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The Responsible Business Summit New YorkHighlights Report
◗ The Responsible Business Summit New York 2019 in Numbers◗ #RBSNY on Twitter◗ #RBSNY Twitter Highlights◗ Attendee Feedback
March 18-19, 2019 Marriott Brooklyn Bridge
#RBSNY
INTRODUCTION
CONTENTST he Responsible Business
Summit New York took place on March 18-19, 2019 in Brooklyn, New York.
Ethical Corporation’s US-based event is widely recognised as a conference that tackles the key issues and opportunities in an honest and frank manner with key stakeholders from B2C, B2B companies as well as leading investors, NGOs, Academics and Governmental representatives. The two-day conference brought together 400+ attendees eager to network, learn and discuss ways in which to lead the change to a new sustainable future. There were many sponsors offering a breadth of innovative sustainable solutions to help accelerate these impacts.
We challenged all attendees to think big, think bold. With a lack of national leadership, business must lead the way to a sustainable, clean and responsible future. The environmental threats facing the planet are unprecedented, and it’s up to businesses and
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3 Introduction4 The Responsible Business Summit New York 2019 in numbers6 Thank you to our sponsors, exhibitors and partners8 RBSNY Executive Summary12 THEME 1: Strategy, Innovation and Impact18 THEME 2: Climate-Action and investment22 THEME 3: Companies and investors search for
common ground on growing ESG requirements
investors to provide the blueprint for innovations which will create a global economy fit for purpose and one that prospers.
Across the two days we ran case study sessions, Chatham-House rules workshops, innovative networking sessions as well as more informal networking breaks to help facilitate the connections that will deliver the future collaborations.
We are already working on our The Responsible Business Summit West 2019 (October 9-10, San Diego) as well as The Responsible Business Summit New York 2020 (March 16-18, New York). We have ambitious plans for both events to deliver discussions, debates and collaborative approaches to address the societal and environmental opportunities that are present to business. If you would like to be involved in these events then please do contact Ed Long who heads up our US Operations.
BY LIAM DOWD
INTRODUCTION
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
THE RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019 IN NUMBERS
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
1.7M+ R E A C H
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THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
For the business leaders, investors, governments, and other thought leaders gathered at the 7th Responsible
Business Summit in New York in March, shaping the future of sustainable business was as much about the opportunities as the risks—even at a time of increased urgency in the face of major global challenges.A few months earlier, the UN Intergovernmental Panel on Climate Change (IPCC) had warned that limiting global warming to 1.5°C would require “rapid, far-reaching and unprecedented changes in all aspects of society.”
Investors are backing that assessment. At the UN COP 24 climate negotiations in Poland in December 2018, 415 global investors with $32 trillion in assets called on governments around the world to address climate change, citing their concern over “substantial negative impacts” should the world not deliver on the goals of the Paris Agreement.
The private sector is expected to step up to the plate—and to demonstrate their accountability. Investors are increasingly requiring that companies disclose more data on their environmental, social and governance (ESG) performance.
TACKLING SDGS IN PARTNERSHIPThat’s a daunting set of challenges for business to tackle but the mood in New York veered decisively towards opportunity and collaboration. New strategies, product innovation, climate action and investment, supply chain management, better ESG disclosure, more transparency in reporting, and purpose-driven communications with stakeholders—these were all
chain with smallholder farmers, you know there is poverty there, you know there are human rights abuses, and too few companies are willing to deal with that.”
Mars is forming new alliances to achieve that goal. As part of its Sustainable in a Generation Plan, Mars is working with Oxfam to help lift 500 million smallholder farms out of extreme poverty through the Farmer Income Lab. Mars is also partnering with CARE International to improve women’s access to microfinance. The Livelihoods Fund for Family Farming with Danone is yet another approach to tackle the thorny issue of poverty.
ACHIEVING NET-POSITIVEThe current nature of business is driven by growth but under current business models, growth comes at the expense of the environment. Interface is driving an ambitious strategy to move from net zero to climate positive while still delivering business success. Among the progress over the past 25 years is reducing water use by 88% and switching to 100% renewable energy , in its factories, and using 88% renewable energy globally across its
“If we don’t address climate change, reaching the rest of the Global Goals will really be impossible,” Amy Davidsen, executive director of The Climate Group said. “And the only way businesses will be able to address climate change is through collaboration.”
