As 2016 draws to a close one key clairvoyant lesson in hindsight emerges – expect the unexpected! 2017 is already shaping up to be a watershed year. Who knows what it will hold? As the mists of premonition clear soothsayers may well, er, say that business will face increasing scrutiny in how it treats society, pushing risks such as modern slavery and income inequality up the board agenda. Alternatively, the falling runes and swirling tea leaves may suggest that economic uncertainty will put a sharp focus on discretionary spend – it might be sustainability’s “Houdini” moment.
In these complex times, fortune favours those who can foretell the future. We asked Mystic Ed (Ed Gillespie) to dust off his crystal balls and shine some light into the darkness of 2017. He was helped by six people at the epicentre of change, and asked them why their issue will shape the agenda and what will happen if business gets it wrong. We heard from;
Aidan McQuade, of Anti-Slavery International on “Modern Day Slavery”
Jessi Baker, CEO of Provenance on “Open Data”
Joe Franses, Director of Coca-Cola European Partners on “The Global Goals”
Catherine Howarth, CEO, Share Action on “Investor Engagement”
Mike Barry of M&S on “Going Local”
Caroline Hill of Land Securities on “Science Based Targets”
We used an online poll to rank the ideas before a broader discussion involving everyone, followed by roundtables on different themes such as; circular economy, addressing the skill gap, re-defining materiality, reporting to investors, and technology breakthrough.
Inequality has many faces. Lack of access to education or skill development is one of the critical areas, and business is yet to make a concerted effort on this. What’s the role of business in addressing the skill gap? Are governments simply subsidising businesses in today’s economy? Do you think the government’s apprenticeship levy plans could be effective?
Issues concerning the STEM skills gap
• There is a need to fill STEM-related roles, but does everyone need to get involved?
• Need better incentives to encourage students to enter STEM-related fields
o Companies being actively involved in recruitment of students for jobs post-graduation
o For immigrants/internationals, visa-related advantages similar to what the US has
• There is currently a lack of synchronisation between the tech world and what is being taught in universities – how do we ensure classroom teaching is up to date?
Preparing the next generation for an uncertain future
• With an uncertain political and technological future, we need to consider alternative paths to employment beyond the usual A-levels → university → internship → work model
• As university fees increase, alternatives are looking more appealing
• We need to learn how to adjust to a world where many jobs are getting automated, which is an opportunity that also creates other jobs
Benefits of apprenticeships
• Gives companies access to a larger pool of talent outside of people who went through the traditional university route
• This is really the only path that many people without a degree can pursue
• Examples from the group:
o Deloitte’s Brighthouse for people with no traditional education path
o Penguin Random House’s The Scheme, a yearlong program for people wanting to enter editing regardless of their age and background
o Granthorn developed school programs to espouse entrepreneurship, highlighting the importance of engaging students at an earlier age
• Apprenticeship levy: this allowed airline companies to recast their existing programs and increase the number of roles available for people to apply to
• There is a need to harness talent (and manage the lack thereof) of the different people coming into and living in the country
• Needs a sector-wide approach to successfully address diversity
• “Groupthink” produces only one solution to a problem; diversity contributes to a more creative and productive environment
General issues for consideration
• Accessing a wider talent pool through open talent networks (that give increasingly flexible hours), programs for older people to re-enter the workforce, etc.
• Discrepancies between pay assigned to high value jobs
• If we don't incentivise people the right way, there will always be a skills gap
• Should we scale up to serve society in general as opposed to preparing people to perform specific roles? Will we eventually get to a world where people can skip out on the job requirement?
With technologies such as Blockchain, AI and the IoT starting to upend whole industries, we live in revolutionary times. Which are the technologies sustainability folks need to grasp, and to what degree do we - as a community - get it? This our best chance of rapid change, or is it right to be a little distrustful of technology?
The topic is wide, largely unknown and undiscovered. The way to understand how technology can be embedded into businesses for driving sustainability is to deepen the understanding of one aspect of technology at a time.
