increasingly vocal claims about the superiority of its governance model have put Western leaders on the defensive, and, ultimately, a reduction in any commitment by countries to democracy and to personal freedoms would result in a sustained weaker performance in the social and governance aspects of ESG over the medium term.

Joe Kornik: I said I would circle back to the U.S. This is my final question for you—you’ve been very generous of your time. I’m based in the U.S., and a lot of our readers for the VISION program are as well, so I have to ask you how the U.S. is doing: Where did the U.S. rank overall, and what do you see as some of its major challenges for the future?

Lyndsey Anderson: The U.S. as a striking underperformer in our ESG rating is the reality. It ranks 33rd out of 150 markets covered. That means it trails most European Union members. It trails many other developed economies such as Australia, New Zealand, Canada, Japan, and it trailed some emerging economies as well—the likes of Uruguay and Chile. The ratings don’t neatly align with income levels—in particular, our data shows that there isn’t a particularly strong linkage between how affluent a country is and its environmental performance as compared to other pillars. Now, there is this stronger correlation between income and the scores for social and the governance pillars. I think that’s what makes the U.S.’s underperformance more striking.

The U.S. bucks the trend where richer countries generally perform more strongly in those social and governance parts of the ratings. The U.S. is ranked 19th out of 150 markets for the social pillar. It’s ranked 21st out of 150 for the governance pillar. It’s bucking the trend in terms of things like the relatively weak protection of labor rights in the U.S. compared to in other developed economies, for example. The environmental pillar is without a doubt the area where the U.S. needs to make more progress in order to climb up the ESG ranking. In the environmental pillar, it ranks 59th out of 150 markets, and it’s dragged down by still-limited uptake of renewable energy, still-significant exports of coal and oil. It still has a long way to go on that E pillar in particular.

Joe Kornik: Thanks, Lyndsey.

Lyndsey Anderson: Thanks very much, Joe. It’s been nice to talk to you.

Joe Kornik: I know those ratings are updated quarterly, so I’ll be checking back in for sure. If you’d like to learn more about the EIU’s ESG Rating Service Report or read more about the rankings, check out the link to the executive summary that we provide in the introduction and show notes. Thanks for watching this VISION by Protiviti interview with the EIU. I’m Joe Kornik, and we’ll see you next time.

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Energy expert: A global ‘grand bargain’ will be required for complicated climate transition in India

Energy expert: A global ‘grand bargain’ will be required for complicated climate transition in India

A heatwave lingered across northern India for much of the pre-monsoon period from March and into June, bringing temperatures that approached 50°C (122°F) in some states and power outages for millions. The government responded to the energy shortfall by announcing an increase in coal generation and the re-opening of more than 100 mothballed mines.


ABOUT

Alan Rosling
Co-founder
ECube

Alan Rosling is a global business pioneer and expert on India and climate transition. He is author of the bestseller Boom Country: The New Wave of Indian Enterprise. Alan is co-founder of ECube, a specialist ESG platform in India, which is establishing a climate finance institution. He is Chairman of Azure Power. Previously, he was co-founder of Kiran Energy, one of India’s first solar power developers. Rosling spent five years as Executive Director of Tata Sons Limited and was Chairman of the Jardine Matheson Group in India.

The irony of responding to mounting evidence of climate change by actions which boost carbon emissions illustrates a core conundrum for India. On the one hand, India is among the countries most vulnerable to changes in the climate—including a risk to the monsoon pattern on which hundreds of millions of farmers rely, receding glaciers in the Himalayas which feed the great rivers of the north and east, and more intense storms and flooding.

Yet the politics of a noisy democracy make the hard decisions required for India’s sorely needed energy transition more difficult. The rising middle class aspire to the carbon-heavy lifestyles they see on streaming content—cars, travel and summer air conditioning. And politicians shy away from taking on the vested interests of King Coal, at least not while 77% of India’s power is generated in government-owned thermal plants and more than a million jobs in key states depend on the coal industry and its supply chain.

By 2030, India will be the most populous country on the planet and have the second largest economy behind only China. It’s critically important for us all that India gets this right.

At COP26 in Glasgow in November 2021, India’s climate dilemma was again on display. The Prime Minister, Narendra Modi, was an early advocate of climate action from his years as Chief Minister of Gujarat, and published a book entitled Convenient Action calling for radical policy change. He pleasantly surprised many by coming to Glasgow offering a more ambitious national contribution by 2030 and a net zero target date of 2070. In a fast-growing economy with a very low per-capita carbon footprint, these were genuinely stretching commitments. Yet it was India which, on the last scheduled day of the conference, held up the final Climate Pact by refusing to agree to the intent to “phase out” unabated coal usage, and instead settling for “phasing down” coal.

