Sustainable Consumption, Production And ESG Risk

The transformation of our society that is called for by the UN Sustainable Development Goals is bold. Moving towards a circular economy where both production and consumption are sustainable is a crucial target to achieve by 2030. The ever-increasing expectations of the community on how private firms help make these outcomes are one of the ESG risk factors boards and senior executives need to manage.

Many firms can change their current operating model to improve energy efficiency, reduce environmental impact, reduce adverse social effects, and still deliver strong economic returns to shareholders. Understanding the breadth of your current operating model and continuing to drill down into the people, processes and technology across your entire value chain is a crucial part of understanding and managing these ESG risks appropriately.

The current consumption footprint of the global population is vastly unequal between countries. If developing countries consume at the average rate of developed countries, by 2050, we may need the equivalent of 3 planets to produce the level of natural resources required. It’s not explicit what assumptions around increasing technological efficiency sit around that number, but it is still a concern.

There are still boards and senior executives whose mindset has not adjusted to how they will need to change their business to make a positive impact on solving these societal issues. Making changes to your operating model to help address these issues and reduce ESG risks isn’t about veering out of the lane of private enterprise into politics – it’s about responding appropriately to changing community expectations around what a business has to do to maintain its social license to operate.

The Royal Commission into financial services in Australia provided a wakeup call to the financial services industry but was not that much of a surprise to many consumers. Many feel as if, after speaking to the hand for many years, the social risks inherent in many of the products that the banks, insurers and wealth providers sold, were exposed in case study after case study.

When you realise that the terms of reference were heavily restricted and that there are not only these risks around acting in the best interest of customers that need to be managed appropriately by doing the right thing by your customers, but there are many other environmental, social and governance risks that must be equally managed or removed from operating models in the financial services industry alone, the scope of the challenge for Australian business becomes apparent.

Boards and senior leaders need to revisit their social purpose – why does their business exist? When they have figured that out, there is a clear need to design their business strategy in line with responsible and ethical principles. The subsequent design and implementation of a new responsible operating model to deliver the outcomes to customers, shareholders, and the broader community of stakeholders, could be one of the defining make-or-break moments for your business in the coming decade.

It is amusing to read the “head-in-the-sand” commentary that is still coming out on climate change and ESG risk. Responsible investing isn’t going away, and if your firm participates in the capital markets, your cost of capital could be increased substantially over time if significant ESG risks are not remediated substantively.

One of the trends in corporate governance since the Global Financial Crisis has been a strong focus on risk management – have a risk appetite statement, have a risk management framework, implement a three lines of defence model, have robust internal and external audit, and have the board and senior executives sincerely across the details of the risks the business is running. The response so far of many large corporates indicates that the “risk bureaucracy” response to increasing regulatory demands means that ESG risk may be “press release managed” by many firms.

This approach may suffice in the short-run. However, institutional investors such as super funds, sovereign wealth funds, and pension funds are becoming even more demanding on these issues. It won’t be long until extensive operational due diligence on suppliers and customers up-and-down your value chain will be a standard part of their questioning.

The plethora of ESG ratings, disclosure, and evaluation approaches aren’t helping matters. So how do boards assure themselves that their firm is positioned ahead of the curve on these issues? Thinking deeply about what “ever-increasing” community expectations mean for your firm and the products and services it sells is a useful exercise. Increasingly, it means that outcomes for customers that would be outrageous from your perspective or even against your interpretation of contract law could soon be the default new expectation for that product line.

As an extreme thought example, the “slippery slope” outcomes from a heightened focus on ESG risk could see enormous changes in product design that need to be thought about today to enable your firm to maintain its product and service catalogue in the face of ever-increasing demands from stakeholders who you may never have imagined would have a voice in your boardroom or management committee.

The previous bare minimum of sustainability reporting is now having climate-related risk financial disclosures added to the checklist.  The catchup required by firms is analogous to that on AML/CTF risk which many buried their heads in the sand on until they saw that the penalties for non-compliance had teeth. I predict that over the next decade, large financial services firms that currently have to balance technology investments in customer experience against risk & compliance will face a third stream of required investments in ESG related projects that will cost some tens of millions of dollars a year.

From a business strategy perspective, turning the cost of managing ESG risk on its head and asking the question: “can our operating model be simplified to remove or reduce ESG risk by design”? will be a differentiator from your competitors. The rise of B Corporations is merely the start of this. Increasingly, entire value chains will be sustainability-focused, and revenue growth will not be possible if you can’t meet the vendor selection criteria that will exhaustively interrogate your business on its ability to comply and attest compliance around an ever-increasing number of ESG risks.

Boards and senior executives will need to consider the breadth of their operating model carefully. To manage ESG risk appropriately, bringing previously outsourced capabilities in-house may be required. Some firms could face having to redesign their entire production capability as it stands today because they have no chance of meeting institutional investor expectations under their current operating model. This change will present enormous opportunities for disruptors in capital-intensive industries.   

Sustainable Cities, Social License To Operate And Managing ESG Risk

The UN Sustainable Development Goals are a useful high-level framework for benchmarking your firm’s sustainability impacts. The 17 goals include issues such as climate change, reducing inequality, improving access to clean water, and building global partnerships between the public sector, private sector and NGOs.

Many top global firms already use UN SDGs in their annual sustainability reporting. They have identified where they can make an impact, and taken steps to reduce any negative consequences from their activities worldwide. They are just one of the many sustainability reporting options available to boards and senior executives.

Goal 11 of the SDGs is about making cities inclusive, safe, resilient, and sustainable. I think this is one of the dark horse goals of the SDGs – cities are so critically important, and nearly every country in the developed world has problems with their cities let alone some of the issues developing countries have with some cities development.

Many people want to move to cities because that is where opportunity exists. For some countries, only one city will be able to offer the incomes and opportunities that people desire. Some firms may want to think about how locations work in their operating model. There may be opportunities to build partnerships with cities that can offer employees something different in lifestyle or work-life balance.

Because cities are always evolving every day because of individuals choices, there is only so much that firms can do to help build sustainable and resilient cities. Central planning and coordination aren’t always going to align with how people want to live in the real world. Deeply ingrained cultural preferences seem to reject density and better investment in public transport.