INVESTOR-DRIVEN ESG DISCLOSUREThe interest from the investment community in ESG dislosure is growing rapidly, with no signs of slowing down. A study earlier this year from Oxford University found that more than 80% of mainstream investors globally now consider ESG information when making investment decisions. The shift is requiring more parts of the organization to be involved, with greater levels of transparency. Companies are keen to understand what investors expect and how they can work to push ESG disclosure forward.
For Mindy Lubber, CEO and president of Ceres, a Boston-based nonprofit that represents investors with over $32 trillion in assets, what investors want is pretty straightforward.
RBSNY EXECUTIVE SUMMARY
operations. Such efforts have led to a 96% reduction in greenhouse gas emissions.
“We need to know the why behind the what. Mission Zero was a great what but it wasn’t a why. Our why at Interface, our purpose, is to lead industry to love the world” Jay Gould, CEO of Interface said.
Its Climate Take Back approach reframes the mission, in which live zero is to aim for negative impact on the environment; love carbon, is to stop seeing carbon as the enemy and start using it as a resource; lead the industrial revolution is to transform industry into a force for the future we want, and let nature cool is to support the biosphere’s ability to regulate the climate.
“The last bit of our carbon footprint is carbon offsets to make sure that every product we sell around the world is carbon neutral,” Gould said. What makes him optimistic about tackling climate change is that “when we release human ingenuity to solve problems, it is amazing what c an happen.”
Such innovation will be essential for business, if progress towards the UN SDGs is to be accelerated.
RBSNY EXECUTIVE SUMMARY
BY AMY BROWN
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
NEVER BEFORE HAS THE WORLD HAD
SUCH A COHERENT AGENDA TOGETHER
ON WHERE WE WANT TO GO
LISE KINGO EXECUTIVE DIRECTOR OF THE
UN GLOBAL COMPACT
promising avenues of opportunity, especially in partnership across industries and sectors.
“The 2020 goals many companies set are just around the corner. We need to be honest about where we are, what our shortcoming are and be open and collaborate,” Ethical Corporation’s managing director Liam Dowd said. “Yes, there are challenges but there is also a lot of room for optimism if we are ambitious in our approach and if we work together.”
Collaboration was a key theme of the conference, with the private sector’s contribution to the UN Sustainable Development Goals viewed by many as a compelling invitation for partnership.
“Never before has the world had such a coherent agenda together on where we want to go,” Lise Kingo, executive director of the UN Global Compact (UNGC) said in her opening keynote.
While she noted that 80% UNGC signatory companies were taking action on the SDGs, more companies needed to get involved to scale up and reach tipping points on some of the areas where progress has been more elusive, such as climate change and gender equality. Another key focus is mobilizing the $2.5 trillion annually to meet the SDGs, she added.
Taking action on the Goals offered enormous opportunities, Kingo said. Closing the gender gap could add $28 trillion to global GDP and bold climate action could yield a direct economic gain of US $26 trillion, prevent over 700,000 premature deaths from air pollution and generate over 65 million additional low-carbon jobs.
POVERTY MATTERSIn some countries, a lack of national leadership on the Paris Agreement and the SDGs has led to local and state government, businesses, investors and NGOs to step in and drive change. Andy Pharoah, vice president of Corporate Affairs, Strategic Initiatives & Sustainability at Mars, said that impact-driven coalitions would be new way to deliver on the Global Goals and for Mars, that means tackling SDG 1, ending poverty in all its forms everywhere.
“Very few companies focus on poverty but we need to address it. It’s vital, it’s complex and we need to bring real rigor to it,” Pharoah said. “Anyone who has a global supply
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THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
“In the end, if something is important, material and financial, and it makes a difference, it needs to be disclosed, and, I would argue, not differently than any other financial information, which means it should be mandatory,” Lubber said in a keynote on transparent, investor-driven ESG disclosure.
“Information that companies disclose and investors use needs to be more consistent than it is now. It needs to be metrics driven and it needs to be integrated into the business,” she added. “We have to ensure that disclosure is part of the reality of corporate practice.”
Matthew DiGiusppe,Vice President, Head of Americas Asset Stewardship at State Street Global Advisors agreed.
of their work remains the same, according to co-CEO Daniel Wild.
“When we started out, we were convinced that companies that better embrace sustainability related risks and opportunities will just be more successful in the long term,” Wild said.
