Q + A with Andrew Noone
We spoke with Andrew Noone, UK Managing Director at Anthesis to understand some of the trends that a global sustainability consultancy is seeing in the ESG space and get advice on how to lay solid governance foundations to underpin ESG activities.
Over the last few years, ESG has increased in importance in many sectors, particularly in finance, why do you think this is?
In my opinion there have been two driving factors; increasing regulation and business success better aligned to the importance of ESG.
We now see two defining periods. An old era, where businesses didn’t have to disclose their material sustainability risks and few consequences financially or reputationally by not making them readily available. However, as the new economy has driven for more sustainable business models to generate value – comparability between businesses has now become a focus. Investors are playing a part in this also and are pushing for standardisation across ESG metrics, helping to make investment decisions on a more level playing field and uncovering sustainable value creation opportunities.
Businesses who invest in strong ESG practices have become more appealing for investors, because of the evident correlation between ESG performance and financial performance. Showing a long-term commitment to ESG is providing investors with reassurances around the future-proofing of the business, and in turn, the longevity of their investment.
Are you worried that, amid an economic downturn amid the UK’s ‘cost of living crisis’, that we could see companies pulling back on their sustainability efforts?
There is always a worry when confidence in the economy declines, that sustainability and ESG efforts could be de-prioritised. We have seen consumer sentiment this year still focused on a cost of living crisis. However, I think the days of businesses seeing this agenda as discretionary spend have long passed. Take the summer of 2023, as inflation holds high and interest rates rise to curb inflation, the start of June saw global surface air temperatures rise 1.5 degrees Celsius (2.7 Fahrenheit) above pre-industrial levels for the first time. This is the threshold governments said they would stay within at the Paris Climate Agreement. So, plenty to do for businesses to speed up their sustainable performance transitions.
Also, there is a growing pressure from shareholders to hold companies to account on climate science and issues that align with their sustainability beliefs. There have been several incidents over the last few years where shareholders have not backed resolutions they feel are not working fast enough to remove unsustainable practices, showing that the broad culture around ESG has changed.
The lack of global agreement on standards in all areas of ESG leaves companies in a challenging position of defining their own targets and reporting mechanisms, leading to the rise of alleged greenwashing. Do you have any tips for companies to leverage good governance to accurately disclose its ESG performance?
The ESG and sustainability landscape is continually evolving, with demands on companies only becoming more complicated as they seek to engage and communicate complex information with stakeholders.
Some basic tips to drive good ESG reporting governance with rigour and robustness include:
- Defining material topics & targets – stakeholders need to see how decisions of impact and importance of ESG issues have been identified.
- Upskilling your board of Directors – having support from the top down on the understanding of ESG to risk and value thinking.
- Use of existing business processes – expanding the enterprise controls and risk management system needed to address material ESG risks.
What ESG themes do you think will be pivotal in shaping company strategies and forming business decisions over the next few years?
Biodiversity loss and business interactions with nature are high on the corporate agenda now. The extinction of species, loss of flora and fauna, this is something that many businesses don’t immediately see as their responsibility, like they have done with carbon emissions and waste management. However, better sophistication and understanding of the interconnectivity across all ecological systems of business are needed i.e. if you are protecting natural resource systems, you’ll be protecting your business.