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How the Sustainability Matters podcast is looking ahead in 2022
The Sustainability Matters podcast welcomes its new host, Bruno Sarda, highlighting the issues that will likely inform ESG matters in the coming year and outlining his vision for the series.
Looking ahead into 2022, the Sustainability Matters podcast welcomes Bruno Sarda, Climate Change and Sustainability Partner with Ernst & Young LLP and new host for the EY Sustainability Matters podcast series, chronicling the recent prioritization of environmental, social and governance (ESG)and the need for greater ESG integration into investor decision-making and corporate strategy.
In this episode, Bruno reflects upon the series to date, highlighting key ESG issues, along with ways businesses can prosper while working harmoniously with the environment and society at large.
Bruno showcases three personal highlights from previous episodes and their continued relevance today:
Finally, Bruno looks ahead to the next 12 to 24 months, and the issues that could inform the ESG agenda: the increase in regulation and reporting obligations, the role of private capital and finance, and the effect of the COVID-19 pandemic as a dress rehearsal for the disruption to global economies that climate change could bring. Bruno also discusses the importance of the social aspect of ESG and how diversity and inclusion are set to remain prominent issues.
Key takeaways include:
The crucial catalyst for change is the move from ambition to action in transitioning to low carbon business models.
The implementation of increased regulation and disclosure requirements will likely be strong motivators for change.
The private sector and private capital should take a leading role in financing this transition.
The COVID-19 pandemic appears to be accelerating a change toward new business models and that could make organizations more adaptable.
The increased focus on racial, gender equity and diversity & inclusion (D&I) issues is likely to continue to gain prominence alongside the environmental debate.
For your convenience, full text transcript of this podcast is also available.
Bruno Sarda
Welcome everyone, my name is Bruno Sarda. I am your new host for the Sustainability Matters podcast. But big thanks to our previous host, my colleague Chris Hagler. I'm a partner in our Climate Change and Sustainability Services [CCaSS] practice at EY [Ernst & Young LLP]. I advise EY clients across sectors at all levels of the [environmental, social and governance] ESG and sustainability maturity curve, with particular focus on helping business leaders both integrate hard wire ESG practices and performance into their core business operations and strategy at a time when many, if not most, large organizations are really at an inflection point in advancing ESG into the way they do business and go to market. Prior to EY, I was myself one of those executives that was a sustainability ESG executive, previously chief sustainability officer at a large energy company and prior to that at a large technology company. I was also head of an environment [Non-governmental organization] NGO focused on climate and environmental disclosures at the interface of business and capital markets, and for the past decade plus, also have been a part time professor at a leading university on topics of sustainability leadership and advancing sustainability within the business context. I'm excited about the opportunity to help individuals and organizations find both fulfilment but also success in advancing topics that are very near and dear to me as well as to us to as EY at a time when the intersection of business purpose and ultimately within this broader concept called stakeholder capitalism — how to help business prosper, not at the expense of, but in fact in concert with the environment and society at large.
So, the Sustainability Matters podcast exists for a variety of reasons. This is an important topic for our customers, for our employees and team members across the world who are interfacing with business, government and a variety of other institutions. Even if their work is not directly labeled ESG or sustainability, there are few aspects of business operations these days that are not touched by some form of ESG dimension, and that is really the purpose behind this podcast is to put a spotlight on ESG issues in action, to help place them at the top of the agenda for EY, for our clients, for the wider community at a time when these matters increasingly permeate all aspects of business, policy and regulation, very much across capital markets and how capital is being deployed; and at a time when many organizations then are themselves looking to evolve their own capabilities to deliver on both the opportunities that ESG and sustainability afford in pursuit of more sustainable low-carbon economies, but also to address the risks that are inherent in action and in any sort of disruptive transition as business has experienced before through many various cycles. So, what we will do is we'll leverage the experience of EY, of our team members but also our clients and experts at large. In ESG issues, in ESG topics to offer new and interesting and hopefully valuable perspectives to all of you who hopefully will choose to listen and learn something along the way and more importantly hopefully find something to apply as a result of what you hear. So, we look forward to engaging with you.
