SVM Webinar: How businesses are responding to the IMM and ESG landscape – the key takeaways
On March 16th, Social Value International hosted the 2nd event in #BeyondESGMonth – which is a series of discussions regarding how we can collectively evolve the current ESG agenda to achieve sustainable development for all.
This event was a panel discussion, exploring how businesses are responding to the impact measurement and management (IMM) and ESG landscapes, and the changes that we have seen globally in this space in the last few years. In this discussion, we were joined by 5 fantastic speakers who are shared some fantastic insights and advice for businesses grappling with the challenges faced as a result of the global rise in awareness about ESG and IMM, these speakers were:
Belissa Rojas, IMM Advisor at SDG Impact, UNDP (Moderator)
Vincent Siegerink, Economist/Policy Analyst at OECD WISE Centre
Alexandra Heaven, Global Senior Manager at Danone & Business for Inclusive Growth
Reinoud Willemsen, Partner at Embedding Impact
Dr. Rasha Dyatt, Director, Planning and Institutional Development at Amman Stock Exchange.
The panel discussion was focussed around 3 key questions, and in the blog below summarises the discussion.
From your perspective, how has the landscape evolved over the past 2 years and what are some of the risks/challenges faced by businesses in such context?
Similarly to the first panel discussion of #BeyondESGMonth that took place on March 8th, it was quickly highlighted that over the past few years there have been a number of changes that have defined and altered the ESG and sustainability landscape.
The biggest change that we have seen is that conversations around ESG, sustainability and IMM have become increasingly mainstream, and questions are being asked about how this impacts communities and what this means for the shared prosperity of our planet. Consumers are demanding better from businesses and this is leading to shift in attention – for example Alex noted that in Danone, ESG requests from investors doubled from year 2018 to the year 2019.
But with this growth of awareness around ESG, IMM and sustainability, several challenges have been thrown to light
1) Definitions are unclear
One of the biggest challenges that was highlighted by all panelists, is that many definitions remain unclear. Globally, businesses are unclear as to the difference between (and sometimes meaning of) sustainability, ESG, CSR, IMM, social value etc. This is creating a challenge where often these terms are used interchangeably which caused increased confusion, and from the perspective of a business can create challenges in focusing on what impacts are material to them.
To overcome this, we need clarity and streamlining of definitions about what these concepts and words mean.
2) Lack of harmonization
Linked to the unclarity of meaning and definitions surrounding the words and concepts used, is the proliferation of standards, frameworks, ratings agencies, and regulations that we see. Over the last few years, these have increased dramatically but there is a real disconnect and lack of alignment between these approaches that is causing real challenges for business who are trying to understand their impact, and what this all means.
Even within ESG alone, there is a huge disconnect between the various ESG metrics from different ratings agencies meaning that, as Vincent noted, we are comparing apples with oranges.
It is therefore vital that within various standards and frameworks that are out there, we see increased harmonization. The Impact Management Platform is encouraging such harmonization through its ongoing work, and this is something that SVI strongly support. You can see our call for harmonization in our recent response to a CDSB consultation.
3) Reporting and Management practices
As ESG, IMM and sustainability have become mainstream, we have seen an increase in impact reporting and whilst a growth in businesses being reporting on their ESG, sustainability or impact practices is positive, we are also seeing a worrying growth in “greenwashing” or window dressing. As Reinoud noted, as these practices become mainstream, we are seeing a rise in organisations tapping into this agenda without understanding what this truly means which is causing harm and reducing trust in the sustainability agenda.
By overcoming the challenges noted above, we can start to overcome this challenge – as with harmonization, clearer definitions, and cohesive regulation it will become clearer as to what these practices mean, but it was also noted that there needs to be a significant shift in management practice if we want to ensure businesses are maximizing their impact and not just producing unverified, greenwashed reports.
Rasha shared an example of a change in management approach following on from a training programme - where the ASE hosted training for the top 20 companies on the stock exchange. At the start of the training, individuals came with a focus on how to write sustainability reports, but because of the training, one of the outcomes was that it was understood that a strong, top down, sustainability/impact strategy was needed in order to achieve sustainability or impact goals.
A strong strategy, leadership and a collective understanding of what this means is therefore vital to overcome some of the challenges faced by businesses, and to ensure that businesses are reporting on impact that has been created and not overclaiming or green/impact washing.
4) Are we measuring what matters?
Another challenge that was highlighted, is that often case, we are not measuring what really matters to people. In order to understand the impact of a business we need to go beyond measuring what businesses are doing (the outputs) and begin measuring what matters to stakeholders themselves.
