Six key opportunities for sustainable business leadership in an era of crisis
Ahead of the annual edie Awards dinner that took place at the back end of March, more than a dozen senior decision-makers and sustainability professionals gathered for a debate on how best to be an ESG leader in this era of polycrisis or permacrisis. Here are six opportunities this group identified.
1) Proactive energy management
A senior executive at an energy supplier told the roundtable that the energy price crisis “has really triggered many businesses – and, indeed, households, to look at how they consume energy and how we produce energy”.
On energy production, most people now realise that investing in new fossil fuel developments in the near-term comes with the “real risk of overhang and write-down”, he argued, with most businesses looking more deeply at demand reduction in the first instance, primarily through electrification from onsite renewables.
Only 1% of the 225 people who responded to edie’s Business Leadership Survey this February stated that investing in energy efficiency was not at all a priority for the next 12 months. Perhaps even more strikingly, 70% said net-zero investments in general were either a ‘high’ or ‘business-critical’ priority.
Another roundtable attendee, representing a sustainability software provider, said his firm has never been busier, as an ever-broader church of organisations look to measure their energy use – and as firms that had previously sought data for one project for a limited time are now seeking to take a more holistic approach.
Despite this, one attendee from an SME in the hospitality sector said she sees many of her peers failing to take a step back and look for “low-hanging fruit” in terms of energy efficiency, with major gains still to be had. With the International Energy Agency warning that energy efficiency improvement rates need to double, there is opportunity yet to innovate here.
2) Embedding purpose
While the discussion started by covering the opportunities to rethink energy management, the consensus was that businesses wishing to be true sustainability leaders should not stop there.
Businesses also need to respond to rising costs for their suppliers, workers and the communities they serve. In addition, leaders need to address the biodiversity crisis and play their role in closing social inequalities.
One speaker, from a law firm, called the 2020s an opportunity to “double down on purpose” to ensure a more holistic response to the polycrisis.
‘Purpose’ is often banded around as a buzzword or an optional nice-to-have. But research has shown time and again that businesses with strong governance and clear purpose find it easier to attract and retain talent and to build strong client and supplier relationships.
Several of the speakers agreed that it is incumbent on pioneering businesses to communicate the benefits to others, being the catalyst of change.
One speaker, in the events sector, said: “News about the hospitality industry at the moment is all about how it is suffering with high energy prices and struggling with recruitment. But, since we’ve become a B Corp, I can’t cope with the level of inquiries for bookings and for working with us. Sales have gone through the roof… we have a waiting list of people wanting to work for us.”, evidencing the power of the purpose driven consumer.
This professional wants to see more businesses getting out of “shallow and short-term” mindsets. Similarly, another attendee spoke of a need to “treat the cause rather than putting plasters on the symptoms”.
“Doing sustainable business is doing good business,” said another speaker, an executive at a large consultancy. “It’s not a thing that we should see as being foisted upon us.”
3) Supporting partners across the value chain
At the crux of an organisation being able to live and deliver on its purpose, the speaker from the law firm said, is “obliterating command-and-control leadership styles”. This entails listening to, working with, and properly supporting the most marginalised individuals and communities in the value chain, rather than taking a top-down approach.
This aligns with the growing demand for an equitable sharing of the socio-economic benefits from the investment poured into modern net zero infrastructure. 49% of respondents to the Business Leadership Survey agreed that the just transition is a critical part of their organisation’s strategy – and, doubtless more will embed this thinking in the coming years.
One attendee, a senior sustainability professional in the built environment, said: “We’ve got really enlightened businesses around this table. We need to understand that having thousands of partners in the supply chain means we need to play a long-term game, a systems-change game.”
She argued – and a peer from the same sector agreed – that small suppliers are already under pressure and do not need lengthy documents full of jargon. They need concise advice in language they understand, plus ongoing dialogues to build long-term trust and certainty.
“it is incumbent on us all to make this simple… simplicity will enable action,” she summarised.
Beyond messaging, there was an acknowledgment that SMEs in supply chains will need practical support tailored to their specific context. Some may operate in markets with poor renewable electricity infrastructure, for example, and would benefit from their clients engaging with policymakers to change this and investing in microgrids in the interim. Others may need access to new and innovative finance solutions to invest in the technologies needed to decarbonise in line with their clients’ science-based targets.