Boards and senior executives may choose to diversify their locations away from large cities. However, large cities are still where much of the skilled workers live and are available for work. Remote work has not nearly been as prevalent as the technology could make it. Face-to-face communication is still critical for business-to-business sales and relationship management, for example.

ESG risks when it comes to city sustainability and resiliency may emerge in a firm’s real estate portfolio. Disclosure of the environmental impact of office space, retail space, and industrial space you own or lease will be required. Because of the ever-increasing community expectations on sustainability in supply chains, other participants in your value chain will need to share this data with your sustainability team.

Board and senior executive considerations

Understanding your current operating model and the locations where your value chain takes place is a crucial requirement for understanding your firm’s ability to make a positive social impact on Goal 11 of the SDGs.

If you are currently operating a flexible operating model with a wide range of vendors performing essential outsourced functions to deliver outcomes for your customers, understanding how they understand and manage sustainability in their locations is critical.

One of the ESG issues I predict will increase in severity in the 2020s is a backlash against large corporations using partnerships with cities to extract unfair advantages or subsidies over competitors. Some companies even play cities off against each other to see how much they can obtain from the public sector.

This sort of corporate behaviour will increasingly be scrutinised and punished. When inequality is higher, and many large firms have an already shoddy reputation, taking advantage of ratepayer or taxpayer money will become more difficult. The use of partnerships with cities will need to be carefully thought through to manage any ESG risk. The use of robust governance procedures and probity around these arrangements will be necessary.

One particular problem for some firms will be how they respond if one of their locations is green, sustainable, or low-impact on the environment – but a significant part of their value chain is delivering a negative social impact for a particular city.

Finding yourself in this situation may be easier than in decades past. The need to revisit your purpose and business strategy in a highly competitive environment with increasingly strict guardrails on all forms of corporate decision making mean even making appropriate business decisions like closing down an unprofitable part of your business will leave you pilloried.

Politicians on the left have increasingly used the phrase “a just transition” when it comes to moving workers from sunset to sunrise industries over time. If predictions about rising automation and its impact on jobs eventuate, then firms will need to delicately manage the changes in their labour requirements to avoid controversy.

The assessment of the current operating model of your firm should include observations on the automation potential for different parts of your organisation. Streamlined and automated customer experiences mean that many frontline roles will reduce over time and increasingly, higher-skilled workers who never expected automation out of a job will be in the firing line.

The constraints on corporate decision making mean that a press release driven approach to thinking about your impact on a city you operate in won’t cut it. Genuine partnerships with employees, suppliers, local and regional government, and other stakeholders will need investment.

Boards and senior executives can consider the perception of location changes within cities as well. For some employees, a location change could be extremely disruptive to their lifestyle, for example, if both parents are working. A serious consideration of how many people won’t apply for new roles at the new location should be part of the business case in these situations.

ESG risk management is comprehensive, and when you are operating under resource constraints in a competitive environment, tradeoffs will be required. This shift means that most CEOs will have to go back to the drawing board and revisit the purpose of their organisation.

Once they’ve done that, a radical transformation of their strategy and the design and implementation of a responsible operating model that enables them to deliver value to a wide group of stakeholders will be part of the execution side of their role.

The identification and triage of ESG risk isn’t a checklist exercise. It’s part of the risk management framework and will need to be embedded in the culture of a firm if there is any chance of avoiding existential controversies that destroy your firm’s social license to operate.

There are many businesses in 2020 that will not survive until the end of the year because of their indifference to ESG risk, let alone through to the end of the decade. Rising community expectations from the corporate sector mean that directors will need to interrogate the board reporting they receive and ask tough questions carefully. They don’t want to end up in the witness box of the next Royal Commission.

ESG Risk, Technology Risk And Reducing Inequality

One of the UN Sustainable Development Goals is about reducing inequality among and within countries. The UN SDGs are a high-level framework of 17 goals that the world can achieve by 2030. They are useful as a way of understanding your firm’s social impact and identifying how to change your operating model to reduce any adverse effects or enhance any positive ones.

ESG risk and reducing inequality may seem entirely unrelated. However, there are ever-increasing community and employee expectations when it comes to issues such as executive compensation, wage growth, sharing in productivity increases, and managing rising living costs.

The detailed sub-goals of Goal 10 are really about the developing world, and not the relative poverty issues in developed countries. Many countries cannot afford social protection policies and legislation that richer countries can. Some richer countries place high tariffs on goods exported from poorer countries which makes it more difficult for people in these countries to trade their way to higher living standards.

An example of the ESG risk in this space is the cost of migrant remittances. Hundreds of millions globally send billions every year back to relatives in their home country. Often, there are high fees associated with this and many global financial institutions have encountered a lot of issues ensuring AML/CTF compliance in this space.

Goal 10.C is quite sad – reducing the cost of remittances to no more than 3% by 2030 and eliminating remittance channels that cost more than 5% in transaction costs. The rise of startups in developed countries that enable you to send money overseas at wholesale FX rates when poor people are charged enormous premiums is definitely in the social risk category.

Product management and pricing decisions around FX or overseas transfers will be even more complicated over the next decade than they already are. It’s certainly an area that is being disrupted by firms with better technology and customer experience than the banks. People who are moving between developed countries or paying less for their overseas holiday shopping and dining out capture much of this benefit in reduced costs.

When researching this particular UN SDG, the issue of technology startups in developed countries coming up with great ways to solve problems that only work in developed countries became quite clear. Many amazing innovations will only work if you have a passport from an OECD country. There are still enormous increases in transaction monitoring capability required to change negative screening for entire countries that some financial institutions still feel the need to do because their technology is decades behind Silicon Valley.

The strength of the focus on risk and compliance over the past decade has led many boards to authorise investment in their technology platforms. But merely spending hundreds of millions of dollars on technology isn’t necessarily enough.

How many ESG risks are hiding in the legacy technology ecosystems of major financial institutions around the world? A target operating model for a risk function includes more than just the implementation of transaction monitoring software. The people, processes and systems all need to work to clear principles and deliver the right outcomes for a broad group of stakeholders.