DECARBONIZING THE SUPPLY CHAINInvestors and companies alike have their attention increasingly focused on the supply chain and particularly how to reduce carbon emissions across the supply chain. To meet the 1.5 degree target requires ambitious investments and innovations in technologies, strategies and clean energy. Since making a carbon-intensive business sustainable is a moving target, a pair of experts shared their insights in a keynote.
“Sustainability is an enabler of our business objectives. We are switching from a model where we sell technology to one that is more consumption-based, aimed at helping our customers achieve outcomes,” said John Kern, SVP for Supply Chain Operations for Cisco, sharing insights from Cisco’s Circular Advantage approach that will lead to a projected 85% reduction in global electricity. “You have to embrace a circular model or you will have a situation where the materials are not available.”
“We really need to rethink our carbon economy. We need to think about single-use carbon. If we’re going to be on a carbon budget we should only put it where we absolutely need to put it. Instead of thinking green, think blue, in terms of taking carbon out of the air. To me, this is the future, the ability to convert pollution into
From the people side of moving from risk to opportunity, Caroline Rees, president and co-founder of Shift, the leading center of expertise on the UN Guiding Principles on Busienss and Human Rights, urged attendees in the closing keynote to consider the “human footprint” of their companies.
She said it is important for companies to recognize where along the value chain people are negatively impacted, regarding issues, for example, around living wages, child or forced labor, or displacement of communities in land use.
“We need to ask ourselves, ‘How do I fundamentally change the life experience of the most vulnerable people in these societies who are part of my value chain? How do I systemically address this?’” Rees said. “Once you understand what is driving these risks and you bring the leadership and innovation and collaboration to transform lives, we will hit target after target in the Sustainable Development Goals as we start to see the difference we can make.”
products,” said Jennifer Holmgren, CEO of carbon recycling company LanzaTech. Its business proposition is to put waste carbon into the circular economy and has raised $250 million to develop its technology.
FROM RISK TO OPPORTUNITYThese types of sustainable innovations are part of the pathway to convert ESG risks into opportunities for prosperity and growth. Waste is a persistent problem that many companies—and society—are looking to tackle. A company that is demonstrating leadership and seizing the opportunity for sustainable innovation in this space is TerraCyle, the global leader in collection and repurposing of complex waste streams.
“We’re a mission-driven organization; our mission is to eliminate the idea of waste,” Tom Szaky, CEO of TerraCycle said in the closing keynote. “But we’ve learned that the unlocking principle to bring more companies on board is to simplify the message, to frame it in the most basic motivator of what drives the company, whether that’s selling more product or gaining market share. That, to me, is how you can really get things moving in a scalable, fast-moving way.”
Szaky said that was a key element in bringing so many leading brands like Unilever, Coca-Cola and Proctor & Gamble to join TerraCycle’s Loop system, in which containers are designed to be reused. The program launches in May in select locations in Paris and in three U.S. states (New York, New Jersey and Pennsylvania). If successful, it will roll out in more markets by year end.
“As an investor, when it comes to issues like climate change, I want to know not only are you trying to manage your impacts but are you actually thinking long-term about how you are going to adapt your business.”
STAYING AHEAD OF THE CURVEAs ESG reporting is becoming mainstream and a necessity, companies and investors are calling for standards, comparability and transparency. ESG ranking agencies are standardizing and interpreting that data, but the investment and corporate community is asking for more discussion on how that data is providing real value—or
whether new, under-reported ESG issues should be taken into account to provide a more accurate picture for investment decisions.
In 2011, 20% of the S&P 500 published sustainability reports but by 2017, that figure had risen to 85%, according to Louis Coppola, co-founder and executive vice president of the GA Institute.
A long-time leader in rankings, Robeco SAM, shared in a keynote on ESG rankings that their approach originated from their investor perspective. And while Robeco SAM has consistently introduced new ranking topics over the years, such as human capital development, climate strategy and tax transparency, the bottom line over the past 20 years
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AS AN INVESTOR, WHEN IT COMES TO ISSUES LIKE
CLIMATE CHANGE, I WANT TO KNOW... ARE
YOU ACTUALLY THINKING LONG-TERM ABOUT HOW
YOU ARE GOING TO ADAPT YOUR BUSINESS
MATTHEW DIGIUSPPEVICE PRESIDENT, HEAD OF
AMERICAS ASSET STEWARDSHIP AT STATE STREET GLOBAL ADVISORS
A chieving a positive sustainable impact often comes down to creating the right strategy and
channeling sufficient innovation. Several sessions at the conference this year showed how companies are pursuing a well-defined, purpose-led strategy and new forms of innovation to generate greater impact—and that they are bringing their employees along on the journey.