4) Unlocking innovative finance
Building on that point, several participants noted the opportunity (and need) to unlock unprecedented levels of finance for sustainability. The recent IPCC synthesis report recommended at least a sixfold increase in finance provided to emissions reductions projects by 2030. Even more rapid uplifts are needed in the fields of climate adaptation and nature conservation.
One speaker, with interests in cleantech financing, said: “The amount of institutional money that wants to be deployed into impact is extraordinary, and there are just not the assets out there yet.”
Another participant, in the sports sector, said businesses have a role to play in creating those assets now, transforming their portfolios of products and services. By continuing to offer outdated offerings, she said, they will fail to “secure their relevancy in the future”.
Similarly, another speaker in the health and beauty space spoke of the need for firms to not only prepare for a net-zero, nature-positive future in terms of risk mitigation, but to actively create that future – and finance is needed for this.
As assets develop, so do financial products. Speakers including Lloyds Bank’s head of sustainability and ESG finance Jonas Persson welcomed the increase in the number of green financial products, from mortgages and leases, to more general corporate and product finance facilities, in the market.
But Persson stressed that finance for sustainable business won’t flow at the scale or pace needed without a “consistent, stable, regulatory environment”. While he welcomed aspects of the UK’s updated Green Finance Strategy, he emphasised the importance of finalising a market leading UK Green Taxonomy, which is now back on the agenda.
5) Reskilling for reframing
As already noted, there was an agreement on the need to take a more holistic approach to ESG and to properly build and embed a strong institutional culture, if businesses are to maximise the benefits now and into the future.
This prompted a discussion about the role of the sustainability professional. One participant said that while her job is to highlight the “value of doing things differently”, board members may not always see value beyond short-term commercial benefits. As such, she needs to “reframe” her role, emphasising the financial and reputational benefits having a strong ESG approach has created. But she also sees the opportunity for new training for the board to help them understand that sustainability is profitability.
“I don’t think businesses are taking enough responsibility for development,” she said. “We’re still developing leaders to be the best commercially, to have the best scores short-term. Why are we not reframing the personal development budget into educating them on climate and making them better social and environmental stewards?”
For this knowledge-building, there is a need for increased collaboration with HR and procurement functions. The Business Leadership Survey revealed that 39% of HR teams and 20% of procurement teams are perceived as disengaged on sustainability.
Also discussed were the ways in which ESG-related knowledge and skills could be improved across a whole organisation. In this way, not only do staff know their specific role to play in delivering long-term targets, there are opportunities to ensure that strategy-builders hear from a range of viewpoints on how to enable the just transition.
Lloyds Bank’s Persson described the process of training more than 2,600 colleagues in this field. He said it had brought about “a massive cultural shift as an organisation, which we had not predicted, purely by getting the topic into routine conversations”.
6) Translating jargon
Key to reskilling staff (per point 5) and supporting supply chain partners (per point 3) is ensuring that they are aligned on objectives.
Much of the discussion at this roundtable centred around how to best communicate with, and engage, key groups internally and externally. This was perhaps to be expected; in the Business Leadership Survey, professionals ranked engagement and behaviour change as their third-biggest challenge for the next 12 months, second only to the cost-of-living and energy crises.
A senior sustainability manager in construction argued that SMEs are missing out on the “big picture” benefits of embedding sustainability “because the messaging and the language is poor”. He argued that larger businesses, who have been on their journey for longer and who have larger in-house teams of experts, must “leave a legacy” by supporting others in their sector to take action.
Another agreed, stating that unless we “get to the drumbeat of everyday people”, people will continue to feel overwhelmed by the scale of global issues like the climate crisis and to feel like the jargon associated with the solutions excludes them from participating.
This sixth and final point chimes well with a recent edition of edie’s Sustainability Uncovered Podcast, hosted in association with Lloyds Bank. This episode features Lloyds Banks’ David Willock, managing director, head of ESG finance & structuring, who includes translation as one of his key tips for enabling collaboration between corporate finance and sustainability teams. You can listen here.
Lloyds Bank has launched a new LinkedIn channel dedicated to Corporate & Institutions, Lloyds Bank Corporate & Institutional which you can follow and access further insights on Sustainability & ESG finance including their Sustainability Voices content programme. They also cover the economic landscape, financial and capital markets.
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