What are clients saying?
When discussing sustainability with prospective clients, an initial fact-finding session will always starts with a blend of two questions:
What risks are you looking to manage?
What outcomes are you hoping to achieve?
The answers to these questions will often reveal the current level of commitment to sustainability, knowledge gaps, motivations and of course, current initiatives.
What have I found so far?
Precision - Some clients are impressively ahead of the curve and very precise in their plans for transition where, for example, frameworks and standards now underpin historically siloed initiatives. We have also seen examples where stress testing climate scenarios have now evolved from “we have a group wide awareness of climate change metrics” to “we can optimize and simulate climate change impacts into our supply chain using predictive analytics”.
Inconsistencies: It is not uncommon to find that clients are inconsistent in defining their risk exposures and end up rehashing old impact-assessment templates which end up gliding between departments for consideration, clutching at references to #TCFD, #SDGs #GHG protocols #EU taxonomy and so on. As a consequence, a superficial lens is used to assess financial materiality. These poorly defined risk exposures then set the stage for programmes which eventually lack the prerequisite talent-competence, vision and engagement hence unlikely to deliver on the ESG outcomes.
Call for consolidation: Another reason why risk management discussions become complex is simply due to the colossal scale of ESG interdependencies, coupled with an abyss of UN protocols, action groups, conventions, declarations, initiatives, regulations, organisations and so on. Accordingly, no matter how strong the sponsorship is in these sustainability programmes, there seems to be a repeated demand for consolidation efforts which we can now see in likes of #SASB, #GRI and so on.
Unbalanced stance: Corporate strategy is weighted towards aligning with protocols & initiatives, rather than investing in ESG resilience outcomes.
Investor sentiment: The cheapest, fastest and most impactful means to motivate client engagement comes from the (generally impartial) ESG Analysts. Although there are some caveats to this. Read “chasing ratings” article here.
Independence: Businesses that have grown out of families tend not to compromise on loyalty and simply repurpose their ineffective leadership; rather than remove from the business. In two family examples, both clients had the same (low) governance scores.
Resource constraints: Coming from a Fin/Op Risk background, I often underestimated the challenge in sourcing talent who can critically elicit information from within a BAU risk function. This same issue has been illuminated in ESG Transformation because, not only are we now lacking the ESG Expertise (i.e. teams who understand the physics/models in say energy consumption or social demographics/impacts) but we are certainly missing the talent who can elicit this knowledge from BAU teams.