Being tech savvy is about having people at C-level that understand the technology and what its potentials can be in driving the desired changes. Trusting that technology plays a pivotal role in an analytical capacity is key to a new approach in defining and accelerating sustainable decisions and goals. The pitfall may lay in the linear thinking that currently prevails in how businesses address issues. Thinking that technology is the silver bullet could be dangerous if we use it to simply speed up what already exists. Perhaps adopting system thinking practices may be a useful approach for wrapping our head around technology and begin to understand better what can technology fundamentally sustain and how. Engaging in frugal innovation may be a way for shifting the source from which problem solving and innovation stems to reveal new pathways. Avoid repeating mistakes of the past, in that we waive considering the cost to the environment and only see the opportunities that technological advancement brings. We cannot ignored that 2% of global emissions are attributed to the infrastructure to power tech and the use of ICT.
Being tech savvy is also about helping society accept and adopt technology as part of everyday life. Businesses play a considerably important role in facilitating the buy-in from the public. If they don’t, the risk is they may lose their licence to operate. Inequalities within national boundaries, nation to nation or regional inequalities in the world have began to emerge. We are making fundamental decisions to shape the future on this planet where there are still billions of people that can barely read and write and can only afford an analogue mobile phone. History may be repeating itself as a hand full of people are deciding the long-term direction of everyone's future.
Trust plays the key role in the adoption, integration and acceptance of technology in our life.
It feels like it is too late to shut the gate, we are in it right now. It is more the case of what we do with it. There is a role for those who operate in sustainability to reposition themselves in their organisation and with the public by beginning discussions around how technology can help us overcome energy, carbon and material issues with considerations for ethical and environmental impact.
We need to be tech savvy enough to have meaningful discussions with the right people on the right topic. Unless we are literate in the right way, the community cannot have meaningful operate and have cutting edge thinking. Working together and building cross company partnerships as well as setting industry targets will help with knowledge sharing and collaborating on issues that are too big for a single sustainability player.
Being a relatively well understood concept already, what holds business back from fully committing to introducing a circular mindset? What is needed to mobilise businesses and governments to enable a circular economy? Does circular economy take into account the social aspects as well or is it a pure environmental concept?
• Collaboration is key!
• Clear communication and understanding of concepts needed at all levels from consumers to corporations
• Legislation could be a key enabler to push out unsustainable materials
• The development of the BSI Circular Economy Standard (in draft form currently), is attempting to address various challenges –
o lack of clarity around the terms/definitions,
o clear outline of underlying principles that move beyond circular value chains/closed loop,
o Overview of different business models
o Insight into what other companies are already doing,
o A process map (stage and gate) outlining an iterative process to test out and incorporate circular thinking into your business.
• Despite being well known there is still confusion surrounding topic regarding its meaning and application to non-manufacturing industries
• There are challenges to collaborating with competitors – yet collaboration will be critical to solving some of the intractable issues.
• Training and awareness needed not only to increase awareness of circular economy but more mainstream standards also (e.g. ISO14001) – particularly in supply chain/SMEs
• Many SMEs have limited resources and forced to focus on adhering to legal requirements, making it difficult to move towards circular techniques – large corporates need to work with their supply chain.
• Some councils not engaging consumers properly in terms of waste management – also not always the right infrastructure in place to enable people to recycle easily when out of the house – see the Hubbub coffee cup recycling trial.
Red Flags (warnings)
• Very few companies looking at circular economy from a systemic level (excluding start ups that have applied this thinking to the development of their business model)
o Just applying one aspect of a circular business model – e.g., circular value chain/closed loop does not make the company a circular company.
• Who’s going to pay e.g., for the research needed into new material solutions, or the infrastructure needed
• For some companies it is very difficult to address the challenges because of where they sit in the value chain, they have less ability to influence things early enough but have to deal with the end problems. Companies like this need to get potential competitors to collaborate in a pre-competitive space to address the challenges, but whose role is this?
