Sustainability skills are needed in positions far beyond the C-suite.
ESG issues impact the way consumers, investors and executives make decisions in business and in their daily lives. And just as we have seen a wave of resource commitments in recent years to appoint Chief Sustainability Officers at financial companies, we will now see the trickle-down effect.
This means that sustainability skills are no longer present within the C-Suite. Sustainability skills are increasingly integrated into all functions, every position and at every level. Risk, compliance and finance professionals will likely need expanded skills and deeper familiarity with climate data, for example.
Part of understanding and empowering the ever-evolving talent needs means unraveling what’s driving some of the changes, including upcoming regulations.
Following investor demand, the International Sustainability Standards Board (ISSB) timeline has confirmed that global climate and sustainability disclosure rules should come into effect next year (January 2024).
The rules, which will be issued in late June 2023, will provide a general framework for reporting material on sustainability-related issues and specific rules for climate, including extreme weather events and greenhouse gas emissions, according to the board’s announcement.
Companies will be required to disclose the risks and opportunities they face related to climate, including the implications for the company’s financial position, performance, prospects, business model and strategy.
The SEC has also proposed new reporting requirements that require transparency. According to the new requirements, companies must measure and publish their CO2 emissions in scope 1 and scope 2 from 2024. And for larger companies, mandatory reporting on scope 3 emissions – CO2 emissions from customers and the supply chain – could be enforced next year.
Climate change also calls into question the traditional role of corporate sustainability, a company’s leadership initiatives and how their business practices impact society and the planet.
Investor perception also remains a key driver for taking an early lead towards more sustainable business practices, with investors increasingly looking for ways to interrogate and drive business strategy.
In early 2021, nearly 200 countries at the COP26 summit agreed to improve their emissions reduction pledges in time for COP27, but by the time the next summit began, only 20 countries had done so.
What we saw were ambitious commitments from companies that could not deliver on time, leading to increasing pressure from investors on companies to step up their efforts and action.
For example, ESG investing, which takes into account non-financial factors such as social responsibility, could prohibit investments in weapons and fossil fuel companies. According to research from Morningstar, ESG fund inflows into the US reached $70 billion in 2021, but then dropped to $3.1 billion in 2022. However, it is important to note that inflows into sustainable funds are still well above that, according to the research is then the rest.
This decline in investments took place against the backdrop of an increasingly political and controversial ESG landscape. This showed that public and shareholder perception has a major influence on financial companies and investors – both positively and in other ways.
This means that sustainability is becoming a much more important aspect of an organization’s brand strategy in today’s boardrooms.
Consumers are increasingly demanding more sustainable practices from the companies they interact with and the products they purchase. Leaders will increasingly be tasked with going beyond meeting regulatory standards and net-zero commitments, with actions that focus on innovation, healing the environment and having meaningful social impact.
For example, Adidas has increased sustainability and the use of recycled materials. The brand aims to use only recycled polyester from 2024 to reduce its impact on the environment. Adidas also wants to reduce water use in production, use renewable energy and adhere to fair labor practices.
Sustainability is constantly changing, but success must be quantifiable. Companies must set clear goals to determine the direction of the company.
The need for qualified employees trained in sustainability has led to a war for talent. However, we are running out of time. Companies setting environmental targets for 2030 are starting to realize that this is not so far away.
Climate change and societal fractures require immediate action. Sustainable goals must start at the top, with buy-in from leadership. From there, the most success will come from companies that invest in training their existing workforce, rather than hiring a select few.
Gloria Mirrione is Executive Director and Head of Sustainable Finance & Impact Investing, Americas, at Acre.
Original source: Directors & Councils | Written by Gloria Mirrione | Published on 28/03/23
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