Sarda
We started this Sustainability Matters podcast before the [COVID-19] pandemic in a world that feels distant already but certainly the matters we discuss were already central to many business conversations and having become increasingly so across both business operations but also within organizations and how employees and business relate to these topics and with their customers. So, we thought part of what we would do today is to look back at where we've been and some of the highlights of Sustainability Matters to date that have included a variety of, you know, really expert important guests who have helped us reflect on particular topics. And we've picked three for today just to try to highlight different dimensions of this topic. The first topic is an increasingly important one in this time you know that is being referred to as the great resignation, the great reset at a time when employees within their organizations are finding their voice and looking to align their work more and more with purpose and their values. We reflect on an episode we had about engaging employees in ESG with our guest Susan Hunt Stevens of WeSpire, an employee engagement platform, who demonstrated for us how ESG is not just about achieving goals but actually about transforming employee engagement and therefore business performance.
Susan Hunt Stevens
The piece that companies really hadn't realized, and candidly we almost stumbled upon it thanks to a couple of our clients, was this relationship between participation in ESG initiatives and HR outcomes. That was the piece, in particular, that we had to solve and really be able to demonstrate for our clients. Because, yes, saving energy, waste, water, fuel has a hard ROI [return on investment] for some clients. But for a lot of clients, the energy, waste from water and fuel usage is not a huge cost driver in their business. And so, it was only when we were able to demonstrate that those employees who were participating in your ESG activities were more likely to recommend the company or more likely to retain the company, were more likely to be leaders or supervisors in the future. That companies began to say: oh wait a minute, okay, the value of this is not just in hitting our environment and social goals, but this is also something that is key to hitting our culture goals. The value of a one percentage improvement in retention for some large organizations can be literally millions and millions of dollars. We've been able to demonstrate that participation in ESG activities can drive 10 percentage point improvements in engagement. In some segments of high turnover in employees 37 percentage point improvements in retention. That is mind blowing to people and that really changes the conversation from ESG activities being the right thing to do to ESG activities being the smart thing to do.
Sarda
Another episode we chose to highlight today was really focused on how to build an enterprise through sustainability and when speaking to our guest, Steve Bradley of Cox Cleantech, and how he used baseball to teach us how to optimize investment for sustainability impact.
Steve Bradley
I think the first thing is probably what I said before is just know what you're trying to accomplish. What are you trying to accomplish and what role do you want to play? For us, it's no surprise that we ended up focusing on energy and waste for the reasons you said, but also those are things that are important to us. It goes back to this vast clean tech opportunity set. You really need to focus, and I think to focus you need to pick what is it you want to do and then what role do you want to play to achieve that goal. And then beyond that, you should always, and I may index a little overly towards this, but it's not really any different here than any other type of investing other than thinking about that impact and what you want to accomplish. Because at the end of the day I think everybody's goal would be impact and value creation. If you've got the impact locked down, then you just need to focus on okay, is this the right investment for me or my company to achieve whatever other goals I want to get to beyond just the impact side of things? And then beyond that, I think I always use this baseball analogy, probably too much, but it's “get out on the field and get some reps.” You know, I think you can only do and learn so much if you're doing third-party research. I always sort of joke a little bit that our investments that we were making was us getting into scrimmage games. We don't want to go get our eyes beat out by some really good team but we need to go get some reps, and so I think you got to do that but do it in the right risk adjusted way for you. Just to carry the analogy out I always said the worst thing I could do in Cleantech was to step up to the plate, take three cuts and walk back to the dugout. And so, you know, we think about it in terms of “get some singles.” Get some singles and like, get some momentum going. You're going to learn some hard lessons when you do that, and do that before you really go big, and I mean that's just me, I tend to be a little bit more conservative about how I do things, but I also feel this great responsibility as a steward of the company and the family's money, and I want to make sure that I'm balancing the growth aspirations and the impact aspirations with how much money we need to putting at risk at any one time until we get to the level where we've educated. I always tend to think in terms of you got to educate your gut. At the end of the day, anybody can do the research and figure this out. What sets you apart from somebody else is an educated gut. So you go learn 70%, 80% and then you've got to trust your gut, and that's the only thing that's really going to differentiate you from somebody else who can access the same data, get the same information and so you've got to have that competitive advantage if you're going to be successful.
