Blog #BusinessBeyondProfit archives - Page 2 of 4

What is materiality and how does it affect companies?

20 June 202218 February 2022 by Francesca Mondello

Now that sustainability has become an undisputed priority and more and more companies are defining their strategies to manage it, we hear more and more often about sustainability management. materiality.

But what is materiality, what is its link to sustainability strategies, and why is it so much talked about?

If you are not yet familiar with this term, do not know exactly what it is used for and how a materiality analysis is carried out, this article is for you.

Let's start at the beginning, i.e. by defining what materiality is.

When we talk about materiality we refer to all the environmental, social and governance (ESG) aspects which have a substantial impactpositive or negative, on the company's profitability and in their stakeholders.

Materiality should be the foundation of any rigorous sustainability strategy and therefore material issues are those that merit proper management and, where applicable, reporting.

Although depending on its scope, the analysis itself has a certain level of complexity, we should not view materiality as an exercise for the few, relevant only for multinationals, for a particular sector or for companies that are obliged to publish the non-financial information statement.

Materiality is a strategic tool that facilitates decision-making. Therefore, any company that wants to remain competitive and is interested in creating value for society, regardless of its size or the sector in which it operates, should carry out a materiality analysis on a regular basis.

What are the main benefits of materiality analysis?

Now that we know that materiality is a key concept for both reporting and sustainability management, the next step is to understand the benefits of conducting such an analysis.

The main ones can be summarised in three points:

1.Prioritising and focusing the strategy

Materiality provides valuable information that allows identify issues for follow-up, minimise risks and refocus strategy prioritising the major impact issues in the business and that are more relevant to stakeholders. This helps to maximise resource allocation and minimise efforts.

2.Anticipating trends and improving competitiveness

Through analysis, the company can spotting emerging trends and best practice in the sector, so materiality is an important critical resource for improving competitiveness. Material issues, properly managed, are the levers for creating long-term value for society and should therefore influence decisions about the supply of products and services and, in addition, serve as a guide in defining a differential value proposition with respect to the competition.

3. Promoting transparency and dialogue with stakeholders

Materiality analysis provides an opportunity to establish a dialogue with key stakeholders, to identify the issues that are of most concern to them and for which the company will be held accountable. Materiality therefore contributes to improving stakeholder relations and transparency of the company.

What are the most critical aspects of the analysis?

The most critical aspect of the analysis is undoubtedly the definition of its scope. Materiality is a relative concept that is highly context-specific and, in the case of large companies and multinationals, material issues can vary significantly from country to country. It may even be difficult to identify a single materiality matrix, even if there are many commonalities between subsidiaries.

Secondly, stakeholder engagement requires time and resources. Engaging stakeholders - especially external stakeholders - can seem like a daunting task, so many companies are tempted to leave them to one side and create a materiality matrix simply to comply with reporting obligations.

Undoubtedly, the richness that the participation of key stakeholders adds to the quality of the analysis more than compensates for the effort.

Thirdly, the company's management must be involved. Once the strategic and cross-cutting nature of materiality is recognised, the responsibility for the analysis cannot rest solely with the Sustainability Department, but requires the involvement of all areas of the company and must be embedded in the commitment, vision and validation of management.

Fourth, prioritisation of material issues is key. Companies that have conducted several materiality assessments know that material issues grow as new priorities, regulations or trends emerge.

For both management and reporting on the impact generated to be easily understood, and thus add value to stakeholders, prioritisation of material issues plays a key role.

Finally, materiality is a variable concept. Materiality is a time-varying concept, so while there is no commonly accepted standard for how often the analysis should be performed, it is worthwhile to carry it out on a regular basis.

From direct experience we know that there is no single way to carry out a materiality analysis, but if you found this interesting and would like to know more about the methodology we have developed to carry out a materiality assessment, please do not hesitate to contact us at info@transcendent.es or consult our blog.

B CORP Way, European Sustainability and Impact Consultants

20 June 202220 January 2022 by Ángel Pérez Agenjo

Transcendent has become part of this community of European consultancy firms advising companies on their transformation towards sustainability.

Companies are increasingly looking to generate positive impact not only for their shareholders or from a financial point of view, but to generate impact with what they do in their surroundings, in the environment and in society. But how do they get started, how do they map that journey, what changes will make the biggest difference, who can they learn from to make lasting change?

The B Corp Way has some answers.

This community of 44 European B Corp certified consultancies from 15 countries offering services in 17 languages, which Transcendent has just joined, connects companies seeking to improve their impact with B Corp certified consultants. These firms provide strategic sustainability consulting services, and accompany them in their transformation process and impact measurement.

This European initiative is expected to be extended to Latin America and the United States.

What is B Corp? It is a seal of social, environmental and governance excellence awarded to companies that are certified with this seal. In Europe, the number of 500 B Corps has just exceeded 500 and it is estimated that the growth rate of new certifications exceeds 30%.

We know that transforming a company's operations and approach takes time, commitment and boldness. Companies going through this process need support. Roadmaps, leadership, examples and sometimes collaboration with other companies. This is what the B Corp Way programme offers.

