ESG COTTON TESTING AND SUSTAINABILITY
To break the ice, in a talk a couple of weeks ago, I asked an audience, mostly composed of managers of large and medium-sized companies, how many had heard of ESG before 2019. The response was less than 30%.
Angel Pérez Agenjo, Managing Partner of Transcendent
The progress made by Spanish companies in their journey towards business impact in the last two or three years is undeniable, but it is no less true that many companies continue to see more of an annual mandatory reporting exercise than an opportunity or a competitive advantage for their business.
An ESG dashboard is needed...
A good test of cotton to validate the importance of ESG aspects in a company is to check if management committees and boards of directors have an integrated sustainability or ESG scorecard, and to know what are the criteria for their configuration.
A good ESG scorecard must be based on a rigorous materiality analysis and cannot focus solely on aspects of energy transition, nor only on environmental aspects, even if they are the easiest to measure. Nowadays we already have tools at our disposal that allow us to delve into material aspects by sector, by sector, by ODS relevant, with the appropriate focus on social aspects, and by priority interest groups.
... to manage sustainability objectives
Only from an integrated scorecard can sustainability objectives be incorporated for the management committee, monitored as a team and able to link them to their variable compensation with coherence. If not, we are doing a paripe to cover the file, and with the current transparency it is tremendously easy and quick to distinguish who takes this seriously and who does it more to look good.
Without a scorecard, it is very difficult to have strong and rigorous sustainability governance. The work of sustainability commissions dependent on management committees or boards needs such a tool to move forward.
One of the people who may be most interested in having an ESG scorecard integrated into a management committee is the chief financial officer. Financing linked to sustainability objectives is already a reality and goes far beyond green bonds. Sustainable Linked Loans are progressing rapidly and there is little left until even working capital loans have advantageous conditions based on ESG objectives.
The scorecard can help mitigate unexpected negative ratings from ratings and benchmarking agencies, avoiding eroding not only the company's reputation but also its market valuation and the cost of its funding.
Building a culture of sustainability and business impact requires a useful dashboard that is updated as the company progresses and forms part of the core of the company's decisions.
In aspects ESG and sustainability a good control panel doesn't deceive. Find out more in the Transcendent's blog!