The irony of the enormous spend on risk and compliance technology, particularly regarding regulatory and legislative compliance, is that it has provided many large firms with the right model for how they might need to prioritise investment in climate change risk reduction.

The problem for the customer experience is that if you already have a poor customer experience that will cost $X to fix, and now your bank needs to spend a further $X on more risk and compliance programmes of work, then very soon you start running into a point where the duplication of all of these technology investments across different companies becomes redundant.

The role of a board is to provide governance to an organisation, and this includes making tradeoffs between Project 1 and Project 2. The problem is that many of the loudest voices criticising their every move on ESG risk don’t exactly appreciate the concept of constrained resources. For many financial services firms, they will face a point where they need to consider their entire current operating model and seriously rethink their purpose and strategy.

What is the link between this and the central problem of reducing inequality among countries and within them? Well, previously, a firm could make tradeoffs inside its operating model transformation that included plays like outsourcing or radical restructuring. Now, every person with a Twitter account could set off a backlash for something as random as invoice payment times for SMEs.

The reporting on this issue in Australia has been great because nothing could demonstrate more clearly to a board and senior executives that the operational-level decisions inside their operating model are now fair game. ESG risks must now be fully understood and considered at the customer interaction level and the supplier interaction level.

A board that wants to obtain an independent assessment of its ESG risk and current operating model should consider what social license to operate means in the 2020s. A higher proportion of people will increasingly demand more and more of the private sector.

Unlike politicians, CEOs face the market test. Many are already far advanced in changing their firm’s way of doing business to differentiate themselves from competitors. Higher enterprise value is likely to accrue to firms that have low ESG risk relative to other investment opportunities. Protecting access to finance at all should now be a consideration of boards – one serious enough ESG controversy could see lines of credit cut, investment banks no longer willing to work with you on a debt issue, or even suspension from trading on an exchange.

The level of seriousness boards and senior executives have to take these issues is quite clear. They are skating on thin ice in a real-time communication world. Independent assessment of the ESG risks they face and the steps to take to mitigate, reduce, or eliminate them will be a top focus for 2020 and beyond.

Large transformation projects that have already started may require even larger investments or potentially cancellation and writedowns. The business strategy of a large financial institution is also facing severe risk in an ultra-low interest rate environment. A pandemic related recession could be on the cards in many countries.

When interest rates go down, eventually there is no choice but for net interest margins to go down. The subsequent pressure on high bank operating expense ratios increases ESG risk even further due to the short-term earnings pressure from many shareholders. What a fascinating era!

Sustainable Infrastructure And ESG Risk Management

The UN Sustainable Development Goals are a useful high-level framework for business to use in assessing its negative or positive social impacts. Global partnerships between government, NGOs, and the private sector will be required to achieve them by 2030.

The rise of community expectations around climate change and other ESG risks means that boards and senior executives can no longer function in “press release” mode when it comes to sustainability initiatives.

The management of ESG risk is a crucial part of your risk management framework, and firms need to identify and manage both quantitative and qualitative risks. The excuse that it is difficult to quantify some ESG risks will not cut it with stakeholders over the coming decade.

Institutional and retail investors will increasingly expect rapid and decisive responses to controversies, including the immediate resignation of directors and senior executives. “Riding out” the storm of displeasure will be very difficult given the increasing volume in the media on these issues.

One of the important considerations when thinking about sustainability reporting and the achievement of the UN SDGs by 2030, is that innovation and profitability in the private sector is a crucial success factor.

Many businesses have the opportunity to assess their current operating model, identify where and how they can make a positive social impact, and move towards implementing a responsible operating model that delivers for a full group of stakeholders while still generating an appropriate level of profit.

Goal 9: Build resilient infrastructure, promote sustainable industrialisation and foster innovation

Goal 9 of the UN SDGs is about how essential investments in underlying infrastructure are to enabling sustainable development. Technological efficiency, energy-efficiency, and increased productivity enabled by investments in transport, energy, technology, healthcare, education, and irrigation will all help developed and developing countries alike in improving their standard of living.

A lack of necessary infrastructure in developing countries means that their people are at a clear disadvantage when it comes to ease of access to more markets to sell their products and services. Sustained employment growth will become more realistic for some countries once appropriate infrastructure investments are made and brought online.

Environmentally sound infrastructure development will help achieve other sustainability outcomes while providing lower environmental impacts from infrastructure development. Firms who operate in the infrastructure sector will be able to share their best practices with developing countries to enhance ecological efficiency for new projects.

For firms operating in developed countries, assisting in developing countries and providing technology investments where feasible can help accelerate sustainable development. For example, substantial investment in mobile phone networks in Africa has enabled a wave of entrepreneurship and innovation to take place in previously unconnected communities.

Board and Senior Executive Considerations

Boards and senior executives in other sectors may not think they can have any impact on this particular goal. However, UN SDGs are a broad church of targeted outcomes for a global society. One of the more effective ways that any business can make an impact on these goals indirectly related to your business is through due diligence and standards for your broader value chain.

The first exercise is a current operating model assessment that looks at your present purpose, strategy, and operating model. The outputs of this exercise can be mapped at a high-level to each of the 17 UN SDGs to provide input into the next activity.

The second exercise is mapping the current operating model outputs to each of the UN SDGs and identifying the positive or negative social impacts your business currently has. There may be somewhere there are none, there may be others where some substantial impact is possible.

The third exercise is taking the first two exercises into account and re-examining the purpose of the business. Why do you do what you do? Is your goal relevant in the 2020s? Are you a sunrise or a sunset business?

The fourth exercise is then revisiting the business strategy. Does it help or hinder the achievement of sustainability outcomes? Are there any products or services that need changes or closing down in light of changes in community expectations today or anticipated changes in community expectations tomorrow?

Once the current operating model, mapping exercise, purpose re-examination, and strategy re-examination are complete, a broad group of stakeholders should participate in the development of a responsible operating model.

The current trend in transformation is to speak of the target operating model; however, in the 2020s, it will be necessary to design and implement a responsible operating model. Sustainability outcomes must be incorporated into the design and planning stages of any transformation program. If they aren’t, they won’t be delivered.

