In June 2021, Spirax-Sarco Engineering announced the launch of a refreshed sustainability strategy for the company, ‘One Planet: Engineering with Purpose’. Starting in autumn 2020, Challenge Sustainability was commissioned to provide advice and work alongside Spirax-Sarco Engineering on the development of the refreshed strategy. Challenge Sustainability Director, Jon Woodhead, spoke with Dr Sarah Peers, Group Head of Sustainability, Spirax-Sarco Engineering plc, about the process and rationale behind this work.
As the world's seven largest advanced economies, known as the G7, prepares to meet again in June 2021, one topic it is expected they will focus on is climate change. It is clear that finance and regulation will drive forward corporate action on climate change in the coming months and years ahead, and each of these will influence corporate reporting. G7 finance ministers have already committed to mandatory corporate reporting on climate impacts and investment decisions, and they supported work by the International Financial Reporting Standards Foundation on a new global standard for sustainability reporting. In Europe, companies are watching closely the development of new 'environmental claims' regulations by the European Commission. This article looks at how the confluence of these developments sets the scene to influence corporate action and communications on climate change.
Governments around the world are rapidly establishing commitments that seek to phase out the sale of petrol and diesel vehicles, in favour of models that are electrically powered. The automotive sector, like many others, are setting 'net zero' targets in relation to carbon emissions. The mining of minerals used in the manufacture of electric vehicle batteries, such as cobalt, graphite, lithium, and nickel, have significant environmental and social impacts. This gives rise to a potential unintended consequence of the transition to electric; the risk is that we replace a dependency on fossil fuels with a dependency on minerals. Presenting ‘Net Zero’ targets, without demonstrating the true impact of your organisation's upstream and downstream activities risks presenting a very limited picture. This article explores the need to understand full value chain impacts and develop credible sustainability communications.
In early 2021, the shareprice of Gamestop was affected by the actions of small shareholders co-ordinated via the social media forum, reddit. This case give us a glimpse of the possibilities for this type of social activism, and how it can be harnessed for good. Data and information can be rapidly shared, building ‘swarm intelligence’ amongst a community of interested parties, leading to recommended actions that could have far reaching consequences. These consequences are not limited to share prices – brands could suffer large scale sales declines as a result of momentum building behind a reddit thread on climate change, or on other sustainability topics – not least diversity and inclusion. In the current ‘cancel culture’, this is a potentially significant risk to any brand. This article explores what can a company do, not only to mitigate these risks, but to get ahead of the curve.
Global efforts to coordinate action aimed at managing the climate crisis have both gathered pace and gained much greater focus in the years since the Paris Agreement in 2016 . The contribution made by the corporate sector is the subject of particular scrutiny as companies face up to the challenge to achieve ‘Net Zero’. In the context of corporate efforts on climate change, net-zero can be defined as “a transition to a business model that creates value without causing impacts from the accumulation of greenhouse gases in the atmosphere.” Looking at the details amongst recently announced corporate ‘net-zero’ targets, there are a number differences in approach. As momentum builds towards the next United Nations Climate Change Conference in November 2021 (COP26), more scrutiny will inevitably fall on these targets. Companies will need to pay close attention to the development of standards and guidance on ‘net-zero’.
In the face of an ongoing global health pandemic, many companies are having to focus on the basics. Meanwhile, another international crisis that impacts business - climate change – continues to gather pace. The recommendations of the Task Force on Climate Related Financial Disclosures (TCFD) were first published over 3 years ago. These focus on greater transparency surrounding how climate risk affects business success. Yet even before the Covid-19 crisis began, many companies were only paying lip service to TCFD reporting. Now TCFD risks becoming a task with no force. We examine the current state of play, and suggest how companies can take more meaningful steps towards TCFD reporting.
Reporting on social and environmental activities by Indonesian companies has been evolving for many years already. Some leading Indonesian companies have over ten years of sustainability reporting ‘history’ and have clearly stated that they see this type of transparency and disclosure as an essential way to maintain the trust of stakeholders. In 2017 the Indonesia Financial Services Authority (Otoritas Jasa Keuangan) published rule number 51/POJK.03/2017: Implementation of Sustainability Finance for Financial Services Institutions, Issuers and Public Companies. This required all listed companies to publish sustainability reports, starting with banking sector companies (from 2019), and broadening to a wider range of listed companies (from 2020). Challenge Sustainability has been developing two of these first OJK Reports. From this experience we offer a number of observations.
COVID-19 will be without doubt a defining moment in history. It has brought home how we are all connected, and the urgency with which we need to plan for a more sustainable future. As we all continue to deal with the impacts of the COVID-19 pandemic, there are developing discussions on what the future will look like for companies as we begin to emerge from the pandemic. More than 50 CEOs from the banking and assurance sector recently formed the ‘green recovery alliance’, recognising the importance of aligning economic recovery after the coronavirus crisis with the ecological transition. A the same time the Institutional Investor Group on Climate Change (IIGCC), which manages more than $34 trillion in assets, nearly half the world’s invested capital, issued a statement urging governments to do more to ensure the economic response to the coronavirus crisis aligns with the Paris Agreement on climate change. So, we can expect investor pressure on companies to respond and disclose to grow. COVID-19 might be the tipping point that causes companies to react.
