Ramkumar: There’s been a lot of talk and positive momentum lately around green finance, and specifically around the Inflation Reduction Act. Are you encouraged by what you're seeing?

Oliveira: Yes, I am. Last year was a record year by any measure from a sustainable finance standpoint. Coming off that record year [ING] set ambitious goals and targets for 2022. The year started with a lot of macroeconomic challenges and then a geopolitical one—the Russian invasion of Ukraine. So that has shifted the attention from climate and COVID to what became an energy and humanitarian crisis. While there has been some reduction in terms of the volume growth from last year, sustainable finance—remarkably—is still doing well. Until 2017, corporate bond issuance, as it relates to ESG, was about 1% to 2% of the overall market—so very minor. In 2022, it’s about 13%. So, in just five years’ time we’ve seen an exponential increase in terms of sustainable finance, and it really is becoming more mainstream. So yes, I am encouraged.

Hirth: I primarily work with the reporters of ESG information, and I would say that it's continued to be very active. There are some outstanding sustainability stories in the reports in every industry. Some 90% of the S&P 500 already have some form of ESG reporting; and, at the same time, we've also seen a very significant number of companies reporting for the first time. What's interesting about their first reporting is this: Because they've looked at those leading companies, their first few reports are actually pretty good. So, it's been a really busy time, and we expect it to continue to be.

Gonen: We often like to say sustainability equals clean energy and clean energy equals sustainability, but in fact there's a lot of things going on in the sustainability space that have nothing to do with clean energy. One example is Mycelium, which is mushrooms. There's been a major recognition in the fashion apparel industry that mushrooms could effectively replace leather, which is a multi-billion-dollar industry that is heavily polluting. These types of developments often fly under the radar, but I think investors are looking at these under-the-radar opportunities.

Gonen: I think there's a huge opportunity in the energy efficiency and conservation space. We all get excited about new technologies and there’re huge investment opportunities but when we think about the amount of energy we're using today on a per-capita basis and the amount of renewable energy required to maintain that, it's a high bar to reach. If we bring down the amount of energy we need and continue with a similar lifestyle that to what have today, suddenly we get closer to being able to generate the amount we need. Here’s an example. Right now, we’re in a class A office building in Manhattan. I work in one, too. Every once in a while, over a holiday weekend in the summer, I’ll go in to get some work done, and it’s nice and chill in the office. This is an office meant for 1,000 people working during the week, but on a summer holiday weekend there’s essentially no one there. This summer, I went into the office in a similar scenario and suddenly it’s pretty warm. For whatever reason, the building management decided they’re not going to air condition or heat the whole building at those times. The amount of energy saved for those 10 days a year or so is huge.

Ramkumar: That's an interesting point. We talk about big companies and greenwashing, and rightly so, but it's a good reminder that we all have things we can do in our own lives that can make an impact.

Gonen: But it is big companies, too. Look at what Paul Polman was able to accomplish at Unilever, where he had a vision for making that business a leader in sustainability. At the time he wasn’t rewarded for that; the market said he's just not in line with the other CEOs. Fast-forward 10 years, and he outperformed everybody in his industry. People criticized him when Unilever bought Seventh Generation. People didn’t understand it and thought he overpaid for it, but now it looks like a brilliant acquisition. If you want to see where we’re going, keep your eyes and ears open for these forward-looking CEOs that aren’t necessarily talking about what Wall Street is talking about but rather what their customers are talking about. That being said, I think it's a very difficult and confusing time to be a public company CEO, because you can try to be forward-thinking and progressive and align with your employees and your customers values, and at the same time, publicly run afoul of the state government where you're headquartered. We'll get through this period, but it’s a difficult time, for sure.

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 initiative examining big themes that will impact the C-suite and executive boardrooms worldwide.