If we can change the way we measure the social performance of companies to reflect what matters for business stakeholders, then the impact of a business will become much clearer.
What are the major opportunities moving forward?
The challenges that the panelists put forward are large scale and complex, however the purpose of #BeyondESGMonth is not to just discuss the challenges faced, but to enable us to collectively provide solutions and actions to help evolve the ESG agenda and overcome these challenges. We therefore asked the panelists to discuss some of the opportunities that businesses have moving forward.
1) Harmonization
As noted above, a lack of harmonization is one of the biggest challenges faced by the ESG, sustainability and IMM landscapes, but whilst this is challenge there is also a real opportunity for professionals and experts to be involved in ensuring that harmonization does happen.
The current challenges that we see in greenwashing are mainly around reporting practices – in ESG for example we have seen a lot of tick boxing without making any change on the ground or without any move to a managing for impact approach, but the momentum is there and professionals in this space have a unique opportunity to drive forward and demand harmonization. Peer to peer learning and sharing of examples of what works, and what doesn’t work is central to this.
2) Measurement
As noted, much of the greenwashing we see comes from reporting which is often underpinned by poor measurement practice. Businesses have an opportunity to embrace impact measurement methodologies to better understand the impact their business is having and by ensuring that we move beyond measuring business outputs, and towards measuring the outcomes that matter to people, IMM is helping business to better understand actual impact on society.
3) Transparency
With improved harmonisation of standards, frameworks, language and concepts; as well as improved measurement practices, will come increased transparency. As was noted at the start of the session, investors and consumers are demanding better from businesses - as consumers, we each have a unique opportunity to ask questions and demand transparency in claims of sustainability and impact.
4) Assurance
Linked again to the need tackle greenwashing/impact washing is Assurance. Third party verification of impact or sustainability reports can help create confidence in impact claims that businesses are making, and ultimately in the sustainability agenda itself.
Assurance can also be understood as a learning opportunity for businesses and can help improve IMM practices to ensure that businesses are continuously maximising the positive impact they can create.
5) Long-term strategies
Finally, to overcome some of the challenges faced by the current ESG, IMM and sustainability landscape the panellists highlighted the need to develop long-term strategies.
There is evidence that what is good for society is good for business e.g. employee wellbeing is better for business performance, whereas climate change and inequality (which are both bad for society) are both systemic risks for business performance as they have the potential to damage our shared prosperity as a society.
If businesses therefore adopt longer term strategies, that incorporate double materiality, they are better able to manage and mitigate their negative impacts on society, as well as the external risks that are captured in ESG. Related to this, is the need for ESG rating themselves to evolve beyond short term risk, to long term sustainability and the impact this can have on a businesses performance.
Please share two key takeaways (maybe in relation to what can be done to overcome the challenges and leverage opportunities)
To wrap up the session, we asked each panellist to share a key takeaway and the advice they shared was incredibly helpful:
Reinoud: I urge everyone on this call to be critical of what is being presented. There are so many different frameworks and tools out there, but time needs to be invested in understanding what is out there and what this means.
Alex: Ask questions such as What is the purpose of this organisation? What are we really trying to achieve? And then be very clear about what tools and measures you want to use to measure the impact you create.
Vincent: As much as the issues we are facing are urgent, we need to be patient. We are looking at redesigning a global system, and we shouldn’t lose faith in the system. There is a lot of work to be done and it takes time.
It’s also important to remember that lots is being said about ESG and its limitation, but ultimately what we are trying to do is as a society we are looking to allocate resources in a way that increases value for all of us.
Rasha: As with everything that we change, there will be some resistance. In order to overcome this resistance, we need to be clear about why we are doing, why this important, and this can then help create the culture we need.
We should also encourage assurance and see this an opportunity to both tackle greenwashing and helps us learn and improve!
We thank all of the speakers for their valuable insights and advice during this panel discussion and look forward to working with our members and international community to help ensure that the solutions identified can be actioned upon so that collectively, we can evolve the ESG agenda and achieve shared prosperity for all.
Useful links shared throughout the discussion:
Shared by Vincent:
Shared by Belissa:
https://www.bloomberg.com/news/audio/2021-12-10/the-esg-mirage-podcast
https://impactmanagementplatform.org/
SVI Report Assurance:
https://www.socialvalueint.org/report-assurance
SDG Impact Standards for enterprises:
https://sdgimpact.undp.org/enterprise.html