But what kind of services can be found in B Corp Way?

From how to use the B Impact Assessment to measure the company's current impact and map the path to improvement and possible B Corp certification, to how to become a zero emission company, how to use the SDGs and the B Lab tool to create behavioural change to meet the Sustainable Development Goals, how to approach the sustainable transformation of a company, how to implement B Corp principles in the company's governance bodies or how to use marketing and communication to effectively share the company's commitment to the principles of social and environmental excellence, are some of the services provided.

B Corp Way, the platform of European B Corp consultancies that advises companies on sustainability.

Why now?

Behind this initiative is the conviction of many business leaders that companies will only survive if they innovate and focus on improving the planet and their environment through what they do.

The demand from society and the market for companies, especially large ones, to act and contribute to minimising the climate crisis and inequalities is an irreversible process.

It is not only about achieving a greater positive impact, but also about drastically reducing a company's negative impact. In this process, knowledge, advice and strategic and process consultancy are key factors in moving in the right direction.

Our next generation of leaders needs to make decisions based on ESG parameters and indicators under the principles of fairness and respect for the environment and society. Over time, this transformation will move from the company level to the sectoral level, thereby creating systemic change in our economy.

At Transcendent we are very proud to have been selected by B Lab Europe as members of this select club and we are fully committed to be part of this change and to help and advise Spanish and European companies to carry out this journey to impact, as necessary as it is exciting.

Business Impact Measurement as a management tool

20 June 202220 December 2021 by Marina Fernández

Businesses are key players in today's society. Many of the world's great advances have come from the private sector. Michael Porter, in his study on shared value, shows many examples of how business has driven social development.

The first large-scale programme to diagnose and treat HIV was set up by an Anglo-American company to protect its workers in South Africa, according to a new report. Mark R. Kramer y Marc W. Pfitzer in its article The shared value ecosystem published in the Harvard Business Review. MasterCard is another great example, having successfully implemented mobile banking, providing access to financial services to 200 million people worldwide. And the most recent case is the COVID vaccine, which has been developed and distributed thanks, in large part, to the efforts of the pharmaceutical industry.

At Transcendent we understand that companies are agents of change and that, those that manage to position themselves in the area between the business value and the value to societyare the ones that will achieve a competitive advantage.

Being an agent of change means playing a key role in the transformation of society, promoting sustainable economic, social and environmental growth. To this end, it is essential to to know the impacts that the company generates on society, to manage and measure them in order to maximise the positive ones and minimise the negative ones.

In order to understand, manage and measure impacts we need information. Information, metrics and data are the basis for all business decisions. It is unthinkable for a company to undertake an investment without first carrying out a financial analysis, or to launch a new product on the market without understanding the needs of consumers.

Most companies are intuitively aware of the impacts they have on the environment and society. However, there are still very few that are committed to quantifying them. However, before we begin to explore impact measurement, we need to understand what business impact is and how we understand it.

What is business impact?

Impact is seen from a value chain perspectiveIn this context, companies have a series of inputs that they transform, through activities, into outputs. These outputs are the "tangible" results of the business activity. For example, for an infrastructure company that builds roads, an example of an input would be the raw material used to build the road and the output would be the road.

These outputs generate "Outcomes" and, in the longer term, "Impacts". Outcomes are the specific changes that a company's products or services generate in the behaviour of its customers or users, and impacts are the attribution of fundamental changes, intended or unintended, that occur in organisations or communities over the long term.

Continuing with the example of the road construction company, the "outcome" would be to facilitate access to university for young people from a small town, who thanks to the road ("output"), can more easily reach university. The "impact" is positive, and could be a percentage increase in the rate of students with higher education in the area where the road operates.

Why measure business impact?

More and more stakeholders are demanding that companies have positive financial returns while at the same time generating a positive impact on society:

- The investors increasingly favour companies committed to sustainability (ESG investment, socially responsible investment, etc.).

- The regulatorsincluding the Spanish Administration and the European Union, require companies to publish non-financial information statements.

- The customers and the company prefer to consume from purpose-driven companies that are aligned with their beliefs and values.

- The employees prefer to work in socially responsible and environmentally friendly companies.

In this context, knowing and measuring business impact is an opportunity for companies to position themselves, differentiate themselves and value the positive effect generated in society in the eyes of investors, regulators, users, shareholders and other stakeholders.

Measuring business impact

Impacts are difficult to quantify and measure, so there is no global consensus on how to measure, evaluate and report them.

There is a wide range of methodologies for measuring and managing impact depending on where the focus is sought. Among others, GIIN, BLab, GRI, GSG, the OECD or the WBA. Several are part of Impact Management Project (IMP), we are a partner organisation, and they are also on the recently created Impact Management Platform.

At Transcendent we have developed a IMP-based impact measurement methodology which allows the quantification of impacts, both positive and negative, and their subsequent follow-up and monitoring.

Our experience measuring the impact of large companies is always very positive as managers acquire relevant information to make decisions with it. A trend that is growing all the time.