By 2030, India will be the most populous country on the planet and have the second largest economy behind only China. It’s critically important for us all that India gets this right.

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Prime Minister, Narendra Modi at COP26 discussing India’s climate dilemma
Narendra Modi at COP26

From “King Coal” to renewables

In many ways, India’s policy response to the challenge of climate change has been impressive. Electricity generation is India’s lead source of carbon, representing some 35% of the country’s 3,200 MTCO2e (metric tons of carbon dioxide equivalent) annual emissions. The country has rapidly become one of the largest renewable energy markets globally with more than 100 gigawatt (GW) of solar and wind assets contributing 36% of electricity capacity and 11% of output. The new target announced by Modi is for 500 GW of non-fossil generation by 2030, by which time half of all energy is to come from renewable sources.

India has focused particularly on solar generation. The National Solar Mission has succeeded in making solar the most cost-competitive and fastest growing power source. Falling capital costs and an intensely competitive market have resulted in solar generation at prices as low as 3 U.S. cents/kilowatt-hour (KwH), before the recent uptick in capital costs. Modi has led the creation of the International Solar Alliance and conceived the One Sun One World One Grid initiative designed to connect national grids to make solar a truly global resource.

Similarly ambitious has been India’s drive to decarbonise transportation, which accounts for some 10% of emissions. The target for blending of biofuels was raised to 20% by 2025. The government has announced the intent to electrify transportation by 2030 and is offering subsidies to the electric vehicle (EV) sector through the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India policy. In 2021, 329,000 electric vehicles were sold, up 169% from the year before. Most EVs so far are two- and three-wheelers for commercial use for intra-city passenger and goods movement.

Cohesive policy frameworks and increasingly compelling economics seem set to deliver material decarbonisation of electricity and road transportation in India over the coming decade. However, India’s energy transition towards carbon neutrality is far more challenged in harder-to-abate sectors such as agriculture (15% of emissions), buildings and construction (15%), and industry (11%), according to London’s Institute for Energy Economics and Financial Analysis.

In February 2022, the government announced its green hydrogen policy, aiming to achieve 5 metric tons (MT) of output by 2030. While currently green hydrogen is an expensive option, plans have been announced to address the costs so energy-intensive industries such as steel, cement and aluminium can replace process coal and gas. In June 2022, Adani Group, India’s fastest-growing diversified business portfolio, and energy supermajor TotalEnergies of France partnered to create the world’s largest green hydrogen ecosystem, intending to invest $50 billion in green hydrogen in India. 

169%

In 2021, 329,000 electric vehicles were sold, up 169% from the year before. 

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Hydrogen fuel in transportation vehicle
Hydrogen fuel in transportation vehicle

One alternative or complementary approach is large-scale carbon capture and storage (CCS). India is thought to have the geological capacity to store 500 to 1,000 gigatons (GT) of carbon. However, this option is extremely costly and probably not viable, at least not any time soon.

A looming carbon tax

Given the economic realities, the only credible conclusion is that India’s energy transition beyond 2030 and journey to net carbon neutrality will require some form of carbon pricing. Scale manufacturing has driven down solar costs, and now seems set to do the same with batteries. But frontier technologies like green hydrogen and CCS are unlikely to be as attractive economically, even in the medium term, compared with their dirty and incumbent rivals. The slow pace of adoption of energy efficiency measures in homes, buildings and small businesses demonstrates the market lag that needs to be overcome in millions of distributed decisions across the vast country. Regulation and incentives are unlikely to force the pace of change needed without a robust price signalling that can only come from a carbon tax.

The Indian government, and indeed ordinary Indians, are justifiably irritated when they are lectured by foreigners about the steps India should take to control carbon emissions. India’s contribution to the greenhouse gases (GHGs) that are causing rising temperatures has been minimal. Per capita, it emits a fraction of the GHGs of the United States, Europe or China. Indians have every right to enjoy the economic growth that is now gathering pace and the benefits that derive from a more energy-intensive lifestyle. The actions of others seem set to have increasingly catastrophic impacts on ordinary Indians as temperatures increase, weather becomes more extreme, and sea levels rise.

Indians have every right to enjoy the economic growth that is now gathering pace and the benefits that derive from a more energy-intensive lifestyle.

