With COP26 in full swing, we cannot escape the climate conversation. But what is happening in Glasgow just now must be a springboard to an era of implementation, moving us out of ambition and into a time of true action.
For businesses this means that ESG (environmental social governance) alongside other frameworks simply must be a feature of their operating model. The choice is not between “cheap inaction and expensive action”, as inaction is going to cost more in the long run.
We know from speaking to our network of directors that the importance of sustainability is universally recognised, but insight has also shown us that very few have a solid plan in place. There remains a reluctance to practically manage the transition to a less extractive and more circular resource model.
So, what can leaders do?
Greenwashing won’t work. Companies cannot continue doing what they do, but “just a bit greener”. Stakeholders, even large institutional investors, see through the fluff, and are increasingly taking action. Radical change is needed, not half-hearted sustainability.
At our conference last month, barrister Jojo Mehta of Stop Ecocide International made a compelling case that ecocide (“unlawful or wanton acts committed with knowledge that there is a substantial likelihood of severe and widespread or long-term damage to the environment being caused by those acts”) should become an international crime. It may seem far-fetched, but support for it is growing. It is not inconceivable that in the near future directors could be held criminally responsible for ecocide. They will no longer be able to stand behind “lawful legitimation” to justify making profits from projects that knowingly cause environmental harm.
There is no doubt this is a challenging situation to be in on top of all the other priorities of the board and, of course, organisations cannot expect a sustainability culture to spontaneously appear. It must be proactively nurtured, and many businesses do just that by innovating and contributing to their communities and society, with many supporting this through sustainable practices. Yet often these can be too ad hoc or are seen as a tick-box exercise.
This pivotal moment in our lives calls for a different order of greater commitment – with the whole business refocused around sustainable outcomes.
We hear regularly from our members that boards need reliable, valid data. And that directors, especially financial directors, need to get started and not wait for perfection in order to generate action. ESG measures should be reported as frequently as financial measures.
Urgency, rigorous accountability and creativity is all part of the magic governance mix. Our business, public and third-sector worlds are so interconnected it is increasingly clear that great boards need to be made up of diverse directors. By having a global citizen mindset and acting as a force for good, boards can take responsibility and collaborate for a healthier, fairer planet. A strong, sustainable economy goes hand in hand with a fair and equal society.
Young climate activists are clear that we cannot survive another call to arms or recalibration of targets. We must now focus on rapid acceleration to implementation with a boldness and a unity we haven’t seen before. We need to move at the speed of the most urgent need.
Of course, ESG is simply part of the toolkit that will help us get there. It is not a magic bullet – but potentially a fulcrum to leverage change faster. Leaders must now shift their mindset, and change the business objectives from being the best in the world to being the best for the world.
Louise Macdonald is national director of IoD Scotland
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