It seems, therefore, that impact measurement is the way forward. Because quantifying impacts enables companies to understand, manage and make decisions in line with the purpose of the business, so that they can be agent of positive change in society. Find out more about impact measurement at our blog!

The 23 Spanish companies that lead the world

28 June 20229 December 2021 by María Herrero

Whether we like it or not, our company influences and contributes positively (or negatively) to a better world. Whether we like it or not, we may be singled out to join a club that we have not chosen to join for the justified or unjustified reason that our company is considered a leader and/or exemplary for others for various reasons, based on turnover or number of employees, perhaps because of the sector in which we operate or the community we serve, our type of product or customer base or perhaps because of the important influence of our brand...

However we do it, we companies leave our mark on the world. But which ones leave a footprint for a better world? And what is or how do we define a better world?

A better world is defined by the United Nations in a perhaps simplistic but undoubtedly accurate way, as one in which economic growth is sustainable, responsible and respectful of the planet, contributing to the improvement of people's lives and leaving no one behind.

This objective is set out in the well-known 17 Sustainable Development Goals contained in the United Nations 2030 Agenda, which came into being in 2015. At that time there were 15 years left, which were long for some and short for many, and which today, 9 years down the line, are overwhelmingly short for the great challenges of humanity reflected every day in the news that reach us: from a child dying on the beaches of our coasts, men and women freezing cold on the border of Poland and Belarus, women without the right to work, girls who cannot go to school or parents with their child on their shoulders crossing rivers where they risk their lives in the hope of a better future...

Only business can lead change

Suddenly, and exacerbated by the coronavirus pandemic, surveys show that business is perceived as the leader of change and therefore the hope for achieving these goals.

Neither governments nor NGOs have the resources to invest the 90 billion euros needed to achieve them. And let's be honest, it is not these that have the biggest impact on people and the planet. It is business.

Just as Covid arrived, in 2018 the WBA was created, a non-profit organisation inspired by the values of the United Nations. If society's hope lies in business, it is business that should become the engine of the change and transformation we need. And something had to be done. If they are the engine, where is the fuel to start it up and drive it to arrive in good shape and on time?

The World Benchmarking Alliance (WBA): The Race to the Top

This fuel is the WBA. The WBA is a foundation born in the Netherlands (a country par excellence pioneer and benchmark in sustainability and impact) with the support of the Dutch government and 20 global entities spread around the world willing and united around a mission: to drive the private sector's race towards the SDGs.

The ranking of the 2000 companies that lead the world

The first milestone was not an easy one: choosing the 2000 most influential companies in the world capable of contributing the most to the world's development. Millennium Development Goals, send a letter to their CEOs informing them that they were going to be part of a World Ranking that the whole world, consumers, investors, governments, ordinary citizens, would know the results through a big campaign in the media and social networks worldwide and ask for their collaboration in the process.

The second milestone, the result of an in-depth and rigorous study, was to identify the 7 indices or benchmarks, which respond to the 7 transformational elements that our system needs to be responsible and sustainable. The social transformation (human rights and gender) that affects the 2000 companies, and six other elements or transformations where companies can be rated in 1 or several, depending on the materiality of the impact generated by their business. These are: nature and biodiversity; urban or smart cities; agriculture and nutrition; energy and decarbonisation; digital inclusion and finance.

A third milestone remained, which was not going to be easier because it was the last one. Generating a roadmap that would lead the way by offering tools and support to companies to take action. The journey? Transforming and adjusting their business model to generate measurable and manageable economic, social and environmental value that contributes to one or more development objectives. In short, contributing with innovative solutions so that the generation of goods and services by companies would have a deeper meaning than just producing, selling and consuming them.

Benchmarking for a Better World

You don't choose to be a WBA company

These 2,000 companies were not asked if they wanted to be part of this ranking. So, to motivate them to collaborate and get involved, the WBA provided them with its methodologies, tools and roadmaps to achieve two goals: the 2030 Agenda and a carbon neutral economy. The incentive? To lead the top positions of the World Ranking and be perceived as the best company for a better world.

The 23 Spanish companies that lead the world

Well, of these 2000 companies, 23 are Spanish. The list is made up of Acciona, ACS, CaixaBank, Telefónica, Banco Santander, BBVA, El Corte Inglés, Mercadona, Inditex, Cepsa, Iberdrola, Nueva Pescanova, Indra, Naturgy, Ebro Foods, FCC, Ferrovial, Grupo Logística, Meliá, Renfe, Repsol, Siemens Gamesa and Urbaser.

The 23 companies that lead the world — *The 23 Spanish companies in the WBA ranking*

And all of a sudden, these 23 Spanish companies of different sizes, sectors and market capitalisation.... are now part of the club of companies that lead the world. And they lead the world because the WBA, today constituted as an alliance of more than 250 entities worldwide, has singled them out as the most influential, not to tell them what to do, but to accompany them along the way, offering light and being a guide on the exciting journey of achieving and contributing decisively to the Millennium Goals by creating a world that leaves no one behind.