Today, we’re exploring the future of ESG and its implications for the next decade and beyond, and what a guest we’ve got for you today as I’m joined by John Elkington. John is an award-winning world authority on corporate responsibility and sustainable capitalism, a best-selling author, speaker, and serial entrepreneur. John is the founder of Volans, which works with leaders to make sense of the emerging future to unlock the potential of their organizations.

John, a former faculty member of the World Economic Forum, has helped create and incubate movements including the Dow Jones Sustainability Indices and the Global Reporting Initiative. In 2009, John was ranked fourth in a global survey of the planet’s top 100 CSR leaders behind only Al Gore, Barack Obama, and Anita Roddick. Just last year, John won the World Sustainability Award. He has spoken at more than 1,000 conferences, has served on over 70 boards, and has written 20 books, the latest being Green Swans: The Coming Boom in Regenerative Capitalism.

John, thank you so much for joining me today.

John Elkington: Joe, well, thanks very much for the invitation. I’m looking forward to the conversation.

Joe Kornik: Well, John, that’s a bit of a lengthy introduction and believe me, I left out quite a bit but it has been a lengthy career. You’ve been at this now since the 1970s, and it’s rare I’ll have the opportunity to talk to someone with your historical perspective about ESG and sustainability.

If I could start with asking you to talk a little bit about the evolution of the topic over the course of your career and maybe sort of where we are now and that can lead us into the future.

John Elkington: Well, happily. 2022 is the 50th year that I’ve worked in this space, so half a century. It surprises even me. But when I started in the mid-70s to write about what business was doing, I found very few businesses were prepared to talk about what they were doing on safety, health, environment, these sorts of issues. In 1978, with others, I set up a company called Environmental Data Services to begin to break into the world of what we then called industry and commerce. It became known as business later on, and over the next couple of years, we find ourselves in a rather unexpected position of having to help companies like BP and chemical companies and so on write their first written environmental policy statements. So that was then. Business was on the defensive, thought that anyone that’s an environmentalist was actually a communist in disguise. That’s no longer the case. It is amazing how much things have shifted.

What started to happen in the late 80s, early 90s was that business started to see this as an engineering set of challenges. The World Business Council for Sustainable Development talked about eco-efficiency, so how do you save or make money by cutting pollution, cutting energy use, and so on? None of that bad, all of that good, but what it did was to constrain this to pollution prevention and areas like this. In 1994, I started to talk about a triple bottom line, sort of economic, social, and environmental performance by companies; economic, social, and environmental value either created or destroyed. In a way, ESG is a direct-line descendant of all of that. It’s remarkable to see how that agenda has taken off in just the most recent times.

I think it’s a bit of a feeding frenzy. Every financial fund now needs to have its own investment fund with ESG labeling. What we’re seeing just towards the conclusion is that a lot of that activity is, let’s say, a little bit ill-considered in the sense that when the European Union came up with its taxonomy of terms in this space, something like €2 trillion worth of investments had to be stripped of the ESG label because they just simply weren’t delivering against that explicit or implied promise. We now start to see the pushback against ESG from Texas and Florida and various other places, but in a way that’s inevitable. Every action triggers not always an equal but certainly an opposite reaction, so it’s getting even more interesting by the day at the moment.

Joe Kornik: Yes, it sure is. ESG is having its moment, but I think as you pointed out, what comes with that is often the pushback, right, when it’s that much under the microscope. I’m just curious to your thoughts on how you think what we’re doing right now. Where do you see the biggest challenges or opportunities as we move forward and are you generally optimistic about the future?

John Elkington: If I had £50.00 for every time I have been asked the “Are you optimistic?” question, I could sort of have retired 50 years ago. The answer is, I was born an optimist. You have to be an optimist in order to work in the change area or industry almost as it has become, but at the same time you have to be reasonably clear and then you have to be able to look at the world as it is rather than you would like it to be. The climate agenda, even though some people are still keen to deny it even exists, has become strikingly clear to most thinking people. Whether it’s floods or droughts or fires or whatever it is or growing intensity storms, this is with us and it’s going to get much more intense over time.