“The world is daunting. The challenges around climate change can be paralyzing. My challenge to you is devise a plan, lead with optimism, we can make a difference,” Jay Gould, CEO of Interface told the audience, describing how Interface’s Climate Take Back strategy had helped set the company on the right journey.
INTERNATIONAL PAPER AND WWF FOCUS ON FORESTSFor Sophie Beckham, senior manager of Natural Capital Stewardship at International Paper (IP), the right strategy for innovation was a groundbreaking collaboration between IP and WWF to create the world’s first regional and global science-based targets for forests.
IP is a participant in WWF’s Global Forest & Trade Network program and the new initiative will also create the first comprehensive set of guidance on actions that can be taken to sustain the world’s forests.
“As one of the largest paper and pulp companies, we rely entirely on the sustainability of forests,” Beckham explained. “Our work to manage, conserve and restore forests is not just a sustainability strategy or conservation strategy—it’s actually our business strategy.”
“WWF and IP’s interests have converged for some time on the importance of forests,”
Kerry Cesareo, Vice President, Forests at WWF said. “Now we’re converging on a shared strategic vision.”
Kelly underscored the urgency of taking action. WWF’s 2018 Living Planet Report reported on an “astonishing” 60% decline in the size of populations of mammals, birds, fish, reptiles and amphibians in just over 40 years. The top threats to species were directly linked to human activities, including habitat loss and degradation.
FIGHTING PLASTIC WASTE THROUGH INNOVATIONBusinesses are increasingly looking towards sustainable innovations to change ESG risks into opportunities for prosperity and growth. And the problem of plastic waste is a compelling opportunity for every company to switch up the innovation. By 2050, the oceans could have more plastics than fish, according to the Ellen MacArthur Foundation. Every year, 8 million metric tons of plastic end up in our oceans, and 80% of plastic in the oceans is from land sources.
At a workshop on reducing, reusing and recycling plastic waste, John Ocevar, Oceans Campaign Director for Greenpeace, suggested what companies could do to tackle the problem.
“First and foremost, figure out what your plastic footprint is and set some ambitious targets to reduce it. Innovation is key. We need to think not only how to stop using single-use plastic but to rethink single use in general and start shifting more and more to reuse and refill. Share the great things you are doing with your customers. Be part of the culture shift that is already happening.”
“Food waste is a huge issue across the globe; it’s also a huge climate
1STRATEGY,
INNOVATION AND IMPACT
THEME 1: STRATEGY, INNOVATION AND IMPACT
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
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BY AMY BROWN
issue,” said Keith Christman, Managing Director, Plastics Market for American Chemistry Council. “According to the FAO, if food waste were listed as a country, it would be the third largest producer of climate emissions. Plastics packaging plays a huge role in reducing food waste.”
John Kotlarczyk, senior director, CSR and Waste Reduction at Walgreen Boots Alliance said that the pharmacy chain has been doing a lot to tackle its plastic waste problem. Its Boots pharmacies started charging for plastic carrier bags in their operations a couple of years ago and they’ve reduced the amount of plastic bags that go out of their stores by 85%. Boots UK signed onto UK Plastics Pact, which commits among other things to make 100%
of plastic packaging reusable, recyclable or compostable by 2025 as well as eliminate single use packaging by 2025.
“We will take what we’re learning over there as a blueprint for our other operational areas,” Kotlarzyk said, of the company’s Plastics Rethink, a high-level approach on plastics.
“The people in this room represent many of the companies producing the majority of single use plastic in the world, so we definitely have the power to solve this,” Ocevar said.
Whatever its commitment might be, transparent, holistic communications is now more important than ever for a company to demonstrate leadership and purpose among key stakeholder groups.