2023: Publication date of the first World Rankings

The publication of the indices and the transformation effort of the 2000 companies will be made public in the second half of 2023. We have only months to go. Governments, suppliers, investors, employees, consumers and ordinary citizens will have the opportunity to see the World Ranking of the most sustainable companies committed to the common good.

To raise awareness of the WBA project, the Impact Forum - a benchmark event on impact in Spain led by the Foundation Ship2B - organised a session where together with Victoria Márquez-Mees, the WBA, a leading member of the WBA Board of Trustees, unveils the opportunity that the WBA represents for the 23 Spanish companies selected for the Ranking.

Our wish from Transcendent is that Spanish companies lead the first positions of the Ranking. Some companies such as Telefónica have achieved the first position in the Digital Inclusion ranking. As allies and partners of the WBA, we want the 23 Spanish companies to lead the WBA Ranking, thus demonstrating their commitment to sustainability and the SDGs and that many other companies, seeing their example, effort and success, follow their legacy.

Whether we like it or not, our company influences and contributes in a positive way to a better world... this is our purpose and our raison d'être at Transcendent. Help companies to transcend and leave their mark on the society they serve and why not? To lead the World Ranking of the companies most committed to people and the planet.

The remaining challenges after the Climate Summit

30 November 202130 November 2021 by Francesca Mondello

Although more was expected from this climate summit, as Melissa Fleming, Under-Secretary-General for Communication for the United Nations, has said, "...the climate summit was a success.there is still hope".

The latest report of the Intergovernmental Panel on Climate Change (IPCC) states that, unless greenhouse gas emissions are reduced immediately, rapidly and on a large scale, limiting warming to 1.5°C above pre-industrial levels as set out in the Paris Agreement six years ago, will be an unattainable goal. That is what this summit sought to achieve, and despite the lukewarmness or total lack of commitment on the part of some states, progress has been made.

Agreements adopted at the Climate Summit

The Glasgow Climate Summit has brought with it some agreements that reflect a growing awareness of the urgent need to take a step forward to avoid environmental disaster.

These are some of the compromises that have been reached in the Climate Summit:

US-China bilateral agreement to help reduce CO2 and methane emissions and combat illegal deforestation.
More than 100 countries, including the US and the European Union, agree to reduce methane emissions by 30% by 2030. China has refused to go along because it says it has its own plan.
Agreement between more than 20 countries, including the United States, Canada, Spain and Italy, to end public funding and subsidies for fossil fuels before the end of 2022. China, Japan and South Korea have not signed.
110-country agreement to stop deforestation by 2030.
The International Sustainability Standards Boardwhich will enable companies to adopt harmonised and comprehensive environmental, social and governance reporting criteria.
Countries accounting for 90% of global GDP have committed to the carbon neutrality in 2050. China postpones the target to 2060 and India to 2070.
The Beyond Oil and Gas Partnership (BOGA), which proposes phasing out the production of both fuels, although it currently has only 12 members.

The issue of the price of emissions

However, this progress contrasts with the lack of concreteness on some key issues. This is particularly the case for so-called double counting in the carbon market.

Today there are around 60 different initiatives to put a price on CO2. The problem is that they only cover about 20% of the world's total emissions and their average price is too low (about $3 per tonne).

The International Monetary Fund recently estimated that the price should be around 75 dollars per tonne, that in the regulated European market it is around 60 euros and that the US government estimated the social cost of carbon at around 50 dollars per tonne.

Pricing of CO2 emissions is an efficient way forward in reducing emissions because it discourages CO2 intensive activities and encourages companies to move towards decarbonisation.

Some companies - just over 20% of the world's largest - have set internal carbon prices, allowing them to take carbon into account in assessing the suitability of their projects and the impact of emissions on their accounts. The problem is that companies generally also set an excessively low price per tonne, well behind their foreseeable evolution. This means that the information provided by the internal price is not sufficiently clear.

Although in the Conference of the Parties 26 (COP) has not been much talked about, a global price on carbon will eventually be imposed. In the meantime, Spanish companies should start asking themselves what would happen to their accounts and the profitability of their projects if they had to pay for carbon. Sooner rather than later they will end up doing so.

Along these lines, the Secretary General of the United Nations, António Guterres, has announced that beyond the mechanisms established in the Paris Agreement, he will create a Group of Experts to propose clear standards for measuring and analysing net zero commitments for any organisation that is not a State.

China takes a step forward

One of the most important events to come out of this climate summit was undoubtedly the signing of the climate peace agreement between China and the United States. The heads of the delegations of both nations presented a joint declaration in which they commit themselves to work to accelerate during this decade the fight against climate change.

Among the most important points of the pact reached by both powers is the commitment of the Asian country to present a comprehensive plan for the reduction of greenhouse gas emissions within the next year a comprehensive plan for the reduction of its methane emissions, a powerful greenhouse gas responsible for about 25% of current warming.

The agreement is relevant because both countries account for about 40% of global emissions: China 27% and the US 11%. And their commitments for this decade are very different. The US, with the arrival of Joe Biden in the White House, has committed to practically halving its emissions by 2030. China, however, so far only maintains the commitment to reach its peak emissions by 2030 and thereafter to reduce them.

