ESG companies archives - Transcendent

THE ESG AND SUSTAINABILITY COTTON WOOL TEST

22 June 202117 June 2021 by Ángel Pérez Agenjo

To break the ice in a talk a couple of weeks ago, I asked an audience, mostly made up of executives from large and medium-sized companies, how many had heard of ESG before 2019. The answer 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 still see it more as an annual mandatory reporting exercise than as an opportunity or a competitive advantage for their business.

An ESG control panel is required…

A good test to validate the importance of ESG aspects in a company is to check whether management committees and boards of directors have an integrated sustainability or ESG scorecard and what the criteria are for its configuration.

A good ESG scorecard must be based on a rigorous materiality analysis and cannot focus solely on energy transition aspects, nor only on environmental aspects, even if they are the easiest to measure. Today, we already have tools at our disposal that allow us to go deeper into material aspects by sector, by ODS relevant, with an appropriate focus on social aspects, and by priority stakeholder groups.

... to manage sustainability objectives

Only an integrated scorecard can incorporate sustainability objectives for the management committee, monitor them as a team and be able to link them to their variable remuneration in a coherent way. If this is not the case, we are making a show to cover our tracks, and with today's transparency it is extremely easy and quick to distinguish who is taking this seriously and who is doing it more to make themselves look good.

Without a scorecard it is very difficult to have strong and rigorous sustainability governance. The work of the sustainability commissions reporting to steering 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 steering committee is the CFO. Financing linked to sustainability objectives is already a reality and goes far beyond green bonds. Sustainble Linked Loans are advancing rapidly and there is little time left before even working capital loans will have advantageous conditions based on ESG objectives.

The scorecard can help mitigate unexpected negative ratings by ratings and benchmarking agencies from eroding not only the company's reputation but also its market valuation and cost of funding.

Building a culture of sustainability and business impact requires a useful scorecard that is updated as the business moves forward and forms part of the core of the company's decision-making.

In some respects ESG and sustainability a good dashboard doesn't cheat - find out more in the Transcendent blog!

From Indicator to Impact (via active ESG management)

15 March 202111 March 2021 by Ángel Pérez Agenjo

We are in the high season of NFS (non-financial information statements)The report is based on a series of reports, integrated reports and sustainability reports.

In many cases, the people responsible for them chase their colleagues in search of the number, the data for the report, with a strict deadline because it then has to be verified, and in many cases this is the end of the year's exercise.

In some cases, the board of directors' approval of the integrated report will be missing, a procedure that in many cases is still just that, a mere formality, because it is not the part of the report that is discussed in more depth. Some of this information may be passed on to communication (internal or external) to feed into a sustainability report, the first objective of which is usually to make it look good.

It is true that more and more companies already know that the EINF matters, that their investors are going to look at it, that the ESG ratings and benchmarks They will search for and use the information and, therefore, they will start to be interested in it. This is why knowing how we can carry out a active ESG managementis very relevant for the company.

But what if?

What if the EINF had a storyline linking social and environmental impact with a company's business?

What if, in addition to including a few SDG logos, you went deeper into indicators and measures relevant to your sector and highlighted your company's contribution to the 2030 agenda?

What if the EINF was the last step in a strategic exercise of considering material aspects as part of the management of the company?

What parameters should be measured?

What if, instead of going it alone, we all used the same parameters to measure common issues? As explained by world leaders in business impact such as George Serafeim, Sir Ronald Cohen, Colin Mayer o Clara Barby in its article Measuring Purpose - An Integrated Framework, it would be useful to identify the parameters that companies need to measure in order to activate their purpose. For example:

InputsThe financial, human, social, natural and physical resources that a company uses to carry out its activity.
Outputsmeasuring what a company produces.
Resultschanges generated by a company's activities.
ImpactsThe effects on the well-being of others generated by that company on customers, employees, suppliers, societies and the environment.

But this kind of non-financial information is not the only or the last thing we can do. There is a further step, which is to monetise these metrics.

And why is monetisation key? Because such valuations allow resources and investments to be allocated. In the context of purpose, it is necessary to assign a value to the natural, social and human capital used to achieve that purpose. But beware, there is a risk of not valuing anything that does not have a price, and therefore of not investing in critical issues that no one has assessed.

From Transcendent We have long been making the management of non-financial parameters a competitive advantage for our clients, improving their results and their position in the eyes of their stakeholders.

Interested?

Do not hesitate to contact us at gestionactivaESG@transcendent.es if you are interested in learning more about the ESG management.Find out what else we can help you with at Transcendent!

7 mistakes companies make with ESG management

20 January 20213 November 2020 by Cristina García del Valle

More and more companies are aware of the long-term opportunity offered by developing effective ESG management (Environmental, Social and Governance). Better access to capital, talent and new business opportunities are just a few of them, according to an article published by Harvard Law School.

But many are finding it far from easy to create an action plan. To navigate the complex and evolving ESG landscape, companies need to avoid misguided approaches that lead to missed opportunities. These are the most common mistakes that are commonly made. At best, these failures lead them to miss their objectives, but they can be very high risks.

1. Excessive focus on ratings

Some companies confuse the improvement of their ESG management performance with a better rating by rating agencies. Such positioning can create a distortion by focusing on meeting requirements rather than developing a tailor-made strategy for the company.

2. Treat ESG as a communication effort only.

Communication can help amplify messages, but it cannot be a substitute for a powerful management system that is aimed at controlling real risks. Investors and stakeholders may detect inconsistencies in what is communicated and what actions are actually being taken. This is often referred to as "greenwashing"This exposes the company to greater risks.

3. Lack of vision on the part of the management

Some companies delegate ESG activities to individuals or departments within the companybut without the involvement of top management. However, ESG management strategy should be positioned as a core part of the company's vision and values. It is therefore imperative that top management not only oversees, but also drives and defines the ESG strategy, aligning it with the rest of the company's strategy.

4. Disconnected from business strategy

A ESG strategy cannot be conceived independently to the rest of the company's business strategy. An ESG strategy that does not take into account the company's strategic objectives and does not inform corporate strategy is failing its purpose. Such a disconnect may be due to misperceptions about the ESG programme, lack of vision of the management team or failure to conduct a thorough materiality assessment.

5. Compliance-oriented approach

Some companies present their ESG management programmes by making reference to the compliance with rules and regulations , this approach may be perceived as reactive and indicate a reluctance to go beyond minimum requirements.

To position themselves as leaders, they should proactively demonstrate that they have excellent programmes that exceed minimum requirements as a deliberate part of an ESG strategy.

6. Company-wide inconsistencies

As a result of the lack of a coordinated strategy, some companies end up adopting different standards in different divisions without a clear business rationale for such discrepancies. Such approaches leave significant gaps in companies' ESG management programmes, creating high potential risks.

Creating a cross-cutting map of your policies and programmes for each business unit and harmonising efforts to achieve a single, consistent approach are some of the recipes to avoid making this mistake.

7. Lack of assessment and monitoring

Data and information collection to measure compliance with ESG programmes. This is a huge challenge for companies in implementing these policies. The lack of effective monitoring prevents them from making progress and receiving support for their initiatives through reporting.

Setting up the mechanisms and methodologies to collect the right information and monitor it can be a significant effort at the beginning. However, this process can become a key instrument for the success of the programme.

In addition to the review of the data, the measurement should include a ongoing assessment of the effectiveness of ESG management programmes Find out more about ESG at our blog!