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Sustainability Eco City

Time to Get Serious about Sustainability

May 9, 2022
Investors and customers want sustainability; regulators may require it. Are organizations ready to meet their demands?

The success of corporate sustainability programs may hinge upon four primary factors: staffing, funding, employee support and meaningful metrics. Operations professionals responding to EHS Today''s 2022 Sustainability Progress Report survey indicated that these are the top areas they struggle with when implementing or maintaining a sustainability program.

Industry consultants suggest that corporate leaders prioritize sustainability initiatives as a strategic focus to overcome these challenges. In the coming years, they may not have a choice. In March, the Securities and Exchange Commission (SEC) proposed rule changes that would require registrants to include information about climate-related business risks. In April, an Intergovernmental Panel on Climate Change (IPCC) report concluded that industry must play a critical role in achieving net-zero greenhouse gas emissions targets.

Investors also are demanding change by pressing more companies to establish sustainability programs, says Ryan Lynch, practice director of sustainability, BSI Americas Professional Services.

“I see a lot of pressure from shareholders and some of their fund managers who have their own ESG (environmental, social and governance) commitments or ESG funds or have pledged to invest X amount of their resources to advance sustainable outcomes,” Lynch says.

Lynch is seeing a push by private equity investors for corporate sustainability targets and reporting as well. In other words, if businesses don’t get on board now, they may not have a choice in the future. And that’s not always the ideal scenario for companies.

It’s a trend that’s impacting large, midsize and small companies, says Adam Redling, assistant vice president in the sustainability/ESG practice of Dix & Eaton, a corporate public relations and communications firm that helps organizations with their reporting efforts.

“Investors in many of these companies are requiring reporting as a metric for where they’re putting their dollars,” Redling says. “They want to see companies that are forward-thinking, so being front and center along those lines is something that is almost table stakes for big public companies now, but even smaller companies and private companies are jumping on board because everyone from customers to employees now expect it.”

Building a Culture of Change

Like any corporate strategy, building a culture around a specific initiative begins at the top. Issues such as insufficient staffing, lack of funding and inadequate support tend to resolve once the executive team is aligned on its sustainability purpose and objectives, says Greg Desnoyers, senior client partner for the global industrial practice at management consulting firm Korn Ferry.

“Those components are not natural barriers; those are human being barriers; those are decision barriers,” Desnoyers says. “So, if you have insufficient staffing, that’s a decision that’s being made somewhere. If you have insufficient funding, that’s another decision that’s being made somewhere. Those are not insurmountable issues. You just need to apply pressure there. It has to be a priority.”

Company size can impact how an organization implements and executes a sustainability program. Nearly half of the companies responding to the EHS Today survey indicated they don’t have a sustainability program in place. Almost two-thirds of respondents have fewer than 1,000 employees.

For companies of this size, leadership must clearly demonstrate the strategic value in the early stages to foster a culture of sustainability across the organization as it grows, Desnoyers says. That may require conducting a risk assessment, and a more focused materiality assessment, to determine the key areas where mitigation efforts can yield measurable results, Desnoyers says.

“You may have an idea as an organization of what those risks are, but if you don’t have a formal process around it to put it on paper, you have the potential to leave some pretty significant risks on the table in terms of people, environmental, financial or broader reputational impacts,” he says.

A materiality assessment typically involves identifying the impact areas most significant and most important to company’s stakeholders, which may require customer research, employee surveys and discussions with shareholders.

“This could involve reaching out to local communities where a company operates; it’s also important to take stock of the products, materials, processes and impacts inherent in those,” Lynch says.

Once a company has completed that process, they can begin working with a cross-functional group within the organization to develop an action plan, he adds.

Reliable Reporting Matters

Thorough, credible reporting is one of the most important aspects of a corporate sustainability program. At the time of the SEC’s proposed rule changes, SEC Chair Gary Gensler said, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.”

Organizations need to be realistic about what they can accomplish, not overpromise on their goals and be honest in their reporting, Redling says. He suggests businesses identify manageable, quick wins before embarking on more ambitious plans.

“Companies have to start somewhere,” he explains. “You’re not going to have all the answers right away. You’re not going to be a perfect performer and be able to have these amazing results right off the bat. But you need to take some small steps to get the ball rolling because it is something that stakeholders are looking for companies to demonstrate.”

Jonathan Katz is a freelance writer based in Cleveland, Ohio, and a frequent contributor to Endeavor Business Media publications.   

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