• Government – need for incentive to collaborate between businesses
• More than just resources! Circular economy includes shared economy etc and yet the conversation often returns to a discussion of resource use. To fully maximize the potential of the CE, companies need to take a systemic approach.
• Local issue – much easier to manage within a local regulatory region than global – for example with a global company operating in multiple countries it is hard to have an overall strategy, and easier to look at more local solutions.
• In applying circular thinking in a business, a business will have to make value judgements about what to focus on – e.g a more durable material might be less recyclable, but then may be able to be used multiple times – so there will be trade-offs.
• No off the shelf solution for anyone – each business will have to look at what it means for them and go through their own process to develop a CE strategy and implementation plan.
• Business also need to recognize that it will be critical to collaborate with others to address certain aspects of the circular economy, e.g materials development; waste management
• Standards e.g. BS8001 aims to break down the complexities of circular economy and shows 6 key factors to improve the circularity of any business – Currently looking for feedback through their consultation process
• 6 principles of circular economy outlined in the BSI standard – Value optimization, Systemic thinking, collaboration, innovation, stewardship – were developed to ensure that businesses looked beyond materials and looked at the wider systemic aspects of circular thinking.
• Consumer education will be needed – and also CE as part of the mainstream curriculum.
• Choice editing – to remove unsustainable materials – e.g., black PET trays for ready meals.
• Government – legal requirements to use a specific material types with sustainable properties
• Trade bodies could play a greater role in getting different sectors on board.
• Aspirational consumers – particularly in developing markets have struggled with bottle return systems as they see it as a status symbol to consume linearly - need focus on marketing
• Novellis – aluminium supplier have tried to reframe their business from virgin aluminium to recycled aluminium, but they are not close to 100% yet.
• Blockchain may be a future enabler – the ability to track materials/goods upstream and downstream – and as part of extended producer responsibility.
Working out what data matters to which stakeholders is becoming a complex art form, with companies like Unilever adopting materiality matrices. This allows companies to focus on what matters, and communicate accordingly. Is this the right approach, or are there better ways? Should the SDG’s get a look in?
Moderator: What is good and bad about the materiality…the current themes are social value, stakeholder engagement etc. What are the priorities and why? What is the purpose behind?
Regulatory compliance leads to build the materiality indexes. The question about why to measure it arrives later. Priorities are different and the leading question is how to use the materiality index. Some participants suggested that their respective organisations are working on building an updated matrix to meet the future needs.
Moderator: Modern slavery on the rise. How you or your organisation would report such issues?
The participants were agreed to the point that the particular issue would be dealt according to the nature and size of the business. It would be appropriate to report such incidents in the internal report or in the regional reports for small to medium businesses, but where the firm is a multinational corporation, they might face different challenges at different fronts. Decision makers have to select and decide the methodology they want to adapt to address and report the issue, as it could be counterproductive.
Moderator: What risks and opportunities are there for the businesses? Apart from the NGOs and regulatory authorities, what other data is available?
It requires continuous analysis of relatively new updates to adapt the right decision-making strategy, combining the two will be challenging. SDGs and the global challenges provide much information but sometimes it is difficult to read and understand in the light of general matrixes and priorities. SDGs must be considered while designing the base matrix. It was also suggested that businesses have the data that is more relevant to the particular organisation, for some businesses the challenges such as hunger or modern day slavery are not directly relevant.
Moderator: How the campaign can go behind the 17 SDGs. What is important for people as there is a big area to cover, for example, exports and gender inequality?
It will be a good idea to distribute some questionnaire and then analyse them to see the impact, it is very complicated. Individuals have targets to make it easier to track the progress and how they can map it. Someone argued that the global goals (SDGs) are collective rather individual. Some suggested that consumers are not really concerned with all this practice, and local authorities are playing important role in getting behind. Arranging the focus groups for detailed discussion was also proposed.
Moderator: What is the materiality agenda for the organisations? How can the message be spread?