One of the changes in thinking about ESG risk is that the business case is about the enterprise value of the business itself. Issues that even five years ago may not have merited a mention in a footnote to a presentation could now present themselves as existential crises for a board of directors.

Over the past decade, the cost of implementing appropriate systems and controls to manage compliance risk has been billions of dollars for the financial services sector. The coming decade will see a further increase in required technology and project expenditure to give boards and regulators assurance that a framework is in place and monitored actively at all levels of a business when it comes to ESG risk.

Other industries have faced similar costs, such as the impact of health & safety legislation on the construction sector. But no one would argue that making sure everyone goes home from a worksite at night is less important than making a profit at any cost. However, 30 years ago, those arguments were undoubtedly being made by some construction sector executives and boards.

Times have changed, and old attitudes towards ESG risk will need to be updated. The current economic environment globally, where the asset markets have boomed, and many companies rebounded from the Global Financial Crisis after brief tests in 2008 and 2009 of their operating model, means that the next downturn will provide an opportunity for deep introspection and consideration of what a responsible operating model needs to look like for a secure strategic position relative to your competitors in the coming decade.

Sustainable Economic Growth And ESG Risk Management

An environment of ever-increasing expectations on corporate leaders to do the right thing when it comes to sustainable business means it’s an issue to be taken seriously from the board-level down. The identification, active management, mitigation, or elimination of ESG risk from your operating model is a vital part of building a sustainable business that makes a positive social impact as well as delivering a profitable business for shareholders.

The UN Sustainable Development Goals provide a useful high-level framework for assessing your firm’s ability to deliver sustainability outcomes and is increasingly used by global firms as the core 17 areas for reporting their sustainability focus in their annual report.

You can map the 17 UN SDGs against your current operating model to identify the areas where your firm is making a positive or negative social impact. This exercise could assist in the analysis work before a transformation programme begins, ensuring that the development and deployment of the target operating model incorporate sustainability outcomes.

Ever-increasing community expectations around what businesses are doing to reduce ESG risks and deliver a positive social impact for a full group of stakeholders means that thinking about what a responsible operating model for your business incorporates can help the process of positioning your firm ahead of the curve.

Boards and senior executives might consider assessing their current risk management framework to identify whether the broad array of ESG risks as some choose to define them are present in their existing risk register.

Environmental, social, and governance risks can be much harder to quantify than many financial or operational risks. Firms should develop a defensible framework for estimating the cost of these risks and the severity of their impact on the operations of the business.

The business case for making significant investments into projects that reduce these risks and enhance the enterprise value of your business is clear. Increasingly, firms that do not take these issues seriously or engage in a press-release driven approach will find it difficult or impossible to raise capital.

Institutional investors in 2020 expect well-aligned corporate behaviours and communications on sustainability issues with their preferred responsible investing frameworks than even five years ago. Investor relations and corporate access teams at investment banks will have higher rates of inquiry from stakeholders who may previously never have engaged with them, and that means that the operating model for an investor relations function or corporate sustainability function needs to adapt and improve as part of the core operating model of the business, instead of being tucked away in a small department.

Goal 8: Promote inclusive and sustainable economic growth, employment and decent work for all

Goal 8 is about sustainable growth that cares about people. Eradicating global poverty depends on increasing the quality and compensation levels of workers around the world through raising productivity and sharing some of those gains.

In many developing countries, having a job doesn’t mean that your family is out of poverty. Roughly half of the world’s population lives on less than US$2 a day even with global unemployment around 5.7% according to the UN.

“Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population. There needs to be increased access to financial services to manage incomes, accumulate assets and make productive investments. Increased commitments to trade, banking and agriculture infrastructure will also help increase productivity and reduce unemployment levels in the world’s most impoverished regions.”

Some of the detailed sub-goals associated with Goal 8 include per capita economic growth, higher levels of productivity supported by investment in technology, a focus on high-value-added services, implementation of development-oriented policies, and eradicating forced labour and modern slavery.

8.1 Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries

8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors

8.3 Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services

8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on sustainable consumption and production, with developed countries taking the lead

8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

8.6 By 2020, substantially reduce the proportion of youth not in employment, education or training

8.7 Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms

8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

8.9 By 2030, devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products

8.10 Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all

8.A: Increase Aid for Trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries

8.B: By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labour Organization

Board and Senior Executive Considerations

Boards and senior leaders will see that, like the other SDGs, there are several areas where any business can make a positive social impact. Procurement processes need to ensure that risks such as forced labour and modern slavery are not in your supply chain.

When you assess your current operating model, the key areas to explore when considering Goal 8 include people and culture processes and policies. If you are in financial services, finding what actions you could take to support the achievement of goal 8.10 would be a key focus. If you are in transportation or travel, exploring sustainable tourism such as going beyond net-zero or carbon neutral and thinking about carbon-negative operating models that create local jobs where you operate your business would be worth consideration.

The use of the UN SDGs as a high-level framework to map your current operating model against the ability of your business to deliver a positive social impact is a useful exercise for businesses. Many leading global firms already incorporate this reporting in their annual reports.

The decade ahead will be necessary for firms as they strategically position themselves to be ahead of their competitors on ESG issues. Moving beyond reporting and engagement to actively choose where your operating model (people, processes and systems) can adjust to improve positive outcomes or reduce adverse consequences will be tables stakes.

Institutional and retail investors are growing their awareness of ESG risks and expectations of the pace at which boards and senior executives will respond decisively if any controversies arise. Waiting it out or sending out a press release won’t cut it. Resignations and ending supplier relationships will become far more frequent and building a responsible operating model with in-built flexibility that can respond if a critical supplier needs to be changed because of an unacceptable level of ESG risk will increasingly mark the leaders in this space distinctly from the laggards.

Sustainable Energy Goals And ESG Risk

The UN Sustainable Development Goals are a useful high-level framework to assess your firm’s ability to make a positive social impact. They cover a wide area of topics including equality, energy, climate change, responsible growth and more.

