2023-10-31 05:46:13
Why do companies, today more than ever, need to adopt a sustainable strategy?
Frédéric Vonner. – “The very essence of a business is to be sustainable, or long-lasting. Today, we are witnessing an awareness that the life and survival of a company does not depend solely on its ability to be financially profitable. The availability of resources – material, human and intellectual – is just as essential to its proper functioning. We must also favor approaches that will guarantee the availability of resources sustainably and support responsible development, concerned with the environment, society, communities and ecosystems around us.
More pragmatically, economic players must also evolve if they want to be able to continue to recruit or remain on the market. Young recruits are particularly attentive to these aspects, which are decisive in the choices they make. A recent study found that one in five young recruits had turned down an offer from a company whose ESG ambitions were not aligned with their values.
All organizations today are called upon to adopt a sustainable development approach. However, tackling such a transformation is not easy. How to understand it well?
“Participating in a sustainable development approach involves considering three main pillars: the definition of a strategy, the transformation to be carried out and the reporting associated with the objectives pursued. The biggest challenge businesses face is determining where to start. It is the chicken and the egg question that arises at this level. Do we start by determining a strategy to improve our social or environmental performance? Or is it preferable to make an initial assessment of the impacts of the activity to define a suitable strategy? If we look at what is required by the Corporate Sustainability Reporting Directive (CSRD), which requires organizations to report on their environmental, social and governance performance, we find this principle of double materiality. The company must both assess how the environment impacts it and measure its footprint on the world around it.
At the heart of ESG transformation, it’s regarding finding how to do things better or just as well, but differently.
So, how to start the process?
“Companies will have to work on both aspects, strategy and impact measurement. However, the way to initiate the transition will mainly depend on the sector in which the organization operates. The issues are not the same for a service company, whose environmental footprint linked to its own activity is more limited than for a manufacturing industry. However, it is important that everyone understands that an ESG approach is considered taking into account the environment in which the organization operates and all of its stakeholders.
Why is this important?
“Considering an ESG approach without taking into account the actors who make up the ecosystem in which we operate, without taking care to evaluate the risks and opportunities linked to our actions on the environment, will produce limited effects. Such an approach might even prove counterproductive. For example, deciding alone to place beehives on the roof of your building comes from a good intention. But if the selected bee species is deemed invasive, it can harm biodiversity more than preserve it. Furthermore, faced with the many challenges facing us, we must act collectively. The various policies currently implemented, particularly through regulations, seek to create and reinforce strong leverage effects.
Concretely, how do these regulations create leverage effects?
“Our impact depends on the actions we implement directly as an organization, but also on the commitments of our partners, suppliers and even customers. This is why change must be seen in an ecosystem way. An organization’s purchasing function, by integrating a set of environmental or social criteria into its selection processes, has the potential to significantly influence the company’s ESG performance. Let’s take the example of an organization that, overnight, decides to replace glass water bottles with jugs of filtered water. The decision will perhaps improve the performance of the organization. However, it may have regrettable impacts on the supplier of bottled water.
What other approach can the company take towards its suppliers??
“It can work in collaboration with its suppliers, seeking to involve them in the company’s ESG approach. Together, the stakeholders involved can seek alternative solutions and innovate in pursuit of common sustainable objectives. We can think, in the context of our example, of the implementation of deposits on glass bottles. By acting together, we improve performance on a larger scale. At the heart of ESG transformation, it is regarding finding how to do better or just as well, but differently, so as to be aligned with the sustainable objectives that we are pursuing.
Between strategy and reporting, it is necessary to transform the model. How to understand this?
“First of all, it is important to set clear and coherent objectives with regard to the company’s activity. The strategy will be determined by making a selection among the 17 sustainable development goals defined at the United Nations level. At this level, the company must aim for objectives to which it can contribute significantly. From there, it must be able to establish an inventory, determine how it positions itself with regard to the selected issues and set a goal to achieve. To carry out the required transformation, clear objectives are needed that are understood by everyone: management, employees, suppliers and partners, as well as customers. It is regarding integrating these ambitions into the heart of the company’s strategy, so that each decision taken is aligned with these issues.
What are the challenges of implementing quality reporting?
“If we set objectives, we must associate them with well-chosen indicators, which will allow us to understand the progress we have made. This can have implications for broader data management across an organization. If one of the challenges is to reduce waste production, we must be able to quantify it, determine what portion is recycled… We must collect this data, structure it and be able to follow it over time. Indicators, moreover, are important for mobilizing teams in the pursuit of common objectives, communicating regarding challenges and results, determining levers for improvement and generating new ideas from employees.
Accounts to be given
CSRD
From 2024, the Corporate Sustainability Reporting Directive (CSRD) will gradually come into force. It will require more than 50,000 companies in Europe to establish extra-financial reporting, in other words to monitor and publish, in addition to their financial report, an ESG report (environmental, social and governance).
CSDDD
The Corporate Sustainability Due Diligence Directive (CSDDD) aims to regulate the social and environmental responsibility obligations of companies and to apply the notion of “duty of vigilance”. If adopted, it would require European companies to publish information on identified sustainability risks, including at the level of their service providers and suppliers across the entire value chain.
This article was written for the ESG supplement from the edition of Paperjam of the month of November 2023 published on October 25, 2023. The content of the magazine is produced exclusively for the magazine. It is published on the site to contribute to the complete Paperjam archives.
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