Earlier this month, Permutable attended the London Sustainability Forum organised by King Stage Business School and the RSA, which delivered an insightful view into how companies can control their impact to achieve environmental objectives and meet sustainability goals through sustainable business practices.
The conference conveyed a sincere message on the potential for companies to improve their environmental, social, human, and economic impact through the adoption of disruptive innovations. It also shed some light on the market sentiment surrounding the difficult path facing companies to reach Net Zero, to achieve sustainability, and to generate value for all their stakeholders.
Sustainable business practices and the importance of stakeholder engagement
The conference commenced with Sally Hills, Head of Sustainability at BBC Studios, highlighting the importance of storytelling and the positive influence it can have on consumers through normalising sustainability. This normalisation in consumer demands and the need for more socially and environmentally beneficial products and investments has become apparent in market trends identified by speakers from The British Business Bank, Iken Associates, and Algbra. Not only are consumers more focused on sustainability, but employees are also considering the value their prospective employer places on sustainable business practices.
There is thus a great opportunity to address these needs of the stakeholders of organisations. However it seems to be missed or even ignored by organisations with only a handful of companies having sustainability departments in-house that are consulted for business operations or adequate budget allocated towards sustainability efforts. The unfortunate truth is that many companies are still exploiting this normalisation of sustainability by society and making use of greenwashing tactics instead of innovating new sustainable solutions. Companies, therefore, continue to see sustainable solutions as an extra cost and not an opportunity.
Thinking outside the box leads to a competitive advantage
There were many positives to take away from the conference, with Luton Rising’s Graham Olver taking us on a journey through how an organisation that places sustainability at the forefront of everything they do can look, operate and flourish. This type of thinking outside the box where a company assesses the social and environmental impact of all their operations and development is something that can be admired.
It further shows how a company could take a more holistic approach to achieving sustainability through dual materiality and even offsetting their unavoidable carbon emissions through projects in the local area. This sustainable design is indicative of the concept of Doughnut economics where value is created for all the stakeholders that are involved in the operations of the organisation.
The presence of “greenwashing” and “value-washing”
There are unfortunately a large number of companies that are abusing the focus of ESG on achieving sustainability by employing greenwashing and “value-washing” tactics, exploiting the public’s demand for a more sustainable approach.
Here, value-washing refers to an organisation using a political or cultural movement to promote their activities but not acting on or systemically support the ethos of the movement. Not only is it misleading to the stakeholders of companies, but it is also extremely difficult for these stakeholders to distinguish between real and fake claims.
The hope of ESG ratings helping investors and consumers to make more environmentally-conscious investment decisions and product purchases is prejudiced by the inadequate data that companies and portfolio managers have on scope 3 carbon emissions. The failure of companies to indicate their supply chain emissions is on par with many “greenwashing” tactics.
Philip Ward, Chair of the RSA Sustainability Network, pointed out that the reduction in the UK’s carbon emissions can be seen as flawed given that many UK companies have moved their “dirty” operations to developing countries. This trend thus highlights the need for more transparency regarding the reporting scope 3 emissions.
Lack of transparency amidst increased regulation
There was some positive sentiment in the ESG market, with Iken Associates’ Paul Pritchard highlighting the increasing role that the TCFD (Taskforce on Climate-related Financial Disclosures) plays in ensuring that the top UK companies disclose their scope 1 and 2 emissions. However, the disclosure of scope 3 emissions is not mandatory for these companies, leaving companies the opportunity to move their environmentally harmful operations to areas with less stringent environmental regulations. Not only does this create a massive upstream supply chain risk for companies looking to generate higher returns for their shareholders, but it also has severe human, social and environmental consequences.
This need for more stringent transparency surrounding scope 3 emissions is a sentiment that was supported by Algbra, who highlighted the fact that many of the top UK banks continue to invest capital in companies who engage in dirty business practices, whereas Algbra focuses on ethical investments.
Conclusion
Over the past couple of years, the stage has been set for companies to explore their sustainability goals and ideas regarding a transition to a more circular economy and building value for all stakeholders involved in their practices. The ambitions and intent of companies to focus on more sustainable business practices were thus present throughout the conference, but the shadow of “greenwashing” and lack of transparency in the supply chain remained lurking in the background. The practices of Luton Rising and Algbra can be commended for moving beyond simply talking about their intentions and acting on them. This year – 2023 – is hopefully the year in which we can expect to see many more companies acting on their intentions and making a tangible impact on sustainability.
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