Iran and Brazil look the other way

On the geopolitical front, the positioning - or lack thereof - of some countries is noteworthy.. This is the case of Brazil, whose president has decided not to stop deforestation in the Amazon and rejects climate change from a scientific point of view; Iran, which is the sixth largest emitter in the world and has not even ratified the Paris Agreement yet. Or Australia, Mexico and Turkey are also in a grey zone that would not belong to them.

Climate Summit stocktaking

In short, the Glasgow climate summit fell short in its ambitions to revitalise the fight against climate change. In any case, it is just as important to accelerate and intensify environmental policies as it is to respect the commitments already made by the various countries.

Sir David Attenborough, in his speech to COP26 in Glasgow

According to the organisation's projections Climate Action Tracker, if each and every one of the announced targets (mandatory and voluntary, long-term and NDCs) is met, the temperature rise by the end of the century could be limited to 1.8°C, not far from the 1.5°C target set in the Paris Agreement. But that is surely too optimistic. The road ahead is long and difficult, and it remains to be seen whether the target will eventually be met.

We tell you more in our Stay Curious section!

What is corporate sustainability and how to develop it

17 October 20224 November 2021 by Cristina García del Valle

Over the last decades, there has been a growing awareness of the need to change the current economic model towards one that incorporates sustainability at the heart of ensuring a social and environmental balance. For this reason, the concept of corporate sustainability is becoming one of the key lines of business in small and large companies. In this article we tell you what is corporate sustainability and some of its keys.

What is corporate sustainability?

The concept of sustainability refers to "balance" and can be viewed from different perspectives: economic, social and environmental.

Corporate sustainability refers to the company's contribution to sustainable development: its ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Characteristics of corporate sustainability

Businesses are one of the major agents of change in society. As such, they have a responsibility to incorporate environmental and social practices into their business. However, there are different levels of incorporation of environmental and social practices. sustainability in business:

Hygienic or minimal: at this level are those companies that comply with current legislation, monitor their social and environmental performance and report it appropriately.
Strategic level: corresponds to those companies that incorporate sustainability aspects into company decision-making.

Corporate sustainability covers the latter group of companies with the following key features:

They have a sound sustainability strategy that takes into account their material aspects and is therefore relevant for the company.
Based on this strategy, they set ambitious environmental and social targets and work towards achieving them.
Sustainability is integrated into the different areas of the company as a management element beyond external communication.
The most relevant aspects of sustainability are reported to the organisation's highest governance bodies, both to monitor their performance and to incorporate them into their decisions.

For such companies, sustainability is an opportunity to improve their business performance, positioning and long-term sustainability.

How to develop corporate sustainability?

When it comes to work sustainability strategies in business, in order to achieve these objectives, it is necessary to establish some prior objectives. This will help us to specify the actions that we will later implement in the organisation. Once the objectives have been defined, depending on the needs of the company, different actions can be implemented. These are some of the most commonly used strategies:

Involving senior management of the company
Mainstreaming the SDGs (Sustainable Development Goals) to their business and prioritising.
Conduct a materiality analysis to determine which aspects are most relevant to the company's business and its stakeholders and should therefore be focused on.
Defining a strategy The company has a solid, rigorous and achievable sustainability strategy that sets out the direction in which the company should move forward.
Set your own objectives to transform them into business objectives and integrate them into the company's strategy.
Integrate sustainability aspects into the different areas of the company.and in the governance of the company.
Inform and communicate to the rest of the companyThis will facilitate the dissemination of corporate information, access to corporate information by stakeholders and general awareness of the shared set of priorities.

Benefits of implementing sustainability in business

Corporate sustainability has become a strategic asset for companies because:

Improve efficiency in the use of resources, reducing costs for the company and the end user.
Generate new sources of income emissions arising from the circular economy, such as the identification of waste that can be used by other companies as raw materials.
Participates in the value chain of other organisations (as suppliers and customers), including public administrations, which have started to include environmental clauses in their purchasing and contracting processes and to develop measures to drive industry towards the development of increasingly sustainable and health-safe products.
Develop innovative products and processes of higher quality through the incorporation of the environmental and social variable in the design process, which will differentiate them from their competitors, make it possible to access new markets, etc.
Improve your reputationThis can enable you to gain more customers and reduce the risk of losing the ones you have due to a bad company image.
It can become an improvement in the employee engagementThey will be contributing to objectives beyond the economic benefit of the company.
Attracts investment.

The commitment of Spanish companies is increasing. The sustainability in business has become a key strategic resource and a competitive necessity. Organisations that operate sustainably are today more profitable and resilient.

Find out more about corporate sustainability on our blog and how to develop it in your social impact strategy!

The ESG bubble

19 November 202120 October 2021 by Ana Ruiz

Sustainable investment is undoubtedly a key lever to drive the business paradigm shift. However, it is increasingly important to have transparency to ensure that these investment flows are truly directed towards sustainable assets. In this regard, we believe that the European taxonomy will bring clarity and allow investors to focus their efforts on investments that truly address social and environmental issues.