There are many frameworks that governments and NGOs try and get business behind. Each has its pros and cons. The UN Sustainable Development Goals are a global framework which enables comparison sustainability reporting between companies that operate in different jurisdictions or industry sectors.

Boards and senior executives should assess their current operating model against the 17 high-level SDGs to capture a baseline. They can then identify the areas of their operating model that make a positive or negative impact on these goals and generate sustainability reporting to track their progress in moving towards a responsible operating model that incorporates sustainability outcomes into the transformation process.

Goal 7: Ensure access to affordable, reliable, sustainable and modern energy

Goal 7 of the UN SDGs is to ensure access to affordable, reliable, sustainable and modern energy. Almost 1 billion people still don’t have access to reliable electricity, half of them in sub-Saharan Africa. Energy production and consumption are responsible for nearly 60% of total greenhouse gas emissions globally.

Globally, not even one-fifth of global electricity production is from renewables. There are many areas of energy that will need to improve over the next decade including energy efficiency, battery storage technology, renewable energy production, and reliable energy supplies for developing countries that doesn’t cost too much.

The benefits of clean energy for our planet are enormous. Reliable and affordable energy sources mean that cooking, cleaning, and necessary business activities become possible for people in developing countries.

In developed countries, increasing energy efficiency, even more, means that marginal energy producers that rely on fossil fuels such as coal, natural gas, and oil can sunset older plants and invest in renewables such as solar, wind, geothermal, and hydropower.

 Some countries have already made enormous progress in developing their renewable energy sources, including China which has some of the most significant solar and wind power initiatives in history in operation and under construction.

The ability to make an impact on goal 7 isn’t just for businesses in the energy sector. Responsible electricity consumption and energy efficiency initiatives are realistic in a company that uses electricity.

Thinking about the energy efficiency of your entire value chain including the energy efficiency of your suppliers and partners means that operational due diligence on suppliers should start to include questions around their electricity provider, their investments in energy efficiency, their analytics and insights into their energy use, and developing a strong understanding of their strategy to reduce their carbon emissions and increase the proportion of their electricity supply from renewable sources.

Board And Senior Leader Considerations

There are many different frameworks and reporting guidelines for sustainability and ESG risk. As at January 2020, there are no global standards like IFRS that enforce certain levels of disclosure. Some companies will not care about transparency on these issues because, for some, it could be “brand destroying” to be open about some of the ESG risks that exist in their value chain.

Boards and senior leaders should start with a high-level assessment of their current operating model. Working through the basics of your business model is necessary before launching into exhaustive ESG risk analysis.

  • What is your purpose? Why do you do what you do?
  • What is your business strategy?
  • How do you deliver your strategy?
  • Who delivers value to your customers?
  • Where are your operations located?
  • Who are your key suppliers?

The business model needs to be understood and decisions made on the boundaries of how much the board and senior leaders are willing to change the business model to achieve the targeted level of ESG risk in their business.

The risk management framework and risk registers will already include many of the risk themes that emerge during a strategic review of this nature. However, some of the ESG risks like social risk and environmental risk, are facing ever-increasing community expectations.

Boards and senior leaders need to be forward-looking in their identification, mitigation or elimination of these risks. They need to be ahead of the curve because an acceptable business practice today could be completely unacceptable from a social license point of view after one newspaper article or one tweet goes viral.

A great example of an ESG risk related to energy is the proportion of your electricity supply that comes from renewable sources. Some organisations have changed their procurement procedures to ensure that only the suppliers with the best effort on increasing renewable sources of electricity supply are even in the running for tender opportunities.

What does this mean? It means that because the era of the press release is over, boards and senior leaders need to be thinking long-term about how to position their business strategy so that their operating model does not give rise to any potential ESG risks that will put their economic engine at risk.

The business case for building a responsible operating model and reducing or eliminating as much ESG risk as possible is not just about return on investment. Customer satisfaction, shareholder approval, cost avoidance, revenue retention, regulatory compliance, social license maintenance, and employee satisfaction all have some elements that can be quantified to support the financial side of any business case for a programme of work to build your responsible operating model.

The UN Sustainable Development Goals have one significant advantage for boards thinking about how to measure and monitor their social impact. They are a global framework, and many major global companies already include their SDG reporting in their annual reports.

One consideration is that some companies are already so far ahead on adjusting their operating model to deliver better sustainability outcomes, that they could already “lock-in” a strategic competitive advantage.

Costs to businesses not taking ESG risk seriously can arise in visible areas such as the ability to raise capital. Look at how thermal coal companies are on the way to becoming unbankable as an increasing number of financial institutions globally stop lending, cut lines of credit, don’t take commercial paper, and don’t invest in equity or debt raises for thermal coal companies.

Thermal coal miners are currently losing their ability to raise capital. Retail and institutional investors will increasingly demand near-perfect delivery from boards and senior leaders on the reduction and elimination of their preferred definition of ESG risk.

The rising community expectations on these issues will impact a firm’s social license to operate, and focusing on short-term operating model changes that deliver outcomes will be judged better than long-term ambitions that will take decades to achieve.

Clean Water, ESG Risk And The UN Sustainable Development Goals

The UN Sustainable Development Goals are a useful high-level framework for thinking about your firm’s ability to deliver a positive social impact. Goal 6 is to ensure access to water and sanitation for all.

In a world with ever-increasing stakeholder expectations, boards and senior executives must to actively engage with and ensure that environmental, social and governance risks in their organisations are identified, managed or eliminated.

Zooming out to consider the global context in which your firm operates is a helpful exercise. The UN Sustainable Development Goals help boards disclose these ESG risks because the 17 high-level goals align with the classification of the material risks your business faces.

Through embracing sustainability reporting with the UN SDGs as part of the reporting framework, comparability between businesses and across industry sectors and countries becomes possible. Over time, institutional investors will increasingly demand more disclosure around sustainability outcomes your business is delivering for stakeholders.

The current focus on ESG risk is predominantly on responsible investing. Setting up processes and frameworks for asset managers to consider whether or not a particular company is suitable to invest capital into or lend to is also known as impact investing.