There were mixed responses, priorities included education, charity work, climate change that cause recent flooding and creating awareness among the public. Some participants, however, believed that the public is already aware of the mentioned issues. There is a divide about the priorities and how we see the global goals, and we must make them our goals. Businesses are acting differently about the issue of sustainability and so is the public. There may be a fear among businesses that if they don’t act differently, they might lose on the competitive advantage. Employees’ engagement is also critical to passing the message across the organisation. There is a lot of untapped knowledge among the employees and businesses must seek for their input. There is a need to have a series of community dialogue, there must be some arrangements for such gathering to identify and discuss our roles as an individual, groups or society. It is like a journey, creating awareness among children can be a great idea as they will discuss those issues with their parents at home.
Moderator: What other areas need to be discussed, for example, big data? How can it help in market research and in identifying the trends?
It is again very complicated area, the source of data is critical for reliability. One has to be intelligent to understand all this. If there are no other sources to find out, this situation can lead to isolation. There is a need to have more quantitative data and analysis to understand the stories behind and the statistics will also bring some richness to the available data. Localisms, personal preferences, change in behaviour and collective belongingness were some other areas that require more consideration. The participants were divided over science-based targets, SDGs, and shareholder activism as per their preferences.
The combination of the Modern Slavery Act and increased media focus on antisocial corporate behaviour, modern slavery is likely to grow as an issue in 2017. Is this a soft target for an era where society is turning against big corporations? How well understood is this by boards of companies? What could change the game for tackling modern slavery in 2017?
• Modern slavery is a topic that lots of individuals on different sectors have an interest in. The Modern Slavery Act has been a catalyst that has driven many businesses into action.
• The uncertainties of Brexit and a fragile economy increase pressure on UK suppliers to subcontract, increasing the risk of slavery being part of the supply chain.
• The Refugee crisis is making Modern Slavery a bigger problem. In refugee camps you have children being sold and people willing to do anything to get by. In the UK, as a refugee you are not allowed employment and are given a token amount of money to survive, refugees live in dire poverty and are at risk of doing anything to get on in life.
• In finance it’s incredibly hard to track the end of the supply chain. There is a transparency issue and banks could be facilitating slavery inadvertently.
• Companies might be discouraged from investigating their supply chains due to the reputational damage they might suffer when abuse is discovered. The uncovering of slave labour used in all of Nestle’s shrimp supplies caused major damage to the company in spite of its goodwill to come up with these results from its investigation.
• Certification is a first step to tackle the problem and demanding accountability from suppliers. However, it is likely to have a minimal effect and it is not real solution. Suppliers will show you what you want to see and hide what they don’t want you to see when you carry your audits. The Rana Plaza incident in Bangladesh is the clearest example when an audit done weeks before the tragedy cleared any concerns and risks.
• Working closely with local NGOs can help the analysis of potential risks or abuses happening in the supply chain. Protection of reporters needs to be ensured as it is often easy to track how information may have been leaked. Auditors and NGOs have to come together in the industry. Though it is difficult to trust big NGOs: NGOs that are grassroots and on the frontline are much more trustworthy.
• It is generally accepted that it is a bad idea to disengage from suppliers whenever abuses are reported, as it does not solve the problem. It is better to engage with the latter.
• From an activist point of view it is excellent for companies themselves if they are subjected to shame and criticism by activists. If they are forced to report on their supply chain every 12 months that will force them to sort existing issues. Though under the Act companies below the £36 billion revenue threshold don’t have to report, they will also be impacted by the Act due to the creation of new shareholder expectations: companies that are not transparent will not be secure, sustainable long term investments.
• Businesses could come together in a collusion to demand a certain minimum standard from suppliers. The problem is who monitors and enforces this plan. Another issue is that often companies get very nervous about people speaking about suppliers with competitors in the industry.
• Vertical integration alongside the supply chain is more popular and a potential solution. The 1st stage of globalisation was that of companies outsourcing activities to reduce costs ignoring implications. With the coming of internet, reputational damage has become a significant issue, and now even a legal damage.