Sarda
The third episode we chose to highlight was really focused on the [COP26] climate conference and how businesses can act on outcomes. Our guest was our own Steve Varley, Vice Chair of ESG and Sustainability for EY [Ernst & Young LLP], and let's listen on how Steve summarized the opportunities for businesses to enhance their value to stake holders by adopting and implementing sustainability strategies.
Steve Varley
I guess for some companies this is and will be taken out of their hands because governments will regulate, and actually they’ll also find their investors demanding change and focus on this area. But I also like to think there's a more positive story. Therefore, many organizations that we help, they are looking to innovate, create new products and solutions and services for customers. They're looking for customers that maybe they've never served before, that they can now access because they've got a sustainability offering. Where they're heading is to embed into their strategy, into their business model, products and services and internal operations that are respectful of the climate and reduce greenhouse gases and reduce the warming. So, for some, I think they'll be forced into this by external forces. I think the smarter ones, the leading companies will lean in, will look to see how they can adapt their business model, especially to find new customers they've not accessed before. And from a position of driving value for stakeholders, including value for their shareholders, but really value for stakeholders, they'll begin to understand that they can both help the planet be more sustainable whilst also growing their business and growing the value to stakeholders. And I think that driving capitalism is a positive force for sustainability, Chris, is going to be one of the opportunities we all have to stop the planet warming up too much.
Sarda
What I find certainly exciting as a member of the EY community, you know very focused every day on these topics of ESG and sustainability, feeling very fortunate to be able to do this all day with organizations whose work, whose commitment, whose people inspire and motivate me to try to do my best work. The Sustainability Matters podcast gives us an opportunity to really leverage, I think, what I believe is a very unique and exciting vantage point that we have as a significant large global firm that practices across financial audit and assurance, tax, strategy, you know transformation, mergers and acquisitions. And we're actually very excited that EY has been recognized by the research and advisory firm, Verdantix, as a leader for ESG and Sustainability consulting services in its latest report, the Green Quadrant: ESG and Sustainability Consulting for 2022. With a practice now of over 2,000 dedicated ESG and Sustainability professionals serving the globe, but located physically in different countries with many individual perspectives and local connections. And understanding of these topics at a very personal level, we believe we are very well positioned to help our clients advance their own agendas as they navigate through these global dimensions, often through global organizations as well. So, it's an exciting place we have to bring all of the capabilities, all of the know-how, all of the perspectives that EY has across these corporate dimensions, across these geographies, across the sectors of the economy; and use that opportunity to bring in outside diverse global voices to share useful but especially actionable views on these important topics in the sustainability context. We just don't want to know what we should think or believe. We really want to talk about what we do and how it works and maybe sometimes when it doesn't work and what we do about that. But the idea really is about translating ambition. There's so much of it now into action, and action that translates to results that can be measured, that can be communicated and reported, and tracked over time and bench-marked, so that we start looking at what is good, what is better, what is best, how to deploy leading practices across the different areas of the economy that we support as an organization, and really help us get beyond the what and the why of sustainability. They both really matter but really get into the how at a time when this global rise in ambition absolutely needs to be translated into action. So, we will focus in this series on practical examples of what is being done, where, by whom and how it's working.