The focus for the next decade will need to be on building a responsible operating model. A responsible operating model is an evolution of a target operating model that incorporates sustainability outcomes and positive social impact into the strategy, design principles, and execution of the new operating model.

An exercise for boards and senior leaders to run is an assessment of your firm’s current operating model against the UN Sustainable Development Goals. Once you have that, consider your purpose and fundamental value proposition for your customers. Are there parts of your operating model that could be modified or enhanced to deliver a positive social impact as well as deliver value to your shareholders?

If you are going through a transformation, it can be like turning a container ship in a large organisation. During the programme initiation and spin-up phases, the sustainability outcomes need planning and analysis. Projects required to enable these outcomes to be delivered will never be scoped, budgeted, delivered and used by the business unless they are there from the beginning.

Goal 6: Ensure access to water and sanitation for all

The goal of ensuring access to water and sanitation for all has particular application for some companies. They may operate in countries where clean water and adequate sanitation is behind the country where their headquarters are.

Poor access to clean drinking water, inadequate sanitation, and poor access to reliable water supplies at all are problems faced by hundreds of millions of people every day. Water scarcity affects almost 40% of the global population. Nearly 1,000 children die every day because of preventable water or sanitation-related diarrheal diseases.

If your business operates in the water, sanitation, or engineering industry sectors, there is a clear opportunity to deliver a positive social impact and support the achievement of Goal 6 by 2030.

A business doesn’t have to have an office in a developing country to help. They can use their people and resources to assist developing countries in improving water and wastewater systems. They can offer secondments to experienced engineers and technicians to assist impoverished communities. They can use their voice to lobby for global efforts that improve access to sustainable and affordable finance for water and sanitation projects in developing countries.

Many technologies can benefit from further investment in research & development such as water recycling, desalination, water and wastewater analytics, wastewater treatment, recycling and reuse technologies.

If you are running a business that works in an office in an OECD country, starting with the water and sanitation efficiency and sustainability of your building and any other premises you own or occupy is a vital part of any current operating model review.

You will need to work with your building manager and landlord to understand the sustainability performance of your office space. There are sustainability analytics tools that can assist in reporting on this. Some older buildings may not be able to deliver sufficient levels of water reuse and recycling without substantial investment from landlords.

If you are a manufacturing company, ensuring there is no environmental impact from water or wastewater pollution from your factories is table stakes for the 2020s. Ironically, many manufacturers are well ahead of many service industry businesses because of environmental regulation and stakeholder pressure over the past few decades in identifying and managing these risks.

Goal 6 is about water and sanitation, and every business will be able to do its part to identify and report how it is supporting the achievement of this goal. It may not be the highest priority for a business in terms of how it can help sustainability outcomes, but similar to supporting gender equality it is table stakes for being able to communicate to stakeholders how it holistically considers its overall social impact.

Considerations for directors and executives

Boards and senior leaders that decide to use the UN Sustainable Development Goals in their sustainability strategy and reporting should consider a wide-ranging review of their current operating model against the 17 high-level goals.

The active engagement and governance of ESG risks inside a business will become increasingly critical for boards of directors. Boards should consider how they want to incorporate ESG risk into their risk management framework and ensure there is sufficient budget available to spend on sustainability projects, reporting, and assurance.

 A decade ago, a business could respond to ESG risk issues with a press release. They could even donate to a project in a developing country. These PR focused measures did not involve deep introspection and analysis of their current operating model and its strengths and weaknesses when it comes to sustainability outcomes.

In the 2020s, from the board-level down to the operational level, the enterprise value of the business is increasingly going to be impacted positively or negatively by the ability of the company to deliver value to its customers through a responsible operating model that has sustainability outcomes considered, measured and achieved through the capabilities the business assembles to provide value to customers and a broader set of stakeholders around the world.

Gender Equality and Sustainable Development Goals

The UN Sustainable Development Goals are a useful high-level framework for understanding the breadth of issues facing our planet. The deadline for the goals is 2030, so the next decade is time for both the private and public sector to make changes to their operating models to support the outcomes of these goals.  

Board members and senior leaders are likely to have gender equality or diversity & inclusion policies already in place. They may even have taken decisive action to ensure a gender-balanced board of directors or senior management team is employed.

Both developed and developing countries still have great lengths to go in achieving gender equality with some of the appalling statistics noted by the UN when it comes to how women and girls are treated poorly around the world.

When it comes to reviewing a firm’s purpose and strategy, building a more diverse and inclusive organisation is one of a minimum expectation of any organisation wanting to make a positive social impact and help support the UN Sustainable Development Goal outcomes in 2030.

Goal 5: Achieve gender equality and empower all women and girls

  • 5.1 End all forms of discrimination against all women and girls everywhere
  • 5.2 Eliminate all forms of violence against all women and girls in public and private spheres, including trafficking and sexual and other types of exploitation
  • 5.3 Eliminate all harmful practices, such as child, early and forced marriage and female genital mutilation
  • 5.4 Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate
  • 5.5 Ensure women’s full and active participation and equal opportunities for leadership at all levels of decisionmaking in political, economic and public life
  • 5.6 Ensure universal access to sexual and reproductive health and reproductive rights as agreed following the Programme of Action of the International Conference on Population and Development and the Beijing Platform for Action and the outcome documents of their review conferences
  • 5. A Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, following national laws
  • 5.B Enhance the use of enabling technology, in particular information and communications technology, to promote the empowerment of women
  • 5.C Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels


Board and senior executive considerations

When a business wants to assess how its current operating model either helps or hinders the achievement of the UN Sustainable Development Goals, having female directors and female senior executives driving or heavily involved in the process would be an obvious consideration.

If there are no women currently on the board of directors or on the senior leadership team, this will be a significant problem with almost any stakeholders. Institutional investors who care deeply about the firm’s reducing ESG risk will undoubtedly call it out.

It’s no longer credible to argue that there isn’t a “pipeline” or “suitably qualified” available. There are large numbers of highly qualified women willing and able to work in these roles, and there’s no reason why they can’t be working for your organisation.

When it comes to assessing the organisation’s social impact, ensuring that there is a balanced consideration of potential sustainability initiatives is critical. For example, some organisations that have pay equity issues may need to radically rethink their operating model to be able to deliver a better outcome for their people.