We share with you the article written by Kenneth P. Tucker where he talks very graphically about this ESG bubble and the importance of alignment between investment flows, corporate engagement, along with citizen action and more urgent and aggressive government policy to change the mindset and rules of the system.

Article "A trillion-dollar fantasy" by Kenneth P. Tucker

The National Oceanic and Atmospheric Administration Observatory on Mauna Loa, Hawaii, reported that carbon dioxide levels in the atmosphere had reached 419 parts per million, the highest levels recorded in more than 4 million years.

On the same day, BlackRock, the world's largest asset manager, announced another milestone: it had raised $1.25 billion for its US carbon transition investment fund. The largest exchange traded fund in history. The fund is a reflection of what BlackRock CEO Larry Fink communicates to his clients: "we don't see business as a passive observer" when it comes to combating climate change.

Seeing the world's largest asset manager act as a social and environmental agent should be cause for optimism. Instead, it represents a kind of Kabuki play in five acts, according to Kenneth P. Pucker.

- Act I: Companies realise their responsibility to address growing social and environmental challenges.

- Act II: The academic class begins to do research on the subject.

- Act III: Rating agencies, consultants and other financial institutions are rushing to create environmental, social and governance (ESG) products, highlighting the opportunity for companies and investors to achieve superior financial performance and social and environmental impact. It's a win-win circle.

- Act IV: Investors are slow to recognise that ESG investing, as currently practised, is unlikely to lead to higher financial returns and, for the most part, do not care about the impact on the planet.

- Act V: Awakening to the opportunities and limits of investment to address growing social and environmental challenges.

Where are we right now? We are at the intermission after the third act. As ESG investing has accelerated, the planet has experienced the two warmest decades on record, Antarctica has melted, income inequality in the US has soared and species have been disappearing at a rate not seen for millennia. The Dow Jones Industrials are hitting new highs and asset managers are charging high fees to monitor an increasingly popular new investment category: ESG investing.

This is what is wrong. Investors are finally getting serious about ESG investing. But, as currently practised, most ESG investments have little or no social or environmental impact.

Companies wake up

Timberland, a shoe and apparel company then worth billions of dollars, was at the forefront of a cohort of companies committed to society and the environment. The company expanded one of the first corporate social responsibility (CSR) reports in 2002, paid employees for 40 hours of community service and installed renewable energy at its distribution centre and corporate headquarters. Timberland believed that business had a role to play in addressing growing social and environmental challenges.

Despite Timberland's incipient efforts, the prevailing mood in business, academia and Wall Street at the time was that Corporate Social Responsibility was, at best, a distraction.

Undeterred, early practitioners of Corporate Sustainability were supported by a growing group of NGOs and consultants eager to help companies define and report on their social and environmental impact.

In 1997, the Global Reporting Initiative (GRI) with the support of the United Nations Environment Programme to create the first comprehensive sustainability reporting framework. "In the early 2000s, there was a belief that sustainability disclosure was the missing ingredient," says Ralph Thurm, former chief operating officer of GRI. "Data would allow consumers and investors to put pressure on companies to become more sustainable, delivering benefits to people and the planet."

Over time, Wall Street's view of social and environmental issues shifted from enmity to indifference.

Investigations begin

A 2012 study began to change investor sentiment. This collaborative study between academics at Harvard and London business schools examined 90 "twin" companies, each in the same industry (e.g. Walmart and Kmart Corp.), one classified as "high sustainability" and the other as "low sustainability".

During the first six years, the share price movements of high and low sustainability companies were almost identical. However, when compared over an 18-year period, the authors found that high sustainability companies outperformed low sustainability companies by an average of 480 basis points.

How research fuelled a marketing blitz

Armed with these studies, Wall Street's sales engine kicked into gear. Goldman Sachs and BlackRock made acquisitions and new hires to support the launch of new ESG investment products, and research by Morgan Stanley and others "helped dispel concerns that investors have to sacrifice returns to do good", as The Wall Street Journal wrote in 2016. Investment firms collectively went from denying sustainability to becoming fierce advocates of it.

It is hard to overstate the change in fund flows that this win-win narrative has generated. Just five years ago, the term ESG investing was still fairly new. Now, according to the Global Sustainable Investment Alliance (GSIA), in the last two years, contributions to ESG funds have almost doubled those to other equities. Over the past two years, ESG fund inflows have almost doubled over the past two years compared to all other equities.

Unknown market size is a warning sign

There is no common definition or legal framework for ESG assets. According to the Financial Times, "ESG is, in many ways, a bank's marketing dream, precisely because it is so vaguely defined".

With no security barriers, asset managers can construct ESG-branded portfolios in any way they wish.

Regulators, particularly in Europe where ESG has a longer history, understand that this cannot continue unchecked. In Brussels, the European Union is working towards a taxonomy governing what can be marketed as a sustainable or ESG asset.

