This Climate Business podcast: Why ESG boxes on and on – Lee Stewart, ESG Strategy (edited excerpts)
Listen to the full episode here.
Vincent
“I'm curious about the state of ESG because it feels like it's taken a hammering, especially in the last few months and particularly as the effects of the Trump administration start to trickle out through corporate America, but also to other parts of the world. What's happening in boardrooms and for you?”
Lee
“It’s really hard to gauge because it's moving so fast, in a state of flux almost daily. What I am seeing is those that have sort of been around a while and look at sustainability more long-term are generally, probably being a bit more quiet, quiet achievers are still going on with things. I haven't seen any wind back and stuff. What I will see and what I do fear a little bit coming up is the rise of green hushing, where people are obviously afraid to talk about their achievements. Sometimes you lose a lot of the benefits of sustainability when people start doing that. What I will probably see is the backlash against what's happening in the US because everything coming out of there is probably that far wrong that people are going actually, no, there is a reason for this. The whole reason the term ESG exists, is to build better businesses, better resilient businesses. And with that comes more profit, more customers, more markets, and that's the avenue I play in. I work with those clients that want to actually be better businesses, aren't the reluctant compliers of legislation, look at the opportunities around this, and generally they do a lot better.”
Vincent
“Describe the difference between sustainability and ESG.”
Lee
“ESG stands for environmental social governance. It was pretty much coined by the finance sector to try and measure and report on what a company is. And I talk about this in the book and I have two circles. The inner circle is ESG. And that really, for me, looks at what the company is doing. What are you doing internally? How are you managing environment, your social, your people and your governance? And when I talk about sustainability, that's the wider circle. That's your influence on society, the planet, communities as a whole. ESG looks at what you do as a business. And for me, sustainability looks at how you impact and your influence you have outside your company walls.”
Vincent
“There are other terms doing the rounds, all of which are fun and interesting in their own right. A word like regenerative is now being applied, particularly in an agri setting where there's the sense that by operating as a farm, you are enhancing the environment.”
Lee
“To be regenerative, you've got to know what your impacts are to start with, a baseline. For instance, say a company has 10 tonnes of carbon. To be regenerative, for me, you've got to be putting more than 10 tonnes of carbon back in the atmosphere by maybe trees or whatever. That's a very simplistic form of that. You could even go to be truly regenerative, have a look at how long your business has existed and what has been your total impact from its inception. And to be regenerative, you've probably got to calculate all your carbon and then go back. I do like the term, but it does need some caveats and definitions.”
Vincent
“If you're a regenerative practitioner does that mean that you are not an ESG person? Are they exclusive?”
Lee
“No, not at all. I think everything needs to go towards regenerative giving back more than you take. And companies that look at that as a lens generally do better in terms of community engagement and client-customer engagement. They have better stories to tell and better comms. A good example was when I was head of sustainability at Fujitsu. They own a rainforest in Borneo. And they're regenerating that rainforest and they have a 40-year plan for that. That's regenerative thinking. That's longer term thinking. It's not just your annual report. You're now regenerative. If anyone says, ‘hey, we're going regenerative’, I want to see a 10-plus year plan.”
Vincent
“Another phrase that you hear often is circularity and building a circular economy. Again, is that a different concept from ESG? How do those mesh?”
Lee
“It definitely complements ESG, especially circularity. The waste issue is something that's quite dear to me. Just last month I visited three landfills in Fiji on behalf of a hotel chain. We need to do so much better with our waste and stuff. I would encourage anyone interested in sustainability, go to your local landfill and just see for yourself. We need to get circularity under control, especially where we are. We're in the ocean. Ocean plastics are a massive issue for our neighbours. Circularity is a great concept that definitely is part of ESG. I talk about it with every client. You look at their waste streams and what they do, what they put out there, what they make, where it goes, end of life. It's meshed in with measuring scope three emissions and supply chain as well. Social is very much part of circularity as well. When companies look at that and take a circular economy lens, there are opportunities that come up.”
Vincent
“Are you seeing ESG as a discipline kind of filtering down to SME's?”
Lee
“No, and you raise a very good point. I've seen it a lot in New Zealand and across Australia. Guys come out with a great product. It hits a sweet spot, but they haven't really sorted out their backyard. And that really annoys me. Even for a small startup, it's one or two days work to really sort out your backyard - have a measurement, do your basic carbon footprint. I am very reluctant and would advise no company go out there and start talking about your environmental, sustainability, circularity without having something looking inward first. And doing a basic materiality assessment of your business. It's just asking a few people about what your greatest impacts are. What do you actually stand for just beyond your product? What is your product going to enable? It's a really good story. But if you are making the greatest gadget that enables circularity, but you're screwing over your people, that to me is just missing the whole point.”
Vincent
“In your book, you talk about the politicization of climate change is really unfortunate because it stops us having sensible conversations with everybody. If you're in charge of the procurement department, you should be just as interested as if you're a marketer or a CEO.”
Lee
“Correct. And sadly, I've seen and I've learned, made all these mistakes myself. You get down the rabbit hole of arguing science when actually it's not your job description. If you're in business, you're in the role of staying aligned to what is our strategy? What do our customers care about? Where our products come from? How do we become a better business? Yes, climate change and those issues are a key factor in this. Most businesses become better businesses when they take climate change seriously, set targets, look at energy consumption, look at waste, look at what your customers are demanding or wanting, and aligning better with your clients, where the money comes in. So as I talk about in the book, a sustainability strategy exists and will exist better and will be more effective when it's aligned with your customer-centric strategy.”
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