Asset managers who currently work on ESG issues need to assess their operating models too: what is the compensation profile at their organisation? How is the bonus pool distributed? Are gender-diverse people treated fairly? Are there any red flags around hiring processes such as previous salary disclosure?

When it comes to supporting Goal 5, the organisation can consider how it can make a positive impact on women and girls in developing countries. There may be scholarship initiatives, knowledge-sharing programmes, or supply chain diversification initiatives that could help improve the wellbeing of women entrepreneurs.

Some organisations may revisit their purpose and find that because their target markets or primary labour pools are predominantly female, they may want to pivot their operating model to support women-owned businesses and redesign their entire value chain to promote greater gender equality.

Several specialist consulting firms can assist in this area to develop a policy, supporting processes and frameworks and provide assurance that positive gender equality outcomes are in the operating model of the business.

Increasingly, ethical considerations during tender processes mean that firms that are not living what they claim to in their marketing materials when it comes to gender equality may lose out on substantial new revenue. They may not make it past the first round of submissions, or the tenderer may not even invite them to tender for new business.

The business case for incorporating gender equality outcomes into your business’s operating model is quite straightforward. Revenue protection, cost reduction, cost avoidance, and new revenue opportunities are all categories of financial benefit that accrue to firms who take this issue seriously.

The development of policies that enable people to bring themselves to work and attain a reasonable work-life balance further enhance these goals. During reporting on these initiatives, there is no excuse for firms in developed countries not to be able to make a sizeable impact on many of these UN Sustainable Development Goals when many of the actions required on their part are merely becoming the minimum level that the community expects from them as corporate citizens.

Through thinking critically about the entire operating model of a business, and exploring in-depth how the strategy of a firm can be executed creatively, there are many avenues for a firm to adjust its operating model at the implementation layer that changes how its people, processes and systems work to make a positive social impact and deliver value to a broad group of stakeholders around the world, not just its shareholders.

Quality Education And Lifelong Learning

The UN Sustainable Development Goals are a useful high-level framework for thinking about your organisation’s ability to make a positive social impact. The 17 goals cover a broad range of environmental, social, health, wellbeing, education and climate change-related areas.

Your business may be able to make a change to its operating model that could help at least one of these goals. In an environment of ever-increasing stakeholder expectations, particularly for financial services companies, revisiting your purpose and strategy to build a new target operating model that incorporates sustainability outcomes as a critical success marker is vital.

Boards and senior executives should be actively considering how their risk management framework accommodates the identification and management of environmental, social and governance risks. The focus on financial risks has moved towards a focus on operational risks in recent years, however many organisational-level risks still struggle to make appearances in the strategy documents and annual reports of some companies.

Many major global and local companies have gone back to basics and reviewed their purpose – why they exist, and which stakeholder communities they are delivering outcomes for. They want to make a difference for their customers, stakeholders, shareholders, employees, and countries where they operate. Some are clear in their aspiration to make a positive difference for the world as a whole.

A decade ago, these ESG issues were on the radar of boards and senior executives but typically dealt with by way of a press release or modest amounts of spending on a few sustainability projects. This approach will no longer satisfy rising community expectations around corporate behaviour. Their very license to operate in society is at risk if they don’t make changes to their operating model that reflect a higher level of community expectations.

Goal 4: Ensure inclusive and quality education for all and promote lifelong learning

Goal 4 of the UN Sustainable Development Goals is about quality education and lifelong learning for all. Education is an integral part of building a country’s human capital and productivity.

In developed countries, lifelong learning is supported by many employers. In developing countries, rates of literacy and numeracy are still well below where they should be.

Getting a quality education is a vital part of sustainable development. Over 265 million children globally are currently not in school – 22% of them are primary school age.

The sub-goals include targets for raising technical and vocational skills as well as tertiary education. It won’t be cheap to increase investment in education facilities globally. But it’s an investment in the planet’s future.

Some board members and senior executives may believe that these social problems are for politicians and non-governmental organisations to resolve. This way of thinking is increasingly outdated and risks surprising the board and shareholders when a clear communication around increased community expectations is received.

An example of how this could manifest is through the employees of your business. The younger employees no longer want to come to work to be told what to do, receive their pay, and go home. They want to be supporting a clear purpose and strategy that not only helps them self-actualise but helps society.

In developed countries, there are still issues with education and vocational training. To support the Goal 4 objectives, considering how the organisation’s training and people policies support the lifelong learning of employees is one area of potential focus.

Another area of focus could be the provision of scholarships and vocational training support in your industry. Creating supportive pathways from education to valued work is essential to reduce the negative social consequences of people studying for qualifications that don’t land them an entry-level job.

As an example of how individual businesses can make significant impacts on some of the UN Sustainable Development Goals, consider an engineering consultancy. They could partner with a developing country education provider and provide pro bono or heavily discounted consulting services to support the development of educational facilities.  They could offer employees the opportunity to do a 3-month secondment without having to volunteer and incur financial impact.

If an engineering consultancy was to consider this, it communicates how it is making a difference through its actions. When it produces sustainability outcomes reports for stakeholders or needs to respond to questions in a tender response situation, having clear examples of projects its people do for others will increasingly become a vital procurement benchmark to reach.

Board Director And Senior Executive Considerations

From an operating model perspective, through sharing knowledge and undertaking projects in its niche in a developing country would build its employees skills and enable them to share knowledge with host country staff. While there are issues to work through, it should be clear to board members and senior leaders that using unconstrained thinking to decide how your business chooses to make a positive social impact can lead to credible, adjacent opportunities that are genuine win-wins.

 Small projects that are in line with your operating model can mean that helping improve sustainability outcomes is efficient for your business because its in line with the people, process and technology platforms that you have in place already. If your current operating model could support small adjustments to support part of the UN Sustainable Development Goals, then that could be reported on as part of your overall impact.

The business case for many of these sustainability projects is reasonable. Enterprise value in 2020 and beyond will change based on the external perception of how board directors and senior executives identify and manage ESG risks.