• Working from the finance end, making cheaper finance available for suppliers while encouraging ethics could reduce the cost and legal pressures they endure from big retailers, encouraging them to change bad practices. It moves away from the strategy of blame.
With investors increasingly wanting to understand material environmental risks and opportunities to support their decision making and the EU directive on non-financial reporting for big business about to come into force. The table will discuss if sustainability reporting is missing the mark and not providing the “material“ information that investors are increasingly asking for?
There is a disconnect between what investors are looking for and what data is available publicly.
There is little consistency with what is measured and reported amongst companies and thus investors may not have the necessary information to utilise in their decision making.
Corporates usually report on topics to tick their boxes when it comes to their regulatory obligations rather to add value on their reports by disclosing relevant information to attract investors.
Through reports, companies need to address on their material issues. With the development of SDGs there are lots of topics that companies can touch upon. However, a more targeted approach on their reports can give the right information to investors.
Through materiality assessments companies get the ‘permission’ to tackle issues with credibility.
Throughout geographies there are trends on the interests of companies to report when it comes to material issues. Companies do not only report on carbon.
Reporting needs to be relevant and drawing attention to important aspects rather than creating noise. Through reports companies can align their long term sustainability strategies with current measurements and targets.
Different reporting standards should make changes to include measurements on sustainability. Companies should know how different issues such as climate change affects their business. Through these measurements the companies can identify patterns.
Standards and certifications such as ISO 14001 can as a guide on the reporting values as well as add to the credibility of the measurements by aligning environmental data on the requirements of the business.
Reporting on the right material aspects, investors can have a better understanding on the environmental as well as the social impact of companies.
Investors would like to see these measurements aligned with the company’s strategy as well as different targets on the matter. They should have a targeted reflection.
With 168 major companies have committed to science-based climate targets, momentum is clearly building. Is this now the best way of companies to align with the success of the Paris Agreement, and how should one present this to a CFO? Should companies be aligning with 1.5 or 2 degrees, and to what extent should it include supply chains?
With 168 major companies committed to science-based climate targets, momentum is clearly building. Is this now the best way for companies to align with the success of the Paris agreement, and how should one present this to a CFO? Should companies be aligning with 1.5 or 2 degrees, and to what extent should it include supply chains?
Currently the majority of targets are set to two degree goal posts and there needs to be more incentive/drive to aim for 1.5 degrees.
It can be difficult to pitch SBTs to board level in a franchise structure (Hilton hotels example) – where does the relevant sustainability team sit? As part of the worldwide, overarching team or on the individual level? Confusion here can mean a lack of traction or that teams shirk responsibility and take up is missed.
It needs to been seen as a selling point rather than an added cost
Whether SBTs are the climate focused action or part of it depends on the company in question – obviously is there is scope to go beyond SBTs that is feasible, this should be welcomed. SBTs should not be seen as restrictive.
Given that SBTs are useful in that they set out very clear numerical and financial parameters, they are best placed to sit with the CFO and their team. They are best placed to understand the context within which the SBTs are working.
1.5 vs 2 degrees
2 degree landmark is driven by science and is well evidenced, 1.5 degrees is aspirational and policy-driven. The scale of ambition between the two is huge and in order to look forward, the targets need to be woven into all relevant aspects of corporate strategy.
Eg. The two degree reduction alone means a 90% reduction in carbon output per hotel room.
Energy efficiency and internal reductions can account for a huge portion of the reductions but in order the achieve the full reduction, radical internal changes must occur.
Is aiming for 100% renewable energy feasible?
Offsets must be seen and acknowledges as temporary solutions, companies cannot buy out their damage.
How to calculate the carbon price for each company? The range is broad…
In principle…Spend on carbon/emissions = carbon price
Such a rudimentary use of numbers is crucial to transparency but not fool-proof, but the numbers can be used to evidence and influence decision-making.
The main benefit of SBTs is that they are objective and that it is generally difficult to argue with the facts/numbers/science behind them.