If I look at that, I feel that has been a relative failure. I wrote my first book on—no, first report—on climate change back in 1978, so it has been a long time building this agenda. At the same time, you look at loss of species and you look at, say, 1970 to 2016, we lost 68% of nature, of wildlife on this planet of ours. There’s no way—and that continues. That accelerates in many ways. No way can we say we’ve succeeded, but we have broken into the world of business. We have got CEOs, and other members of the sort of global C-suite, if I can call it that, and financial institutions and so on, paying a lot more attention than they once did but in a way, they need a lot more backing from government to make this stuff happen in a sustainable way, and maybe the Inflation Reduction Act in the United States is part of that. Maybe the EU Green Recovery Initiative is part of that. Certainly, very large sums of money are now going in this direction, but I think in a way we’re only scratching the surface where we’re just getting started.

Joe Kornik: You’ve mentioned the business and government and it strikes me these big problems will obviously not be solved by just one side or the other, right? Business alone or government alone is not going to be able to tackle this. I think it’s going to take some combination of the two, and that’s clearly where you’ve spent the majority of your career in that space. Talk to me a little bit about the role of business in solving some of these global challenges and what can and should business leaders be doing to take next steps and prepare their businesses for the future.

John Elkington: Well, I’ve spent the first five years or so of my working life working with governments—EU and the UN institutions and OECD and so on—all of which was interesting, I learned a lot. But what I’ve learned in the midst of all of that was that unless and until business becomes energetically and creatively involved in this space, it’s not going to proceed in the ways that we want it. I have friends in, for example, Greenpeace who would say, “All we’ve got to do is strap these corporate giants down and pin them down so they can’t move.” My answer then, and it still is, that unless and until—again, you can trigger their innovation process and you really tap into their creativity—we’re not going to get some of the nature and scale of change that we needed.

And I’ve said, and I think that business is much more open now that it once was, and one of the reasons for that is we’re not dealing with the same people that we once did. Those people are rather retired or dead now and we’re probably, in business generations, talking about three to four generations on. These people have been trained differently, not well enough yet but they have been trained and if they’re not brain-dead, they’re awake, alert to all of these different issues, challenges, opportunities, depending on which way we look at them.

I think what’s also changing is that business is suddenly seeing that this has to be done even if financial markets do not always yet support them in doing what has to be done. They now have a role in lobbying financial institutions to pay attention to some of this stuff, and even if governments do not yet do enough to really drive this forward in a structured and cohesive way, then business itself has a legitimate role in lobbying government to shake markets. People often think, talk about free markets. Markets are social constructs where governments have been very actively involved in shaping markets for a very long time. Now, they just got to do it but they got to do it better. They’ve got to do it in different ways.

Joe Kornik: Right. You mentioned leadership there and the business leaders that are leading. I’m curious about your thoughts on preparing tomorrow’s leaders for a career or leading through this next challenge that we have, your thoughts on B-schools and how we maybe prepare the next generation of leaders when it comes to sustainability.

John Elkington: Well, a lot of people tend to think if not say, and some of them do say it, that we haven’t got time to educate the next generation. We just got to do it now. I think education remains the single most important investment that we make as societies and ultimately as a species. You ask about business schools, and I’ve taught in universities and business schools now for well over 25 years. Initially, particularly with the B-schools, I found that the students were often interested and there might be one or two faculty members who might be interested, but the broader faculty members were really not interested at all and felt this was like a fast track to sort of Siberia in academic terms, and you had the ranking and rating schemes which then did not prioritize or even particularly value effort in this space.

