Aviva chief: It's time to make sustainability a competitive sport
Sustainability should be treated as a competitive sport, driven by public league tables on corporate climate performance to incentivise businesses to strive towards industry climate leadership, Aviva's chief executive has said.
Mark Wilson, a champion for green business practices, believes that company bosses are too often concerned about short-term financial results to give due attention to sustainability issues.
The New Zealand businessman believes that, by comparing companies with peers in the same sector via a ranking system, firms and entire industries will be motivated to attain stronger climate risk governance and better disclosures. Conversely, companies lagging behind on sustainability and CSR would be much more likely to be held to account for the poor quality of their disclosures, Wilson claims.
“Business and financial markets by their very nature are competitive,” Wilson told delegates at the Economist Sustainability Summit in London last week.
“There are always winners and losers on the market - that is the way the system works. I believe one of the best mechanisms we can use for the environment is making it a competitive sport. We can already glean information through benchmarks, but benchmarks by themselves just aren’t enough until it gets into league tables.
“Reporting allows people like us to make decisions. We are making those decisions and we are divesting in companies until we get the information to certain levels. It’s a step in the right direction, but until we have competitive league tables, reporting alone is not enough.
“I can promise you that, if chief executives like me or boards like Aviva's are in the bottom 30%, you would ask questions. And I can assure you that, if you are in the top 5-10%, you would also talk about it much more. It must be simple, it must be transparent, it must be free and it must be public. And at this stage we don’t have any of that. I think that’s a good place to start.”
Wilson’s multinational insurance company has ramped up its own green portfolio in recent years in a bid promote a rapid, yet sustainable transition to a low-carbon economy. The first global insurance group to go carbon-neutral, Aviva last year invested in rooftop solar PV systems across three of its UK sites as part of a commitment to use 100% of its electricity from renewable sources by 2025.
Wilson has himself become a key commentator on the role of business in society. In September 2015, he joined almost 200 world leaders to commit to the Sustainable Development Goals (SDGs) at the United Nations in New York. In a rare opportunity for a private-sector chief executive, Wilson addressed a UN General Assembly plenary session on behalf of the global business community, calling for business and governments to work together to achieve the SDGs.
At last week's Sustainability Summit, Wilson suggested that governments can take positive actions to promote the sustainability agenda, by correcting distortions in the pricing system on areas such as climate change and natural resource depletion. But government intervention in business sustainability activities should remain limited, as the decisions taken at a national level are too often based on short-termism, Wilson said.
“Regulators are a key part of the problem. Regulators actually force short-term actions. Everything that regulation is focused on is reducing short-term risks. Because of that, they try to take all of the risk out of the system, and the unintended consequence of that is that it goes against sustainability.”
“If we use the sporting analogy, the governing body - such as the UN or G20 - should set the overall framework for the rules. The referees are the regulators who should be on the pitch making sure that companies play by the rules. But they should only govern the game - nobody wants to see the referee score a goal.
“Set the rules on the global basis, such as the definitions for the SDGs, devise the competitive league tables and the benchmarks. The regulators should enforce that. And when there is a market dislocation like there clearly is now, then the governance should change the rules. What we need to see is for the OECD, the UN, the G20, those three bodies to agree on a single long-term definition for sustainability.”