Are the Global Goals a useful framework for connecting business and society or do we run the risk of complicating the message? Can they serve as a unifying narrative and what opportunities do they represent for inter-business/ sector/ country collaboration? How will businesses engage with them - retrofitting their own pillars of sustainability, or focusing on the principle of “universality”?
• The Global Goals can be a useful framework for connecting business and society
• Thanks to its universality, the Global Goals framework can be applied to any country in the world
• The Global Goals can a be a tool to rebuild trust in business that have often been accused of fake CSR
• Good performance of UK in fulfilling global goals does not mean that no further actions by the UK government are necessary
• Major improvements have already been implemented owing to the Global Goals - serious progress with health issues (obesity)
• Can the Global Goals be easily communicated and branded (like Fairtrade)?
• Should the Global Goals be used for benchmarking?
How to get companies involved?
• Asking investors to demand companies to embrace the Global Goals principles - more collaboration is required between different shareholders
• Choosing relevant goals for each company, encouraging them to target one goal at a time (small steps)
• Fostering cooperation on Global Goals between NGOs, companies and government
Education about the Global Goals:
• Due to the universality concept of the Global Goals, they can be a useful tool for educating people from different countries about global problems
• Raising awareness about the Global Goals increases social cohesion on a local level (Italy)
• Education can also bring unexpected benefits to local societies such as decreasing absenteeism in schools (Denmark) as a result of an increased sense of community/citizenship
• It is crucial to raise awareness about the Global Goals among top business executives
Reduction in consumption as a means to achieve the Global Goals:
• Companies should make a shift from the volume to the value model
• Some of the good consumption reduction actions were organised by Patagonia, Tesco, Dyson, Mars and M&S
• Solutions to reduce consumption include changes in package size, ingredients and not participating in popular sales activities such as Black Friday
- How to work with the GG so it’s generally contributing towards the targets?
- What businesses are doing in the space and is there a consumer demand for GG?
- Where the goals are coming from; what is the drive for them?
- Whose responsibility is it to educate the world about the GG?
There is a general impression that people outside of the sustainability world don’t talk ab GG.
It should be a framework for business use when developing their strategies and then they talk to their customers ab them.
Companies can pick up on and communicate the intent behind it/ their work in this space. Companies don’t communicate to customers under the GG umbrella (too complex).
- Is doing good for society doing good for business still being debated?
It’s a differentiator from competitors. There is a tension between keeping the business together and leading the GG ambitious.
Paul Pollman & Co want to recruit 1000 of CEOs to help to enable the goals. They are very pragmatic about how to do it.
SDGs may never be a consumer language. From human nature people like to be part of something bigger, it’s more of an internal check for companies of their sustainability strategies. Storytelling is important.
- Do goals create a framework for collaboration for business? Can we go to these multi-stakeholder platforms for collaboration now?
Surfacing needs to happen. There is a platform that connects businesses depending on the goals they are working on. There is also a fear of experimentation.
There is a lot of internalisation happening about how to work on the goals, which leads to silo thinking. People are afraid to start talking ab the goals as they’ll be accused that they aren’t covering all of them.
In the current economic climate, you’d have to justify your business case better. A lot of companies are already doing a lot of work that would fall under the goals, but it just isn’t communicated as GG.
At the management level, you still have to build a business case – it takes a year of getting one level of management buy in.
- How do GG resonate to not big brands (companies between the corporations and SMEs)? How to bring these people in. Whose responsibility is it to activate those (business / government)?
They are usually part of big businesses’ supply chain, hence its multinationals’ responsibility to take the lead. It’s bottom and top discussion always. Top is about leadership. Bottom is grassroots, should we encourage more scrutiny from the legislation?
Legislation drives awareness. Stick method is the best awareness raising method. A good example for that is a 5p change for plastic bags. It makes it level playing field and everyone start acting.
- Waste and litter requires collaboration.
- Cynicism – there have been too many glossy reports.
- Customers are open to honesty.
- Transparency is the critical stepping stone.
- The goals encourage a shift from poor developing world to other areas as GG are universal.