Sarda
As we kick off 2022, we're going to look ahead now to the trends and, you know, significant topics of interest for sustainability, for ESG that will likely inform the sustainability debate over the next 12 to 24 months. More than anything, what we know when we work in this space is that change is the only constant and what we think we know you know six months from now may change. And that's part of our work. But for sure there are few things we know will be very central to our work, to our conversations, the importance of moving from ambition to action for sure. Setting goals remains important for organizations that have not yet signaled their ambition and their commitment to transitioning to low-carbon business models and towards the net-zero economy. And the focus now is less about setting goals and signaling ambition and much more about showing real progress in what actions are being taken, where a capital is flowing and being allocated in the direction of these transitions. We will for sure talk about the rapidly evolving field of regulation pertaining to climate change. We're going to likely see regulation pertaining to disclosure requirements. We may see things around carbon pricing, about maybe stress testing of financial systems and financial portfolios. And regulation will move fast, but it's not going to move fast or ambitiously enough to meet the imperative of the moment. So, a dominating theme is going to continue to be the fact that the private sector needs to lead, and that private capital will most likely continue to be at the front of financing the transition to this more sustainable low-carbon economy. The global political landscape will continue to be relevant for us in the US and whether it's the mid-terms later in the year on how the legislative and political apparatus aligns or not or what it signals relative to the role they think government needs to play in all of this work. We will see what happens in a hopefully post-Covid-19 world of work, travel, consumption and are we, you know, in the third and final act of this global pandemic and are we ready to come out of it with having hopefully learned many lessons about how to deal with significant disruption to our global economies, to our lives in what many describe as a dressed rehearsal for what potentially awaits us with disruptions from climate change and other environmental issues like biodiversity loss.
As we look ahead, we expect to see more regulation pertaining to climate change, to sustainability, to ESG in the form of disclosure requirements, maybe new or expanded carbon pricing and taxing schemes, stress-testing financial systems. Already we've seen in the United Kingdom the broader European Union with the Green Deal, the Corporate Sustainability Reporting Directive or CSRD, another acronym to learn. And in the United States, action from the Securities and Exchange Commission (SEC) as well as potentially the Federal Reserve Bank also around the idea of stress testing for the financial system. But, we also expect that regulation will not move faster ambitiously enough relative to the imperative of the moment, and certainly continue to expect that the private sector will be expected and will in fact lead from the front, and that private capital will be at the heart of financing the transition to this low-carbon economy that we expect and look forward to.
Sarda
The practical dimensions of some of these transitions are starting to feel more and more real, and we will talk about these. For example including in the automotive sector is the shift to electrification and electric vehicles continues to accelerate and how to think about that in terms of both at a consumer level, at a fleet level, at a system level, what this means for infrastructure, what this means for mobility, what this means for equity and just transitions at a time when these vehicles remain on the higher end of affordability. And we will, you know certainly keep focus on the social dimensions of ESG. After all, the “S” stands for social, and the environmental topics have dominated, but at a time when we're still reeling from issues pertaining to racial and gender equity and justice. Diversity and inclusion remains a very prominent topic in many organizations and clients we speak to. And then this broader topic of just transitions and how do we help all participants in the economy find their way and find their place in this low-carbon economy we describe.
Sarda
So, our vision for this podcast for over the next year and beyond is to really highlight important events, initiatives that will make the headlines; bring to you experts who can share their perspectives, share their experiences, share their insights and help us all navigate through this across many of the systems that we've taken for granted from, you know, energy, food transportation and so on. So, I hope to generate conversations that highlight not just what is possible, what is needed, but also what is happening and why that's exciting. Everything we need to dramatically accelerate the path to a climate-safe and sustainable economy is actually already being done somewhere already at some scale but the speed, the scale, the reach needs to increase exponentially. So, we want to highlight what is possible, what is out there and how it can grow. And hope to invite all of you to this conversation and help bring increasing awareness as we lower the barriers to action for others.
Sarda
If you enjoyed this episode, please take a listen to our previous episodes. They all will add something new and potentially surprising to your day. As well as check ey.com, we constantly publish relevant and interesting articles, research that will help put these bigger topics in the context of your business priorities. Also, if you enjoyed this episode please subscribe or leave a rating or review wherever you listen to your podcast. We look forward to welcoming you on the next episode of Sustainability Matters. We designed this podcast series for you to provide leading trends and practical advice around environmental, social, governance, or ESG, issues and opportunities facing businesses around the world today. You can subscribe wherever you choose to listen to your podcast. As for me, again my name is Bruno Sarda. You can find me on LinkedIn and feel free to connect with me there. Thanks so much for listening.