INNOVATION IS KEY. WE NEED TO THINK NOT ONLY HOW TO
STOP USING SINGLE-USE PLASTIC BUT TO RETHINK SINGLE USE
IN GENERAL
13
JOHN HOCEVAROCEANS CAMPAIGN
DIRECTOR FOR GREENPEACE
LEADING ON DIVERSITY AND INCLUSIONDiversity and inclusion is essential to a successful sustainability strategy. “It has to have the same accountability that any other business metric would have. That is in part the recipe for success,” Carol Surface, chief human resources officer with Medtronic told the audience.
A 2017 survey by PwC found that 87% of companies considered diversity a stated value of their organization. Inclusion requires even deeper communication and understanding. Yet making the effort pays dividends: inclusive teams have been shown to be 24% more effective at creativity and decision making than less diverse groups, according to McKinsey’s 2018 survey, “Delivering through Diversity”.
Surface said that Medtronics discovered that it could not just depend on its mission and “that good things would follow. Instilling measures and metrics was important.”
The company’s goal is to have 40% women in leadership roles by 2020 and 20% ethnic representation in the US. Today the Board of Directors is 30% women and there is a good share of ethnic representation but that work remained to address diversity throughout the rest of the organization. Surface said she had noted investor were much more focused on this issue, and that 90% of her recent conversations with top shareholders was about how Medtronic measured diversity and inclusion.
EMPLOYEES AS ADVOCATESEmployees can be a company’s biggest advocates and most engaged stakeholders. Given the right message, they can be a powerful ambassador for a company’s purpose-driven
communications. In a workshop spanning leaders from a wide range of companies, a number of suggestions were shared about strategies in engaging employees in sustainability and making them part of the movement?
Studies consistently show that engaged employees are focused on much more than their paycheck—they’re invested in their work and the way that it affects others and encourages trust. According to the 2019 Edelman Trust Barometer, 75% of employees trust their employer to do what is right—significantly more than nonprofits, business and media. And about 58% of the general public say they are willing to trust their employer but that the trust must be earned.
For Virginie Helias, vice president and Chief Sustainability Officer for P&G, a key issue is that employees don’t necessarily see the connection between living a sustainable lifestyle and their work. “We have to evolve
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THEME 1: STRATEGY, INNOVATION AND IMPACT
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
the thinking from sustainability is absolutely critical for the future to sustainability is critical to the world right now. Find a coalition of the willing to work on the system and inspire the rest of the organization.”
For Swedish telecommunications company Telia, there was a lot of work to be done to restore employees’ trust and belief in the company after a bribery scandal in 2012 that resulted in $965 million in fines, the resignation of the company’s CEO, the removal of board members, shareholder divestments and lost public trust.
“That’s the cost of doing unsustainable business,” said Anne Larilahti, vice president of Sustainability Strategy at Telia. “We had a lot to do not only to clean up our own act but to get our employees engaged again. We now have a sustainable strategy—not a separate sustainability strategy. Sustainability, brand and human resources all sit in one organization. We no longer have a silo organization—we don’t even have a speed bump. All parts of the company communicate with one another and now I am glad to say that pride in the company is going up again.”
Finding what connects to employees has been important to Pernod Ricard, Amandine Robin, SVP of Pernod Ricard said. “How can you define your vision in a way that is relevant to your employees, that connects to them, and also, how do you connect them to the relevant SDGS.
At Flex, Kelly Hampton, vice president, Global Marketing and Sustainability, said that they had found that sustainability was particularly important to their millennial and Gen Z employees.
Reaching middle management was the challenge for Domtar, Paige
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VIRGINIE HELIAS VICE PRESIDENT AND CHIEF SUSTAINABILITY OFFICER FOR P&G
WE HAVE TO EVOLVE THE THINKING FROM SUSTAINABILITY IS ABSOLUTELY CRITICAL FOR THE FUTURE TO SUSTAINABILITY IS CRITICAL TO THE WORLD RIGHT NOW
Goff, Vice President of Sustainability said. “One thing that has worked to get them to see the importance of sustainability is recruitment. They see that it is our sustainability stance that is attractive to job candidates. And we also make them feel like they have ownership and they are giving back by setting aside $20,000 of our charitable giving for employees to apply for $1,000 grants for a cause of their choice.”
IMPACT THROUGH THE SUPPLY CHAINThe majority of environmental and societal pressures fall within the supply chain. New innovations, technologies, and collaborations will be critical to sustainable, cost-effective and low-carbon supply chains.
