Investments  

We can't afford ESG goals to fall behind

Nicola Stopps

Nicola Stopps

It is no surprise that corporates might consider pulling back on costs during financially stringent periods – but the questions of what projects get sidelined has never been more important.

Where previously sustainability activity may have been the first port of call for cuts, at a time where climate change awareness has never been more prevalent, we are encouraged to see that this is no longer the case.

In fact, as a consultancy advising corporates on their environmental, social and governance pathways on an international level, we are seeing the opposite: the business world is increasingly engaging with ESG.  

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Environmental concerns are pressing and with pressure from global governments to meet the targets set out in the Paris agreements, stakeholders expect businesses to act responsibly, mitigate negative impacts and meet carbon reduction targets.

Most businesses are demonstrating awareness through some level of tangible action, and we are seeing a significant uplift in carbon projects as well as a commitment to reducing – with a view to eradicating – carbon from business operations.

Enquiries are also notably deriving from the top, indicative of C-suite interest in climate commitments and the route to practising good ESG.

The corporate landscape has been completely upended over the past two decades. The concept of ESG is nothing new – having previously been referred to as corporate social responsibility or ‘CSR’ – and historical market fluctuations highlight how little importance was once attached to it.

Illustrating this is the significant corporate momentum behind ESG following the pertinent documentary starring Al Gore, An Inconvenient Truth, which inspired a generation of business leaders to think about the realities of climate change for the first time, and the implications of failing to act.

Within a few weeks of the 2008 global financial crisis, this momentum was shorted, and CSR and sustainability teams were cut as businesses went into survival mode. Business’s prompt dismissal of ESG values in 2008 made it clear that the link between sustainability and longevity was still deemed a luxury. 

Now, business leaders are evaluating ESG risk in the same way they assess other risks and are therefore realising that failure to act could have significant bearing on the longevity of their business.

The mandated Task Force on Climate-Related Financial Disclosures has partly facilitated this, helping to establish the new status quo: ESG is an integral part of how a business operates and is no longer seen as simply a ‘nice to have’. Now there is a clear pressure on businesses to act responsibly, it is no longer a luxury. 

Is ESG costly for businesses?

When I started working in ESG more than 25 years ago, I never anticipated that costs would still have to be justified. Although beginning the ESG journey requires upfront investment from businesses, it is one that will pay back sooner rather than later.