Not Dead Yet
“There’s always been some nut job telling me about the end of the world.” Stuart Kirk deftly ended his career as head of responsible investing at HSBC Asset Management, but he didn’t bury ESG.
A flurry of articles followed: let’s replace ESG with CDP – common sense, decency and pragmatism. Let’s just do the right thing. But this misses the point.
Environmental or social action isn’t about common sense. It’s not about flexible strategies and comfortable words.
By its very nature, environmental and social action is difficult, challenging work. It holds our lives and businesses to a higher standard. It demands imagination and accountability. It’s the humbling decision to expose – disclose - who we are right now.
That’s why we struggle with it. That’s why we want to duck disclosure and default to personal decisions about the right thing. The right thing changes depending on who’s doing it.
The data tells us we currently operate businesses that contribute 41% to scope 1 GHG emissions (Electrical Utilities and Power Generation, SASB Climate Risk Technical Bulletin, 2022) and women occupy 30.06% of EU boardroom positions. This week, the EU has announced a 40 per cent quota for women on corporate boards.
Disclosure - not meaning well and trying hard - drives change.
Reporting standards force us to face uncomfortable facts. Organisations including the Sustainability Accounting Standards Board and the Taskforce on Climate-Related Financial Disclosures offer the best start. There are problems with any frame trying to order a messy unquantifiable world: inconsistency, duplication, the fact much disclosure remains voluntary rather than regulated. But these standards help customers, employees and investors examine and assess your position and progress.
Better for stakeholders to understand you want your carbon emissions to reduce from X to Y, that you’re not there yet but know what to do next. Better nail your colours to the mast than hide behind an opaque A+ from an overstretched ratings agency or a glossy good business badge.
There is no substitute for disclosing your internal processes to stakeholders and managing your environmental and social footprint appropriately. This corporate obligation to future generations – to today’s team – survives the current media froth and backlash.
ESG is only dead when the data tells us so.