Most of the risks and opportunities to a business lie beyond the first tier. Both internal and external stakeholders expect visibility and transparency beyond Tier 1 within the supply chain. That means going deeper into the supply chain to manage and measure operational risks; developing strategies and systems that deliver accurate metrics and oversight to monitor performance and sourcing consistent and reliable data across all tiers to make the right decisions to tackle climate action and human rights risks.
In a workshop, a number of companies and organizations tackled these challenges head-on including the need to get broader access to environmental and social data from suppliers. Jon Hixson, Vice President, Yum! Brands, which is the franchise operator of 48,000 Taco Bell, KFC, Pizza Hut restaurants around the world in 140 countries. Its supply chain is complex, he said, with all types of procurement structures but Yum! Brands prioritizes transparency
THEME 1: STRATEGY, INNOVATION AND IMPACT
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
collaborations can help identify and solve these risks at the source.
Coca-Cola has been working in audits since 2003, according to Wilson, and he said, “while audits will never go away” they are looking for tools to help and augment their process to ensure human rights are respected throughout the supply chain. He did caution that it is important to understand which technology best suits your business before making the investment.
Paul Lalli, Global Counsel, Labor & Human Rights, for General Electric, said that like Coca-Cola, they look to new technologies and approaches to augment rather than replace existing audits. A module on human rights and modern slavery risks has been very well received in the supply chain, Lalli said.
“In India, we did a worker voice survey, going to a community from which a number of our suppliers pull employees,” Lalli said. “We did a smartphone survey and when issues came up, we then educated our suppliers.
the analytics around it is “the bigger challenge. What is all that data telling us in a meaningful way, in real time, that can help the business make the right decisions at the right time. As a company that covers so many countries, so many brands and so many supply chains, that can be a real challenge.”
Traditionally Coca-Cola worked in silos but have discovered this is “the worst way to work,” Wilson said, with data “that is incoherent and difficult to get to business leaders in a way they can actually use.”
Today Coca-Cola aligns all the different parts of the company that undertake data collection, to get a dashboard with a collective picture and bring all systems together.
BEYOND AUDITS Whilst audits serve an important purpose in managing risks through the tiers of the supply chain, added layers are required to identify human rights violations and ensure decent work within the supply chain. New systems, technologies and
and driving better decisions through the supply chain.
MANAGING COMPLEX SUPPLY CHAINS“We’re on a major push to remove antibiotics from our poultry production system,” Hixson said. “This a nice example because it marries with it a third-party verified standard from the US Department of Agriculture (USDA) to meet that goal, so we not only put this requirement in the procurement standards for our poultry but it also, through the USDA, contains an embedded auditing system.”
Brent Wilson, Director, Global Workplace Rights for Coca-Cola, noted that Coca-Cola owns the brands but increasingly does not own the means of production. “We work with our bottling partners in the 207 countries where we have operations. The challenge is how to you direct from the top, get buy in from the system and then alignment around the data and information you collect.”
Wilson said the data collected from the supply chain is important but
16 17
BRENT WILSON DIRECTOR, GLOBAL WORKPLACE RIGHTS FOR COCA-COLA
THE CHALLENGE IS HOW TO YOU DIRECT FROM THE TOP, GET BUY IN FROM THE SYSTEM AND THEN ALIGNMENT AROUND THE DATA AND INFORMATION YOU COLLECT
2CLIMATE-ACTION AND INVESTMENT
T o meet the 1.5-degree Paris climate target as recommended by the UN Intergovernmental Panel
on Climate Change (IPCC) requires ambitious investments. While it is imperative that all businesses deliver economic growth, under current models, this growth has long come at the expense of the environment.
This was starkly laid out in a keynote on the second day by UN Environment Assistant Secretary General Satya Tripathi, who said the IPCC’s report showed that “the point of no return” is 2028, where keeping climate change to 1.5 degrees will not be enough “if we really haven’t changed course in the next ten years”.
“To stay at 2 degrees, we need to be three times better. That means basically everything we do—consume one third less food; throw away a third less clothes, and so on. And to be at 1.5 degrees, we need to be five times better. If we had started back in 2003, our mitigation pathway below Business-As-Usual was 4%, now it’s 18% lower than BAU,” Tripathi said.