If a business is clear about its purpose, value creation and the strategy it has designed accommodates for sustainability outcomes, then creating the right target operating model that ensures sustainability outcomes are delivered from Day 1 should be achievable.

One consequence of going back to basics and incorporating sustainability outcomes into the overall operating model design is that some clear decisions – like eliminating paper-based processes – obviously have a positive impact through reducing paper consumption and waste, but also lead to lower operating costs.

Boards and senior executives should ensure realistic cost-benefit analysis calculations are incorporated into business cases. The clear message from the community is that many groups of stakeholders are highlighting the financial risks to not actively considering ESG risks and adjusting your operating model to ensure that part of the value your business delivers to society is a positive social impact.

Health, Wellbeing And Sustainability Reporting

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 Goals are all interconnected, and in order to leave no one behind, it is important that we achieve them all by 2030.

Is supporting health and wellbeing solely the preserve of companies in the healthcare industry? Goal 3 of the UN Sustainable Development Goals is a complex and detailed one that highlights how far developing countries have come, but also how far they still have to travel to catch up to developed country data on health and wellbeing outcomes.

Increasing life expectancy and reducing infant mortality includes a target of fewer than 70 deaths per 100,000 live births by 2030.

Improving the financing of healthcare systems, boosting economic growth so that countries can afford better healthcare, increasing the number of medical professionals available in developing countries and improving sanitation and hygiene are all ways to improve global health and wellbeing outcomes.

The maternal mortality ratio is still 14 times higher in developing countries, which is a shocking statistic. The specific goals here highlight the enormous gap in health outcomes between developed and developing countries and the importance of taking action to reduce these gaps.

Goal 3: Ensure healthy lives and promote well-being for all at all ages

3.1 By 2030, reduce the global maternal mortality ratio to less than 70 per 100,000 live births.

3.2 By 2030, end preventable deaths of newborns and children under five years of age, with all countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and under-5 mortality to at least as low as 25 per 1,000 live births.

3.3 By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other infectious diseases.

3.4 By 2030, reduce by one-third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being.

3.5 Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol.

3.6 By 2020, halve the number of global deaths and injuries from road traffic accidents.

3.7 By 2030, ensure universal access to sexual and reproductive health-care services, including for family planning, information and education, and the integration of reproductive health into national strategies and programmes.

3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.

3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination.

3. A Strengthen the implementation of the World Health Organization Framework Convention on Tobacco Control in all countries, as appropriate.

3.B Support the research and development of vaccines and medicines for the communicable and noncommunicable diseases that primarily affect developing countries, provide access to affordable essential medicines and vaccines, following the Doha Declaration on the TRIPS Agreement and Public Health, which affirms the right of developing countries to use to the full the provisions in the Agreement on Trade-Related Aspects of Intellectual Property Rights regarding flexibilities to protect public health, and, in particular, provide access to medicines for all.

3.C Substantially increase health financing and the recruitment, development, training and retention of the health workforce in developing countries, especially in the least developed countries and small island developing States.

3.D Strengthen the capacity of all nations, in particular developing countries, for early warning, risk reduction and management of national and global health risks.

Board And Senior Leader Considerations

The specificity of the goals above might make you wonder how your firm can make a positive impact on these goals. What is the business case for a healthcare company giving away services for free, for example? That would be an incorrect take on the situation.

The business case for using the UN Sustainable Development Goals as a framework to understand how your operating model supports or hinders the achievement of the goals is compelling – enterprise value decreases through actions or activities that harm society.

In the current low-interest-rate environment, the discount rate to be used when assessing projects has fallen for many organisations. Higher spending on investment projects to deliver sustainability initiatives can make sense if the payoff to the firm is ongoing and has a long time horizon.

Lower cost financing of these projects is possible through the use of sustainable finance strategies such as the issue of green bonds. Alternatively, borrowing from a bank that focuses on supporting businesses wanting to invest in improving the sustainability of their operating model.

When it comes to reporting on the UN Sustainable Development Goals, an example of how an infrastructure firm that owns toll roads could make an impact on goal 3.6 – reducing global deaths and injuries from road traffic incidents – would be to highlight investments in safety on the toll roads they operate.

What is their safety goal? Zero harm on their toll roads? If so, thinking about how to centre their operation around zero damage to their staff, their road users and other stakeholders could lead to innovations in their operating model and capabilities they have around safety.

Infrastructure funds could use the health and wellbeing goals as part of their operational due diligence on prospective investments – at the business-as-usual level of a target company, are they helping or hindering the achievement of these goals?

The additional sunlight on some companies will highlight how their operations either do not help society outside of the shareholders who earn a return on their capital. These processes may lead to divestment or even shutdown of business units or operations that do not meet new community expectations around social performance.

Every business should at least consider thinking through the totality of the UN Sustainable Development goals and then focusing on those it can impact the most. The board should deliberate on whether the company’s purpose, strategy, and operating model are sufficient to maintain a social license to operate with ever-increasing expectations on the private sector.

The initial assessment of a business to identify its current operating model and how it either helps or hinders each of the 17 goals is a process achieved through workshops and interviews with the board and senior leaders.

The report prepared for senior leaders should drive further examination of the strategy and the portfolio of initiatives underway to realise that strategy help or hinder each of the 17 goals. This way, reporting in the management reports and annual reports can include these factors to be monitored by the board.

A business may find that considering a positive global social impact means that significant changes to parts of its operating model are required. Engaging with external support through this process, including setting up appropriate gateways and monitoring of portfolio, programme and project activity and outputs that take sustainability outcomes as crucial success criteria are essential.

In this series of posts, as I work through each of the UN Sustainable Development goals, it is clear that the ability of a business to positively impact the achievement of these goals is in one of the 2nd level goals or through considering an alternative way of supporting the achievement of the outcome through clever use of scarce resources.

Focusing on the outcomes desired and creatively exploring ways to support them if applicable to your business or industry gives boards and senior leaders freedom to act boldly in a manner increasingly expected by stakeholders and an increasing proportion of shareholders, particularly institutional investors for whom ESG considerations are now standard due diligence for new or continued investment in any asset class.