Image
Indian family enjoying an energy-intensive lifestyle
Indian family enjoying an energy-intensive lifestyle

At the same time, it is clearly true that it is in everyone’s interest, including that of India, that growth should become less carbon-intensive and more sustainable. The government of India has taken responsibility to change its power generation and transport sectors, but—as in other countries—needs to be careful about the politics of tackling coal and imposing new taxes.

The logical and ethical solution to India’s climate dilemma is a “grand bargain” with the global community, especially richer and more polluting nations. The government of India can turbo-charge India’s climate transition by pricing carbon across the economy in return for international partners offering climate finance at significant scale.

To achieve just India’s 2015 commitments at COP21 in Paris would require investment of $3 trillion, so estimates of the price tag for carbon neutrality are in excess of $20 trillion. Most of this debt and equity can come on commercial terms from private markets, given the underlying positive economics. The good news for international investors is that India’s climate transition offers a huge, long-term investment opportunity as India’s economy—currently the fastest growing in the world and rapidly moving from the fourth largest economy to the second by the end of the decade—commits to an epic and fundamental energy transformation.

It is in everyone’s interest, including that of India, that growth should become less carbon-intensive and more sustainable. 

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Building a culture of sustainability: Protiviti people experts take the long view

Building a culture of sustainability: Protiviti people experts take the long view

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In this VISION by Protiviti podcast, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Protiviti’s Fran Maxwell, Global Lead of the People Advisory and Organizational Change Segment, and Kim Lanier, Director with the People Advisory and Organizational Change segment, to discuss what steps business leaders should be taking to create a culture of sustainability at their organizations over the next decade, including what that entails, why it’s so important, and why the time to act is now.

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VISION PODCAST

Follow the VISION by Protiviti podcast where we put megatrends under the microscope and look into the future to examine the strategic implications of those transformational shifts that will impact the C-suite and executive boardrooms worldwide. In this ongoing series, we invite some of today’s most innovative and insightful thinkers — from both inside and outside Protiviti — to share their vision of the future and explore how today’s big ideas will impact business over the next decade and beyond.

Kimberly Lanier is a Director with the People Advisory and Organizational Change segment within the Business Performance Improvement practice at Protiviti where she is responsible for leading human capital reporting in HR transformation solutions. Kimberly has over 20 years of experience in HR performance and people analytics and has worked with many Fortune 500 global brands to quantify and amplify the value of their workforce.

Kimberly Lanier
Director, Protiviti
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Fran Maxwell is Global Lead of the People Advisory and Organizational Change segment within the Business Performance Improvement practice at Protiviti. Based in Phoenix, he brings more than 21 years of experience in human resources consulting. Before joining Protiviti, Fran held progressive leadership roles at Willis Towers Watson (previously Towers Watson), most recently as Managing Director – Market Leader and Client Management Leader.

Fran Maxwell
Managing Director, Protiviti
View bio

Podcast transcript

Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content initiative looking into the future to examine big themes impacting the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of ESG and its strategic implications for people, process and the planet and, specifically, how business leaders can create and foster a culture of sustainability at their organizations.

Today, I’m joined by two of my Protiviti colleagues to discuss what that means, how we get there and what the future holds. Joining me for the discussion today is Fran Maxwell, Global Lead of the People Advisory and Organizational Change segment, and Kim Lanier, Director with the People Advisory and Organizational Change segment. Fran and Kim, thank you so much for joining me on the podcast today.

Fran Maxwell: We’re excited to be with you, Joe.

Kim Lanier: Hey, Joe. It’s great to be here.

Joe Kornik: So, when we talk about this culture of sustainability, what does that entail, and why is that so important?

Fran Maxwell: As you probably are aware, there’s a lot in the market around environmental, social and governance—ESG—and what we think is that we’re at the infancy stage for organizations, developing what that looks like for them and embedding it into their overall culture. When we’re talking about culture, we’re talking about a set of behaviors that an organization tries to adhere to or tries to drive to. We believe a culture of sustainability is getting those things that drive your business from an environmental, social and governance perspective embedded into the fiber and the tissue of your organization. It’s just a part of how you do business, not necessarily something you need to think about.

Kim Lanier: To tag onto what Fran shared regarding a culture of sustainability, it entails developing a clear sense of direction by developing a statement of purpose in regard to ESG. That’s a great place to start. Purpose statements can be effective drivers of sustainability programs. They tend to home in on what is most important. There’s a tendency for organizations without that to address too many sustainability topics that may or may not be relevant to their core business. Most organizations still think in terms of what, how and why. Good leaders will put the why first, hence the purpose statement. Building a culture of sustainability means embedding sustainability into a core business strategy.