That is changing. I think people are recognizing that this is—the dean of the Wharton School told me about 15 years ago—I’ve been in a session at the Wharton School with about 60 academics from business schools around the world, and at the end, he said, “This is the future of business education.” Well, I believe it is. I think it’s taking rather longer than he might have expected and certainly than I and people like me might have wanted. But I think, increasingly, business schools will have to invest in this space and we see growing evidence of that, not least because the people who employ the people at the business schools’ training are going to insist on this. They’re going to absolutely want this as part of the skill set of the people that they take on. It has taken a long time and it’s going to take quite a long time still, but it’s going to happen and a lot of business schools will actually find themselves wrong-footed when suddenly their competition is doing this stuff in very much more coherent ways.

Joe Kornik: Sure, and it strikes me that the students are thirsty for this as well or are going to be demanding this type of training and this type of leadership development.

John, you mentioned that from a climate perspective, you mentioned the loss of species and just some really scary, scary things. I wonder if I could ask you as you look forward, what are the biggest threats? Is it drought? Is it food scarcity? Is it land restoration? We’ve got a lot on our plate. Are there one or two areas that you think we really need to be laser-focused on right now?

John Elkington: Well, it’s interesting because some of the more radical people in the sustainability and environmental movements would at this point say it’s population, it’s population, it’s population, and there’s certainly truth in that. When you go to places like Nigeria, it’s hard to be optimistic about a country like that because of just the sheer scale of population growth. But as you know, Joe, countries around the world, you look at China, you look at Japan, you look at Italy, they’re increasingly concerned about population decline, and in some cases, almost collapse. I think population needs to be a primary consideration, but people often said population numbers actually wouldn’t matter if we were living at relatively low levels of, for example, environmental and social impact. The uncomfortable fact is that as modern consumerist lifestyles are spread around the world, that population growth is massively amplified. I think the lifestyle consumption patterns, how we produce a range of goods and services, all of that remain absolutely crucial, have to remain in the spotlight.

A lot of people are seeing technology as—it used to be that they would see technology as the great Satan. Whether it was chemistry or whatever it was, it was going to do great damage to the wider world and there’s no question that burning fossil fuels and all the rest of it has done precisely that, and insecticides and all the rest of it. I think the new raft of technologies that are all coming in at the same time, and they’re pretty much all digital, have a huge potential for shifting the needle on some of this, reducing our collective impact and footprints. Among the number, I would put things like synthetic biology, not loved by everyone but nonetheless; artificial intelligence, not loved by everyone but nonetheless; and things like new materials, including nano materials, again, not loved by everyone. But that’s always the case: When you have a new industrial revolution or, in this case, a set of industrial revolutions all coming through at the same time—you think about electric vehicles, you think about battery technology, you think about autonomous vehicles, including autonomous trucks and so on. The loss of employment as some of those new technologies come through, and taxi drivers, and truck drivers and so on, hardly bears thinking about, but we have to think about it. I think we are at the relatively early stages of a massive disruption in our economies which could, if we decided to drive things in that direction, push us towards a much more sustainable set of outcomes.

Question, will we? My sense is that although a lot of the billionaire technologists are talking about this stuff, as a recent book, The Survival of the Richest, shows, many are also thinking about what happens when what we’ve been doing brings collapse? Where do we go? Do we go to New Zealand? Do we go to Patagonia or whatever? There’s a lot of work still to be done and a lot of that is in people’s heads and to some degree in their hearts as well.

Joe Kornik: Right, and it strikes me sort of shifting from the E, the environmental, to the S. It’s like maybe the S is becoming more of a front burner issue than the E on some level because we’re seeing a lot of disruption in society. We’re seeing obviously that the polls have indicated that democracy is getting less and less popular around the planet. We’re seeing a real shift in societal norms. There’s human rights and equity and a lot of these things are top of mind, but I don’t necessarily think that we’ve made a lot of progress on them. From the social perspective, where do you think we go from here?

John Elkington: I think we’re in extremely exciting times in terms of the old Chinese curse, in the sense that every 60 to 80 years, our economies and our societies go through a compulsive period of change, which very often takes at least 12 to 15 years to clear if we’re lucky. I think the social side and I think the political side in all of this is going to be central and considerable in growing concern.

