Environmental, social and governance reporting is more than ticking a box in search of corporate acceptability with investors or fund managers, says BDO sustainability expert Brett Spicer.
With rapidly changing focus and expectations around environmental, social and governance (ESG) issues – organisational leaders, boards, and directors need to bolster their ESG strategy and focus for the new year.
ESG is a way of thinking around core pillars that cut across service lines and functions, enabling businesses to make informed investment decisions to maximise long-term enterprise value. Over time, the concept of sustainability as an input to business decisions has evolved considerably.
Sustainability, or an organisation’s effort to “do good”, was once a self-congratulatory exercise to mitigate externalities (efforts often capped at basic compliance) with no disclosures. Now, we see organisations internalising ESG risks and opportunities. We also see disclosure obligations being developed by the International Financial Reporting Standards (IFRS) Foundation that, when implemented globally, will require material risks and opportunities to be quantified, captured, and presented through financial statements, independent sustainability reports, or operating or financial reviews.
Another key consideration for leaders and directors is that ESG themes will continue to evolve, so preparedness for rapid change is critical.
While climate change has been on scientists’ radars since the middle of last century (if not before), it’s only been across the last five years that we’ve seen an exponential increase in global ambition around net-zero. With greater recognition of the value of natural carbon solutions and ecosystem services, my prediction is that biodiversity will be the next ‘climate change’-esque issue of significance, albeit at a faster velocity. And after a long and inglorious history of engagement with First Nations people, we are finally seeing a commitment to constitutional reform to reflect the Uluru Statement from the Albanese Government.
And finally, borrowing the concept from author John Elkington, ‘Green Swans’ suggests that unforeseen events or systemic shifts can be harnessed to simultaneously deliver positive economic, environmental and social outcomes. Now is the time for Boards to create the space and governance to encourage truly lateral thinking for the creation of long-term enterprise value.
ESG reporting is more than ticking a box in search of corporate acceptability with investors or fund managers. It is about the discipline to deeply consider ‘E’, ‘S’ and ‘G’ issues in an evolving landscape and take opportunities to critically assess the company’s strategy to deliver greater success.
Superficial does not win the ESG race.
Brett Spicer is a sustainability partner in BDO’s Brisbane office.
Originally published as Superficial does not win the ESG race says BDO partner Brett Spicer