Investors at the WSJ Pro Sustainable Business Forum lat Thursday said their interest in sustainability information remains high and executives said they are working to develop their data and capabilities even though mandatory reporting isn’t yet in force.
Jeannie Renne-Malone, vice president of global sustainability at fashion group VF Corp., feels fairly confident the company knows what it needs to be doing to meet the scope 1 and scope 2 requirements. She added that while there is a bit of uncertainty about scope 3 requirements, VF is working toward something that could meet a limited assurance standard.
“We do see the California [mandatory climate disclosure] bill as a good framework. I would say that other states…are starting to look at it from a copycat perspective,” said Renne-Malone.
Pharmaceutical company Merck KGaA is changing how it estimates scope 3 emissions, from a method based on spending to one based on weight, partly because of cost inflation. “We may be paying 10, 15, 20 or 30% more for something but that doesn’t mean emissions have gone up…weight-based [estimation] gives us more directly connected, more accurate figures on the scope 3 emissions,” said Jeffrey Whitford, vice president of sustainability and social business innovation in the company’s Life Science division.
One of the things that keeps Ann Tracy, chief sustainability officer at consumer products company Colgate-Palmolive, up at night is that compiling sustainability data is very onerous and manual. She said AI can help capture and analyze sustainability data such as reductions in gas emissions and utility usage. “It’s really important because eventually we’re going to have to have our data audit ready,” said Tracy.
Dan Crowley, partner at law firm K&L Gates, said the anti-ESG movement is mostly political theater and recommends that executives pay attention to the investor-led movement rather than to politicians or policy makers.
“Sustainability is no different than how we would keep boards and management teams accountable for any good, sound governance,” said Kyung-Ah Park, head of ESG investment management and managing director sustainability at Singapore state-investment company Temasek. She recommends businesses talk only about sustainability in their core business; be specific and transparent about both successes and challenges; stay abreast of industry regulations; and lean into standards of certification.
Here are some other takeaways from the event.
Climate risks are becoming uninsurable but there could be a breakthrough ahead
“You’ll find now insurance pulling out of some regions simply because it’s becoming uninsurable in [that] the extreme is becoming the norm. …It’s something that’s not just U.S. related, they see this also in other parts of the world,” said Torolf Hamm, senior director, head of physical catastrophe, at insurer Willis Towers Watson.
However, there is some hope, according to Maryam Golnaraghi, director, climate change and environment at the Geneva Association, an insurance think tank. “The world is on the verge of a major breakthrough in the way that risk modeling [is done],” said Golnaraghi.
Consumers remain receptive to sustainability claims
Despite recent trends toward greenhushing—when businesses keep quiet about their sustainability activities—Randi Kronthal-Sacco, senior scholar at NYU Stern, said, “Consumers do want to hear about environmental sustainability efforts. They are a little less interested in hearing about brands talk about the more polarizing topics, but if it is a material issue for the company, they should be discussing it.”
She studied the consumer messaging of nine leading brands across industries. The most successful first talked about the product’s reason for being—for example, that its laundry detergent will clean your clothes—and then added a sustainability claim.
“What consumers want to hear is how it affects them personally. So we said my health, my wealth, my personal world. So anytime you talked about the absence of toxic ingredients that would be harmful to human health resonated really well, anytime you could put money in the pocket resonated really well.”
There is a bipartisan path for ESG
ESG has become part of the culture wars in the U.S. but the anti-ESG efforts are largely political theater, according to K&L Gates’s Crowley, a longstanding Republican. The extreme politicization has people trying to maximize their differences rather than recognize their commonalities, said academic Robert Eccles, a lifelong Democrat. The two have been working together to chart a course through the controversy. They advise focusing on material risks.
Partnerships remain vital for sustainability
Partnerships are a part of many businesses’ sustainability efforts. That may sound cliché, but it’s a reality, said Cassandra Garber, vice president, sustainability and ESG at Dell Technologies. “Things like climate action, circular economy, digital inclusion…cannot be successfully addressed if you’re not doing it with third parties across your entire value chain.”
Dell thinks about third-party relationships in sustainability in much the same way it does about those in its traditional supply chain—the main difference being that the company talks about different topics and the concepts aren’t as mature, said Garber.
Cultivating green talent can help overcome skills shortages
“Sustainability professionals are in high demand…increasingly what we are trying to do is grow our own talent,” said Tara Hemmer, senior vice president and CSO of Waste Management, a recycling and waste company. Hemmer has created a sustainability rotation program that cycles a handful of people through four to five business functions and after two years brings them back to the team or places them in one of the functions around the business.