In my most recent book, Green Swans, I talked about three areas which are going to be under intense pressure. The first was capitalism, the second was democracy, and the third was sustainability. Everyone might think that now sustainability is going to crash into the mainstream, but it has in many ways got to be disrupted itself. It’s not necessarily yet fit for purpose and within that, I consider the ESG investing agenda as part of all of that.

I think we couldn’t have got where we need to go if the old order continued just the way on sort of the tramlines that it was operating on. I don’t think the fact that we’re now moving into the unwinding of an old order—which is pretty much post-Second World War, post-UN, and all the rest of it, the UN being founded—I don’t think that the fact that that is unwinding guarantees that we’ll come out the other side with exponential solutions, but actually it really does open the possibility, if we know what we’re doing and we have the courage and stamina to push on the right sort of ways, and don’t just focus on corporate responsibility in individual companies but think about markets, how we structure them in order to drive and encourage companies and businesses to move in the right direction.

I think this is an intensely exciting period. I often say to colleagues I think the next 10 to 15 years, and as I said I’ve been 50 years in this space, the next 10 to 15 years are likely to be the most exciting, the most challenging, and the most politically dangerous of my entire working life. I look forward to it.

Joe Kornik: Yes, that’s interesting, and John, literally that was my last question. I was going to ask you. I say we call this program VISION by Protiviti because we want really smart people to give us their vision of the future and I was going to ask you to look out, let’s say, two decades, 2040 and beyond. I’m not going to ask you if you’re optimistic. You answered that a little bit earlier and I’m not even going to ask you really what’s going to happen, but what kind of world will we be living in at that point?

John Elkington: I think it will be—Dickens talked about the best of all worlds and the worst, and I think it will be better and it will be worse than today’s situation, and a lot of that will depend on us. One of the things I do for my own sense of where we might be headed is to read science fiction. I’ve done that since the 1960s and I fall in and out of love with science fiction. There are periods when it has got a lot of interesting things to say and there are periods when it doesn’t. In the 90s onwards, I would focus, for example, on people like William Gibson who talked about not radically different societies so that’s where he started, 20,000 years in the future with Neuromancer. He was talking about a mutated present, but now we’ve got people who are looking out into the future and are starting to say—people like Kim Stanley Robinson talking about if climate change is this important, what are going to have to do as a species in order to manage this and sort it out? His most recent book was The Ministry for the Future. It has been extraordinary to see how many people in business have been reading that book.

There are growing number of visions out there that are all aligning to some degree around this sense that the combination of population and our economic activity around the planet have created this new geological epoch; people increasingly talk about the Anthropocene where one species, which is ours, has for the first time in the planet’s history impacts on the planet which are akin to geological forces. We haven’t got the governance systems. We haven’t got the politics yet to cope with that, but we’re going to have to develop them in very short order and I think business has a crucial role in, not only making sure that those evolve in the right way whether they’re implemented, put into practice.

The final thing I’ll say is just my vision of the future is shaped by an understanding that very often it’s impossible to predict what will happen when you put people under a lot of pressure. We’re putting people under increasing amount of pressure in these multiple areas. We’re an innovative species. We will come up with all sorts of ruses but also solutions which we’d perhaps never thought of, so again, another reason to be wary about the future but excited about it as well.

Joe Kornik: Yes. Well, thank you so much, John. I enjoyed our conversation immensely. Thanks so much for the time.

John Elkington: A pleasure, Joe.

Joe Kornik: Thank you for watching the VISION by Protiviti interview. Until next time, I’m Joe Kornik. Thanks.

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Kornik: Can you talk to us a little bit about your role as global leader of the firm’s Diversity, Equity and Inclusion initiative? What does that entail and how do you make an impact day-to-day?

