Reuters hosted their annual Responsible Business Event USA 2023 at the beginning of April in New York. The event brought together corporate leadership from sectors including manufacturing, retail, real estate, banking, and chemicals; policy makers from finance and climate sectors, and climate tech companies which were focused on measuring and reporting climate risks and metrics.
The key themes of the event revolved around clarity of regulations, roles of C-suite in successful implementation of sustainability practices, and need for accurate data and disclosure.
Many climate experts wonder how corporations are planning to improve their sustainability and GHG emissions metrics while still achieving growth. Whilst investor sentiments and voluntary initiatives on sustainability are generally taken seriously, most of the momentum on US’s corporate sustainability hinges on regulatory clarity around disclosure requirements.
The most anticipated of these regulations are the disclosure requirements proposed by the US Securities and Exchange Commission in March 2022. The final regulations were expected to be released in spring of 2023, but speakers at the event expressed their doubts that they would be released in the near future. The SEC regulations are built on existing Taskforce on Climate-related Financial Disclosures (TCFD) guidelines but certainty around the extent of disclosures including pertinent details such as ‘materiality’, climate-related risks, and transition plans were felt to be missing for a majority of the US corporate sector to embrace disclosure requirements.
However, this is not to say that the private sector has been twiddling their thumbs waiting for certainty. Over half of the S&P 500 disclosed their emissions in 2022, and many are leading the charge with exemplary initiatives in sustainability. Ann Tracy, the Chief Sustainability Officer of Colgate-Palmolive highlighted her company’s commitment to a circular economy and zero plastic waste by 2025. Henry Shields, VP of Analytics from MGM Resorts Design and Development, has seen customer sentiment shifting strongly towards sustainability, which drove them to create transition plans towards clean energy, energy efficiency and better water utilization.
The event also delved into the differences between working with internal and external stakeholders for a business. This not only included creating capacity internally and building reporting standards for ESG that are comparable to financial robustness and universality, but also the important roles within the company to drive strategy. An obvious champion for sustainability within and organization is the Chief Sustainability Officer who must align various departments and their strategies with sustainability ideals and targets, whilst also solving the challenge of motivating and coordinating various teams internally. CSOs found it easier to motivate when financial incentives were tied with leadership’s sustainability targets (as Moody’s did), and advocated the hub-and-spoke model to coordinate across teams.
Tony Germinario from BASF, the world’s largest chemical manufacturers, highlighted their commitment to net-zero goals. The first challenge they wanted to address was identifying the huge infrastructure costs required for the transition. This feeds into another recurring theme of the event – the role of CFOs in implementing successful strategies. This cannot be understated, as the correct allocation of capital is key in achieving sustainability targets; and capital providers themselves are incentivizing climate action.
Businesses investing in sustainable energy or carbon sequestration are not only after government-issued tax breaks; banks such as JP Morgan also offer better lending rates if the company is greener and discloses audited emissions. Green bonds are another route to raise capital for sustainability efforts, and blended finance is even used to support hard-to-fund projects. CFOs are critical in fostering public-private partnerships and organizations such as the UN Global Compact – a coalition of CXOs to achieve Sustainable Development Goals – and to creating forums that propagate these initiatives.
Notable presences at the events included several climate-tech companies and ESG consultants, including BSI, Workviva, Greenly, Deloitte, BCG, Auditboard, and Manifest Climate, to name a few. These companies were primarily focused on data gathering, reporting, and risk assessment, which is not surprising considering the SEC has estimated that compliance may require 26,200–30,500 hours per company, depending on its size. This translates to six- and possibly seven-figure annual costs for measurement and auditing. With technology companies entering the fray, businesses are likely to find it cheaper and easier to meet their disclosure and compliance needs.
Overall, the Reuters Responsible Business Event USA 2023 provided a platform for insightful discussions on the state of corporate sustainability in the US. With an impressive lineup of speakers and attendees, the event highlighted the need for regulatory clarity around disclosure requirements and the role of the CFO in implementing successful sustainability strategies. It was encouraging to see that many companies are already taking steps towards sustainability, and the presence of climate tech companies and ESG consultants indicates that the industry is growing rapidly.
As the demand for sustainability continues to rise, it is crucial for companies to not only meet regulatory requirements but also educate the masses on the importance of sustainability and net-zero emissions in achieving a better future for all.