Over recent years there have been many examples of companies judged to be negating their tax obligations, fuelling consumer frustration and mistrust on the sensitive and emotive issue of tax. Ever since the Panama Papers, the debate has continued on what is deemed a ‘fair’ level of tax to pay, irrespective of the legality of such exploits. Research suggests that hundreds of billion US dollars a year in corporate income tax revenues are lost due to tax avoidance techniques, depriving Governments of money to fuel investments in social infrastructure. Disclosures on tax in traditional annual financial report and accounts are impenetrable, sometimes deliberately so. Until now, only a few companies have gone into any great detail on their approach to tax, in their corporate sustainability reporting. This is now set to change. The Global Reporting Initiative (GRI) has recently issued a new standard on tax with the aim of promoting greater transparency on companies’ approach to taxes. The GRI Tax Standard won’t pressurise companies to pay more tax. It does however ask a company to be transparent and put taxes paid in wider context and tell the story that sits behind the numbers.
How can investors understand climate change and other sustainability issues as components of corporate risk? To help identify the information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities, the Financial Stability Board established an industry-led task force: the Task Force on Climate-related Financial Disclosures (TCFD). $30 trillion of capital has already been pledged to Sustainable Finance and supporting outcomes aligned to Sustainability and Impact goals, such as the UN SDGs and this will only grow. But, this huge volume of capital is only trickling from behind a dam created by uncertainty from lack of data, taxonomies, schemas, reporting and products, robust enough to satisfy the risk register of financial institutions. The result is a lack of confidence about viable options for investing in sustainable initiatives. Where do we go from here?
Individuals tend to trust technology as much as they see it personally benefitting them, but emerging technologies are yet to earn that trust. Building trust in technology requires accurate, relevant and balanced sustainability reporting, explaining impacts in their local context.
It seems the pace of change is forever speeding up in all aspects of life, not least climate change. Companies, just like Governments, have however been typically slow to change course: new policies and targets take months (and sometimes years) to formulate and achieve approval, especially where these are interwoven with commercial strategies. So, how should corporate communications on sustainability react to the ever louder clamour for immediate action, results, and signals of hope? This article explores the need for companies to take urgent action: using scientific evidence to support fast-tracking of new targets to reduce their sustainability impacts in fundamental ways. ‘Whatever it takes’ is easy to say, but hard to live up to.
Over the last 10 years, the sustainability reporting landscape has changed remarkably. Like many aspects of media today, thirst for information and data, the speed of communication and the sheer number of channels available to convey messages and engage has grown almost out of all comprehension. Set in the wider context of global sustainability challenges that fill our news feeds, from plastics to gender equality, climate change to modern slavery, the expectations on companies to make their position clear has never been greater. This article sets out five challenges for companies to overcome in order to create meaningful and impactful sustainability communications.
At Challenge Sustainability, our experience of sustainability report assurance stretches back to the development of the first multi-stakeholder assurance standards, some 20 years ago. Over this time, we have signed off hundreds of sustainability assurance statements, and seen the role assurance plays subtly change as the sustainability profession has matured. Having worked in two types of roles; as assurance provider or on the other side of the fence, supporting reporting and strategy clients through their assurance process, we have a good feel for what works and what doesn’t. This article describes the steps that companies can take to ensure they gain the most value out of the assurance process.
Materiality - identifying and prioritising the issues most prevalent for your business, should be the guiding light for your sustainability strategy. A well designed materiality process also supports sustainability reporting, ensuring you are communicating your response to issues most relevant to your stakeholders. Yet, too many companies miss issues, don’t prioritise correctly, overlook the link with other activities already established in the business and only apply materiality as a sustainability reporting process. This article explores the keys to using the concept of materiality successfully within your sustainability strategy and reporting.
In the time since the SDG’s were announced almost three years ago, they have served a useful role in advancing the way business can engage and communicate sustainability. However, many companies are not yet maximising the opportunity, and are at worst playing lip service by using the goals to showcase ‘business as usual’. The SDGs are helpful as a common and consistent external framework the cuts across governments, wider society and business. But, like any framework the goals need to be considered carefully and not approached as a straightforward ‘tick box’ exercise. In this article, Challenge Sustainability present a series of observations for companies seeking to avoid common pitfalls and make the most of the opportunities the SDG’s offer.
For those companies going through the process of launching a new ‘vision’, ‘framework’, ‘mission’, ‘dashboard’ or other type of ‘strategy’, a number of challenges present themselves. We have distilled down a series of key learnings for any company looking to get maximum value and impact from all the hard work of developing a new strategy.
As the war against plastics remains a hot topic, more and more companies are responding with new commitments to reduce plastic use in a variety of ways, often in favour of paper-based products. Based on our work with the paper products sector over the last 15 years, Challenge Sustainability shares the top five challenges the sector must focus on to build communication messages that maximise the opportunity the war on plastics presents.