Haseley: As the Executive Vice President for Diversity, Equity and Inclusion, I am charged with developing and executing company-wide DEI initiatives through strategic planning processes, leadership collaboration and community partnerships. As a champion of this important initiative, I ensure Protiviti has a strong focus on diversity recruiting to attract diverse talent, including targeted recruiting via diverse professional associations, colleges and digital platforms. I’m also focused on retaining and developing talent and maintaining employee engagement by creating meaningful connections such as our employee network groups to serve employees interested in various initiatives and issues regarding communities, such as women, parents, military veterans, multi-cultural, mental wellness and LGBTQ+.  As a DEI leader, my ultimate goal is for DEI to exist not as a dedicated business function, but for Protiviti to have all of the aspects of diversity, equity, inclusion and belonging deeply embedded into our organizational culture.

Kornik: Why is DEI so important as an aspect of ESG? And how do you see its impact evolving over the next decade?

Haseley: ESG is increasingly becoming an important framework to consider the environmental, social and governance aspects of a business, right alongside financial indicators. The key stakeholders for ESG include employees, consumers, vendors, asset managers and investors. ESG measures the organization’s impact on society and the environment, corporate behavior, and the handling of external challenges and opportunities related to sustainability. DEI must be viewed as part of a company’s core ESG strategy as an enabler of objectives related to all three. The ways in which DEI and ESG strategies and structures interact and collaborate in the future bears consideration. DEI contributes to the social aspect of a company, the S in ESG, based on how a company manages its relationships internally and externally. Internally, a company can examine its workforce, including the recruitment, retention and advancement of diverse employees. It can also examine the workplace, including the culture, engagement and ecosystem. Externally, a company may consider the marketplace, including community engagement, brand exposure, reputation, and even its clients’ core values.

Kornik: That’s interesting. I see DEI in the social aspects of ESG, but I am interested in its applicability to the environmental and governance aspects as well. Can you tell me more about that?

Haseley: In relation to environmental and governance aspects, strong strategies and objectives must embrace diverse communities and the voices within them. Various environmental issues affect diverse communities in a range of ways, and diverse perspectives are necessary to understand how to apply innovative strategies that impact local communities. For example, we have seen a number of environmental crises in recent years and there’s little doubt the response would benefit greatly from in-depth experience and first-hand knowledge that may not be able obtainable without diverse voices having a seat at the table. The same applies in the governance realm, as governance encompasses executive decision-making, governing bodies and leadership styles, along with audits, internal controls, business ethics and shareholder rights. The tie between DEI and governance is understood most clearly if you consider ethical leadership behavior and equity table stakes for any company’s governing body. Employees—as well as all other stakeholders—need to know their voices are heard on a variety of workplace issues. In fact, research suggests boardroom diversity improves ESG performance, as gender-diverse boards outperform non-diverse boards.    

Contrast that approach with the way nearly all organizations in all industries, immediately adhered to—and then went well beyond—the letter and spirit of economic sanctions on Russia precipitated by its invasion of Ukraine. Initially, a few institutions pulled out of the country altogether, an action that significantly exceeded the technical scope of sanctions against Russia. These measures quickly triggered a flood of similar voluntary exits, with the dwindling list of global companies that maintained their operations in Russia facing significant criticism, including consumer-driven boycotts, for doing so.

Although the Russia-Ukraine war represents a thus-far unique and extreme example, an especially polarized political environment, the viral power of social media communications and campaigns to reach broad audiences very quickly, and heightened attention to customer and employee perceptions and values are increasingly forcing executive teams to take a stand on issues that affect their stakeholders and their bottom lines. Going forward, most of these choices will not be the “easy” call that cutting ties with Russia was.

Consider Florida’s “Parental Rights in Education” law (popularly known as the “Don’t Say Gay” bill); the Supreme Court’s recent Dobbs ruling overturning Roe v. Wade; debates over gun control and the liability of and ethics associated with financing gun manufacturers; and investments in fossil fuel producers as just a few other current hot-button issues. Unlike the Russia-Ukraine war, these other matters have vocal proponents on all sides of the argument. As a result, organizations that choose sides on these issues must be prepared to deal with a range of risks, including consumer boycotts, potential government investigations and/or loss of government contracts. Although making such calls may be appropriate and necessary in many cases to live up to an organization’s own corporate and employee values, few firms have the right plan and processes to do so in a consistent and well-informed manner that manages all the foreseeable risks.