In the US, the Securities and Exchange Commission has created a task force on climate and ESG, and the CFA Institute is drafting a new set of standards for asset managers. Meanwhile, greenwashing in the asset management industry continues unabated.

ESG ratings and investment are not designed to promote environmental and social impact.

Sustainability reporting did not present systemic challenges. ESG investment, as currently practised, will not either.

Waking up: there is evidence that finance can be a source of positive environmental change

Beyond the ESG game, there is good news. Pressure from investors and citizens has led more than 1,000 companies to commit to science-based targets to deliver environmental outcomes to protect the planet. Both companies and countries have recently accelerated their commitments to net zero carbon emissions targets. Japan and the EU have committed to becoming net zero by 2050 and China by 2060.

At the same time, drastic reductions in renewable energy and battery prices make it uneconomical to add new fossil fuel capacity in most parts of the world. Government support for technologies such as hydrogen energy, regenerative agriculture and plastics recycling, and a more widely shared urgency to address environmental disruption, is driving the flow of capital into climate technology solutions such as batteries and clean cement and steel. This is producing exciting and transformative solutions in fields including renewable energy, bio-based materials and transport.

Investors and shareholders are also demonstrating that finance can be a source of positive social and environmental impact.

Three questions ESG investors should ask themselves

Until these tools are widely adopted, investors seeking ESG impact should ask asset managers three simple questions to determine the likelihood that a fund is designed to generate positive environmental and social outcomes:

1. What percentage of your fund is dedicated to environmental or social solutions?

2. How do you measure environmental and social impact?

3. How do you assess the fund manager's performance?

The answers to these questions will help to distinguish the wheat from the chaff and to distinguish ESG-marketed funds from ESG-committed funds.

The private sector will need to be an increasingly active and authentic partner in addressing social and environmental challenges. However, governments and policies must lead these challenges.

To do so requires new rules, including carbon and water pricing that reflects social costs, clean electricity mandates, commitments to take internal combustion engine vehicles off the road, fair and enforceable taxes on corporations and individuals, and incentives for new solutions for sectors that are difficult to decarbonise.

The EU's Green New Deal financing linked to each country's environmental progress is a model to emulate, while the United States' re-entry into the global community by making aggressive commitments to electrify and decarbonise is good news. This is how the ESG bubble burst.

So is the increased investor preference for ESG assets and efforts to standardise sustainability reporting and regulate ESG investing. That said, do not expect these changes to adequately address social and environmental issues. That work must also come from citizen action and a more urgent and aggressive coordinated government policy to change the mindset and rules of the system.

Source: Kenneth P. Pucker, Institutional Investor "The trillion dollar fantasy

Find out more on the Transcendent blog!

HOW TO ACTIVATE CORPORATE SUSTAINABILITY

10 February 202311 August 2021 by Cristina García del Valle

The corporate sustainability is a holistic approach that seeks to maximise the positive impact of a company on society and the environment, while maintaining sustainable economic profitability. It is a key concept for sustainable development and applies to all companies, regardless of size or sector.

Companies are increasingly aware that they have to change, transform and adapt in order to move towards a more sustainable world. The sustainability consulting makes this possible.

The 83% for young people Spanish consumers say they choose brands with purpose compared to 39% of those aged 65 and over. Something is changing. Companies are no longer just required not to pollute. The market is going much further. Consumers are buying socially responsible products and services.

That's why companies like Danone are trying to change their production model to a healthier, more sustainable and inclusive style through different initiatives and projects.

Specifically, Danone has long been working towards its purpose: to lead a food revolution to ensure the sustainability of the food system and guarantee a healthy diet for a growing population, while protecting natural resources.

To achieve this, it is committed to a real transformation of eating habits that reduces waste and promotes a system of local and seasonal production. At the same time, it places value on empowering the new generations to become agents of change. In coherence with the BCorp of which the company is a part.

There are many references to look up to. Ecoalf, Auara, Unilever, Ben & Jerry, Central Lechera Asturiana... the list is very long. And more and more. The BCorp movement is growing all the time. In Spain there are already almost 50 companies with this certification, which assesses through a rigorous verification process which are the best companies "for" the world.

The "what for" of your business is key

But how can I incorporate sustainability into my business, how can I transform my business to make a positive impact? A sustainability consultancy can be the answer to these questions.

The key is to define and activate your purpose. What does someone need a company like yours for? That "what for" is the key to the transformation that any company should address, if it has not already done so, in order to take sustainability to the next level.

Activating purpose in a company can help you:

Enhancing reputation and legitimacy to operate
Attracting, retaining and motivating talent
Customer loyalty
Increasing investor interest
Encouraging innovation

Do I need a sustainability consultancy?

A sustainability and business impact can make a difference by helping to define and activate purpose, to manage ESG assets, and through a dashboard to identify, measure and improve your company's performance and social, environmental and governance impact.

All of this allows you to improve your position in relation to your competitors. For example, according to the First Business Purpose Barometer in Spain, produced by APD y Transcendent, 9 out of 10 executives surveyed, purpose brings value and contributes to improving the company's profitability. It is also a lever to attract talent at all levels of the organisation. In fact, 3 out of 4 respondents would move to a purpose-driven company, and 1 in 4 would be willing to move, even at a reduction in salary.