Joe Kornik: In general, how do you think most companies are doing in terms of building that culture of sustainability that you’re talking about, and do you think business leaders and boards recognize the importance of that?

Fran Maxwell: Joe, I’ll address your first question first. It’s challenging to come up with a generality, because organizations are all over the place. There are some organizations that are further along the maturity spectrum than others, that may have ESG metrics already built into leadership goals or individual goals. Those organizations are further along the spectrum as far as developing a culture of sustainability.

And then there are other organizations that are still trying to get their arms around what ESG means to them, like Kim mentioned. Maybe they’re doing too many things, or maybe they’re not doing the right things and they need to take a step back and figure out what direction they need to go. When we’re chatting with organizations, we often talk about starting at a materiality assessment so you can put a strong plan together in figuring out what’s important for your organization as it pertains to sustainability.

Joe Kornik: I feel like companies are at a pivot point right now in terms of the moment we’re in. Fran, you mentioned the different levels of maturity, what we just went through, and what we’re facing in the future, do you feel that too? What’s different about right now, and does that present any unique opportunities?

Fran Maxwell: One thing that’s different about right now is people are paying attention to this. Boards are, investors are. There’s a ton in media about it. We even see that as we’re interviewing candidates for positions—they’re asking about what our sustainability efforts are. What are we doing from the ESG perspective? What are our DEI programs? What do they look like? People—consumers and employees, or candidates—are paying attention. That’s what’s different, and that obviously drives board behavior and CEO behavior. If I were to highlight the difference, that’s the key component.

Kim Lanier: Increasingly, society is expecting companies to exist for more than just profit. They want them to contribute to that greater societal good, and that means taking care of people, communities and the planet. Society is driving this. Government is responding. And employees, especially millennials and Generation Z, want it. They want that sense of higher purpose connected to their work life. It’s rare that all these things converge at once. The key for the organization is not to get too political about it. It shouldn’t be a flavor-of-the-month approach. There’s a unique opportunity right now if we do this right and balance building a good business—profit, purpose and societal good all together—and take more of a long-term perspective.

Joe Kornik: And you both touched on this, but could you expand on it in terms of what needs to be in place for this culture of sustainability to exist and take root in an organization and flourish?

Fran Maxwell: Kim addressed a portion of it. It’s communicating the why: Why are we taking this on? I also think having a direction—understanding what’s important to you. The most important factor, though, is ensuring that the C-suite is modeling the behaviors that they expect from their people as it pertains to developing a culture of sustainability. We know that behaviors change and are modeled after leadership. Those leaders need to model these behaviors and recognize other folks that also share those behaviors and make it a priority for their leadership team to take these big initiatives on and be held accountable for them.

Joe Kornik: Let’s look out a bit into the future. What would you say are some of the key attributes to creating this culture of sustainability? Can you talk about what aspects of this can be addressed near-term and what ones may take longer for businesses to implement?

Kim Lanier: If I have to identify a few things, it would be the top four, as we talked about earlier: The mission, where there has to be a clear direction of purpose to establish a drive toward sustainability and ensure that the stakeholders and employees know how to align to the organization’s overall strategy and objectives. The second component would be consistency. There need to be systems and structures and processes established to support that so that it gets embedded into the organization, and the extent to which an organization can define the values and systems would form the basis of a strong culture of sustainability.

The third component would be the involvement or activation, and this is where once the system exists, it’s about involving and activating the workforce. This is asking a question: “Are our people aligned? Are they engaged?” It’s about getting them committed and owning and responsible for ESG and sustainability inside the organization. The fourth component would be being more adaptable. It’s about paying attention to trends and feedback from stakeholders, and it’s pausing and asking ourselves, “Are we listening to our key stakeholders? Are we listening to the marketplace?”

To address your question about what’s near-term and what’s longer-term, the near-term is creating a culture, setting that right foundation with mission and purpose. The other elements, like consistency and involvement, might take a little bit more of a longer-term view and involve resources from leadership to mature and make happen.

Fran Maxwell: Joe, I might add to what Kim said, and I believe it was in the foundation of what she said, but I’d like to call it out the measurement component: where you can measure the success of your ESG programs. You can see this most aptly, typically, in DEI programs, the diverse candidate pulls you’re bringing, or diverse hires, or those sorts of metrics. It’s important to have those KPIs or metrics in place—again, you're holding yourself accountable for meeting these standards.