4. The value of “extreme but plausible” wargames

Cybersecurity professionals are very familiar with wargame exercises in which diverse stakeholders gather to walk through a simulated threat to the organization and practice its response. This concept can be expanded to future social issues to pressure-test the effectiveness of the action plan described above. Such an exercise can answer questions such as:

• Were the right people invited to the table?

• Was the firm able to arrive quickly at a position or was the issue more contentious than expected?

• Did leadership think of other risks and potential drawbacks the plan didn’t envision?

• Did the company decision makers have access to all the data needed to take a position?

5. Knowing the audience

The most important factors in an organization’s decision to take a stand—and what that stand should be—are the defined values and mission of the company, as described above. However, in evaluating the potential exposure associated with a given position, it’s important to understand the perspectives of all stakeholders involved, including customers, employees, investors, and governmental and regulatory agencies in the markets where the organization does business.

This insight is particularly important for organizations that operate over a large and diverse geographic footprint, especially where the dominant political views in the market where the corporate headquarters (and thus decision-makers) are based may be different from those of many employees and customers. It may also be appropriate to consider holding small focus group discussions with employees as part of both the wargames exercise referenced above and for feedback to a particular response effort. Even if that approach doesn’t sway the organization’s decision regarding which side of an issue to take, it will help to anticipate likely employee and customer reactions and better prepare the organization to respond.

6. Monitoring responses and course correcting

Once a stand has been taken and communicated externally, many organizations consider the matter closed. As a result, they are often caught off guard by negative reactions and fail to counter those effectively as a result. It’s important to anticipate potential blowback when a position is being drafted, as well as to monitor the response after it goes public. The firm’s public relations and social media teams play important roles at this stage, along with functions such as human resources and internal communications, and those managing investor and government relations.

In addition to monitoring for and responding to feedback, organizations should also track the substantive impact of the stand they’ve taken. From an operational standpoint, if a decision was made to reduce or suspend services in a particular market or to particular customer groups, organizational leaders should ask:

• Has the organization anticipated complaints and other requests resulting from its actions and is it effectively handling those complaints and requests?

• Are the restrictions targeted as narrowly as possible and applied in practice consistent with the intent of the strategy, or did additional markets and products accidentally get turned off?

• Is the strategy working?

With regard to the response to the Russian invasion of Ukraine and how it has played out, it’s been interesting to see all the specific implementation issues and potential unintended consequences that have emerged. Some of these include:

• Russia has cash and wants to pay its debts but still defaults. So, in what jurisdiction do you pursue and how do you ultimately (legally) collect from a sanctioned entity?

• Could holders of Russian bonds and credit default swaps bought for pennies on the dollar not only be repaid… but also be paid twice?

• Does abandoning Russian assets actually benefit the government the West is trying to punish, and is abandonment really forever?

• The war has accelerated Europe's transition away from Russian energy imports, putting a large dent in the revenue the country gets from its oil and gas business. What does that mean for the future?

• Russia has united the West. The West's reaction is beyond what anyone, especially Russia could have anticipated. What are the long-range geopolitical impacts?

Conclusion

The complex interconnected and fractious world we’re living in today might make many financial institution leaders long for the days when maximizing shareholder returns was their only objective, but that is no longer realistic. While taking positions on contentious social issues will always carry risk regardless of the path taken—and even when the path is not to take a position—organizations that accept today’s reality and plan for how they will address these matters are far better positioned to weather the resulting stakeholder and public opinion storm than those that treat every such event as an unprecedented crisis.

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.

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.

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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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.

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.