We know that purpose-driven companies double their market value four times faster than others and also record a higher return on capital of 5.9%.

They also become better financed in the markets, improve their reputation, reduce their risks of vulnerability to potential crises, attract and retain talent and improve their performance.

But how do you bring sustainability into business?

Companies approach sustainability from different perspectives:

Incorporating the ODS (Sustainable Development Goals) to its business, which involves understanding the opportunities and responsibilities that they individually and collectively represent for the company.
Prioritising the most important SDGs. In order to know which of these actually have a positive impact, the organisation should analyse them in order to define priority areas for action.
Establishing own objectives linked to these SDGs, which means transforming them into business objectives and integrating them into the company's strategy. At this point, the involvement of senior management is key to ensure that they are implemented as a strategic part of the company's development.
Integrating sustainability into the company's business and governance.
Informing and communicating to the rest of the company, which will facilitate the work of dissemination of corporate information, access to such information by stakeholders and general knowledge about the set of shared priorities.

A process that requires commitment, involvement of the management committee and communication to employees, but which once implemented brings value to the company, to those who work in it, to society in general and to the planet. Find out more about how it can help you fulfil your company's purpose in a way that, according to the experts, there is no turning back. Find out more about how a sustainability consultant!

7 BOOKS FOR THOSE PASSIONATE ABOUT PURPOSE

24 November 202123 July 2021 by Ángel Pérez Agenjo

We are seeing how the market, investors, consumers and society in general are clearly demanding that companies generate a positive impact on their environment and the planet through their activities. The brands that are doing so are improving their profitability because employees want to work in companies with a Purpose, consumers prefer to buy products that generate a positive impact, investors are betting on sustainable funds, etc.

For those who believe that the world is changing, that there is another way of doing business and that companies have to play a fundamental role in this change, from within, reinventing the way they work and placing social impact at the centre of their activity, we would like to recommend some books. They are books on business purpose that inspire us and give us ideas to get fresh air this summer.

Grow the pie, by Alex Edmans

It is one of the reference books on business purpose for those interested in being part of the new capitalism. Based on academic evidence, but with very practical ideas and under the need to combine profitability with Purpose in business. It was voted Business Book of the Year by Financial Times in 2020.

Grit, the power of passion and perseverance

Written by Angela Duckworth, in this book we learn about passion and sustained persistence to improve our resilience, ambition and self-control on the road to achieving our goals. A journey that can take months, years or even decades.

Her research came about when, as a maths teacher, Duckworth realised that IQ was not the only differentiating factor between successful and unsuccessful students. For years she researched the short- and long-term effects of the grit technique on school performance, work performance and personal relationships.

TrailBlazer by Marc Benioff

What is the secret to growing and innovating a company and making your career Purpose-driven in a world that is becoming vastly more complicated every day? The answer for Marc Benioff, is to adopt a culture in which your values permeate and form part of everything you do.

The author of the book is chairman, founder and co-CEO of Salesforce, named Top Innovator of the Decade by Forbes magazine, one of the top leaders by Fortune magazine and one of the top 10 CEOS by the Harvard Business Review.

"Impact by Sir Ronald Cohen

The social impact guru published his book "Impact" last year. A book that shows how the drive for impact investment is turning our economic system on its head, transforming the private sector from a driver of pollution and inequality to a driver of positive impact, distributing opportunity more fairly and providing solutions to major social and environmental challenges. And according to Cohen, this revolution which he calls the Impact Revolution, is going to be as innovative and disruptive as the Technological Revolution was in its day.

Muhammad Yunus' "A world of three zeros".

It is a book based on three premises: zero poverty, zero unemployment and zero net carbon emissions. Its author, winner of the Nobel Peace Prize in 2006, is one of the world's leading figures in ecology and social economy. Founder of the Grameen Bank, the aim is to encourage microcredits for people with few resources in order to promote social and economic development.

Man's Search for Meaning, by Viktor Frankl

The psychiatrist Viktor Frankl who recounts in the book his time in the concentration camps, gives us a lesson about self-improvement and the search for the meaning of life. Through the personal construction of personal freedom and human dignity, he manages to remind us of the importance of purpose in what we do.

"The Heart of Business" by Best Buy's CEO

Hubert Joly, former CEO of Best Buy and the architect of Best Buy's dramatic turnaround, presents his personal guide to achieving extraordinary results by putting people and Purpose at the heart of the business.

In 2012, "everyone thought we were going to die," says Joly. Eight years later, Best Buy was transformed when Joy and her team turned Best Buy into one of the nation's employers of choice, dramatically increased customer satisfaction and dramatically increased Best Buy's stock price. They also succeeded in making Best Buy a leader in sustainability and innovation.

The Heart of Business is a guide for leaders willing to abandon old paradigms and lead with Purpose and humanity. It shows how we can reinvent capitalism and contribute to a sustainable future.

Which of these books on business purpose have you decided to start with? Find out more at our blog!