What Kim said that I’ll underscore is, it’s probably important to revisit every so often at the board level. I don’t mean every year, but every two or three years. The culture of sustainability, and sustainability as a whole, is a journey. It’s not necessarily a destination, and that goes to Kim’s adaptability comment: We can’t just set our course and think that’s exactly going to be it. We have to be prepared and open to making some changes and some curves, and taking some left-hand turns when we don’t expect to.

Kim Lanier: I love the comment about measurement, Fran, and I want to stir up a caution flag, especially for companies that are just getting started: One of the common things for companies that are just getting started is to measure everything, to go crazy with the KPIs, and if you’re just starting out, it’s good to identify those few metrics that are key to your ESG mission and strategy, and then expand from there rather than getting so overwhelmed with so many different KPIs. It’s hard to pay attention to so many indicators. The more mature organizations will evolve to that point, but when you’re just getting started, it’s a good idea to keep it simple.

Joe Kornik: Great advice. I was going to ask you about some of the steps that business leaders should be taking. What advice would you give them to make sure that they’re on track for success in 2030 and beyond? The point of VISION by Protiviti is to look far into the future—a decade or more. There are a lot of near-term things they should be doing, but let’s focus more on those longer-term challenges. What advice would you give business leaders to make sure they get this right?

Kim Lanier: That’s a great question. My guidance would be to get the governance and accountability in place for the long term—to realize that it’s more of a marathon and less of a sprint. If you start with that foundation that we talked about earlier in having a good mission, coming back to that and making sure that those systems and processes are reinforcing that, and putting the energy and the resources into communicating to all your stakeholder groups and engaging them, those leading practices will set you up for success for the long term.

Fran Maxwell: I’d agree with Kim. I might be more philosophical in what organizations should do to make sure they’re successful in 2030 and beyond. It’s fair to say that trying times are going to continue to happen. Divisive things are going to happen in our world. We look at the war in Ukraine as one of those examples right now. Not that that’s divisive, but there’s a crisis there. It’s really important for organizations to lean into their purpose and lean into their company values when these big global events happen, and not necessarily be all things to all people, but be really clear as to who they are to their customers, who they are to their employees and who they are to their stakeholders. Organizations that do that will be very successful in 2030 and beyond.

Joe Kornik: Let’s stick on that 2030 theme, because the whole point of VISION by Protiviti, again, is that we like to bring in smart people and ask them questions about the future. I’m not going to let either of you get out of here without at least making a prediction or two. If I asked you to look out a decade or even more—let’s say 2035—where would you say we’d be? Are you optimistic that we’ll get this more right than wrong? When you forecast out, or when you think about 2035, what do you see?

Fran Maxwell: Joe, you’ll see the successful organizations get more right than wrong, because the organizations that are on the flip side and struggle, you’ll see consumers and employees vote with their feet. They’ll go elsewhere. They may be willing to pay a little extra money for a competitor that is more focused on sustainability or more focused on the environment. And we’ve already seen that trend happen, especially as Kim mentioned earlier, at the Gen Z and millennial levels. We’re at this unique time where the consumers and the employees are now requiring that organizations are held accountable to certain standards. That’s my opinion: In 2035, the folks who get this right will have more consumers and more talent wanting to come toward them.

Kim Lanier: Joe, both Fran and I are optimists by nature. I’m cautiously optimistic that we’re going to be in a good place. Companies will take some time to figure this out. By 2035, we’ll see, as Fran mentioned, successful companies getting more right. And the other trend we’ll start to see is organic coalitions emerge. These coalitions will be groups of like-minded companies with more of a long-term perspective that shares that common culture of sustainability.

The founder of the World Business Council for Sustainable Development coined a concept he called “practical partnerships for sustainability,” and we saw that with things like the total-quality movement way back in the day, where companies come together with practical partnerships from different sectors to combine skills and provide access to practices that one partner might not have. While he might have been ahead of his time when he predicted this would happen with ESG, the more it becomes mainstream and the more it becomes a regulatory requirement, the momentum is here—this will likely become more and more of a reality as more companies implement, have experience with and involve a lot of sustainability practices.

It makes sense that companies will come together. It’s mutually advantageous to share these leading practices, and what works, and how to overcome barriers. That’s the hope for the next 12 years.

Joe Kornik: I hope so as well. Well, thanks, Kim, and thanks, Fran. This was fun.

Fran Maxwell: We appreciate the opportunity.

Kim Lanier: Yes. Thank you. Great conversation.

Joe Kornik: And thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit us at Vision.Protiviti.com to keep up with our latest theme, the Future of ESG, and subscribe to sharpen your vision. For Fran and Kim, I’m Joe Kornik. We’ll see you next time.

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