Defining an authentic sustainability strategy

DEFINING AN AUTHENTIC SUSTAINABILITY STRATEGY

As actors in all areas of the economy develop sustainability strategies, it is essential to gather stakeholder knowledge and, equally important, understand their expectations. This is the only way in which the strategy can be truly authentic. After all, stakeholders expect organisations to walk the talk.

Experience tells us that there is a higher chance of executing the strategy if it is realistic, relevant and specific to the company, and fully embraced by the entire organisation. Indeed, internal stakeholders want to engage with a strategy that reflects their day-to-day relationship with the company. This will also help avoid stakeholders being struck by “sustainability fatigue”, a very real phenomenon.

In the financial services sector, a tightening of ESG regulations and ongoing amendments to and clarifications of existing rules mean that regulators are likewise looking for authenticity. Regulators rightly expect that once a strategy has been defined, it is then put in place on the short, medium and long-term.

The definition of stakeholders is broad and can include a board of directors as well as so-called “silent stakeholders”, which can encompass future generations and even nature. If sustainability is about ensuring that today's growth doesn't negatively impact future generations or the planet, then it is important to recognise silent stakeholders by acknowledging that they have a voice which must be heard.

It is imperative that board directors are engaged during the strategy setting process, especially if they are ultimately validating the sustainability strategy proposal and key sustainability disclosures. One difficulty in involving board directors is that forming an opinion on sustainability and on a proposed sustainability strategy relies heavily on data which may not always be readily available or consistent. It is thus important for strategy authors to formalise the framework and methodology they will use to make calculations or disclosures. That will provide board directors reassurance that a certain process has been followed.

In addition, the board can use their experience and market knowledge to provide a bigger picture. This can help the strategy go beyond ESG compliance which is the minimum the company must have in place and offer a wider range of considerations and proposals. Board directors can step back and help strategy builders to take a more holistic view of sustainability.

Gleaning knowledge from directors, as with other stakeholders, is not always straightforward. Individuals will not only have different levels of knowledge on the topic of sustainability, they may also view it through a different lens. It is part of the engagement process, for instance, to ensure that the stakeholders are not purely focused on the environmental aspect of sustainability, arguably the most broadly cited component of ESG.

Fixating on what we might call a “dark” mindset and only seeing the risks involved with sustainability, and not the opportunities, can also be a liability. Sustainability is about enabling humanity to continue to grow in harmony with the planet and without negatively impacting future generations. If we have that as our North Star, it puts us in a more positive mindset that can help us see opportunities. One opportunity that directors may want to think about is that a solid sustainability strategy can attract a younger generation of employees. Today’s talent prioritises working for organisations that have a clear purpose with which they can identify.