Since the first UN conference on the environment in Stockholm in 1972, there have been 24 UN climate conferences and “we just keep talking ourselves into extinction. Everything we need to do now needs engagement and interventions at the trillion scale. We keep talking about mitigation. It
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THEME 2: CLIMATE-ACTION AND INVESTMENT
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
WE NEED OTHERS TO STEP IN AND HELP US ADDRESS CLIMATE CHANGE
doesn’t work. While we were talking, the world lost most of what matters to us. We are extracting natural resources four times faster than the 1980s; in the Antarctic, five times faster than the ‘80s and in the Artic, four times faster. We are spinning like a top in a void.”
Tripathi added that it was a mistake to think public finance would solve the problem, when the public sector is about 30% of global GDP compared to 70% in the private sector. “Private finance holds the key and we must use that as a leverage.”
THE ROLE OF PUBLIC-PRIVATE PARTNERSHIPThe public sector is engaged, even if it cannot tackle the challenge alone, as James F. Kenney, Mayor of Philadelphia, explained in a keynote on climate change policy. Philadelphia remains committed to the Paris Agreement and to transitioning to 100% renewable energy and to reduce citywide carbon emissions 80% by 2050.
“We made these commitments because of climate resilience, economic security, affordable housing and energy, accessible transportation and healthier communities,” Kenney said.
Some 80% of carbon footprint in the city comes from buildings and industry, energy efficiency is a key tactic. By 2030, the goal is to reduce carbon emissions in government buildings by 50% and purchase 100% renewable energy for the city’s built environment. An energy retrofit at four city downtown buildings including city hall is now saving the
BY AMY BROWN
city $1.75 million a year. A solar power purchase agreement will produce enough solar electricity to power 22% of government buildings by 2020, and is the largest such agreement in Pennsylvania by seven fold, providing electricity for the city and the region.
“But in addition to these actions, we need others to step in and help us address climate change,” Kenney added.
THE POWER OF PUBLIC-PRIVATE PARTNERSHIPSRepresentatives of three U.S. cities spoke about how they are working with their organizations to build smart, circular cities that help decarbonize the urban space.
Research from C40 Cities shows that the potential cumulative emissions from US cities alone represents 6 percent of the global savings needed for a 1.5 degree world. By 2050, about 70% of the world population is expected to live in cities.
“A critical element is changing how people interact on a day to day basis,“ Ravinder Bhalla, mayor of Hoboken, New Jersey, which was key to the city’s decision to ban single-use plastic bags. “Changing the culture not only creating a better planet but a more sustainable community and by purchasing municipal renewable energy you are saving money, too.”
19
JAMES F. KENNEY MAYOR OF PHILADELPHIA
Jon Mitchell, mayor of New Bedford, Massachusetts, Energy Chair of the US Conference of Mayors, said when it comes to climate action, “the cities is where the action is, as we have witnessed a federal government that is unable or willing to tackle the big challenges. Some 69 percent of cities now source a significant amount of their power from renewable sources and 63 percent have at least some electric vehicles in their fleet and most changed their building codes to encourage more energy efficiency.”
Kurt Summers, treasurer for the city of Chicago, said he manages a $8.5 billion portfolio and that the city has taken significant steps in how they invest that capital, including a new set of policies stating that 100 percent of investments have to go through an ESG scoring with any investment requiring a minimum ESG score. The city has also committed to a carbon-neutral portfolio by 2020.
EMBED CIRCULAR-THINKING ACROSS THE BUSINESSPioneering companies are changing cultures, systems, markets and strategies that mitigate climate impacts in areas such as carbon emissions, plastic waste, deforestation and water to provide a net-positive impact on the environment while the company prospers financially.
Increasing pressure on natural resources are forcing companies take a Life-Cycle-Analysis approach to product development. Seventh Generation, Closed Loop Partners, Unilever, Aquafil, and Tetra Pak in a workshop explained how they embed their approach within R&D, innovation, procurement and marketing.
Giulio Boazzi, Chairman and CEO of Aquafil, said he changed his business model over 10 years ago from using textile waste rather than oil derivatives to produce the company’s nylon, using a special system that enables Aquafil to
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THEME 2: CLIMATE-ACTION AND INVESTMENT
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
an opportunity in the costly and inefficient US municipal waste system, in which $5 billion of taxpayer money was spent annually landfilling commodities like paper, metal, glass, plastic, used apparel, electronics—products that could be sold for about $15 billion on the commodities market. Gonen said the value of wasted packaging material in the US is over $11 trillion.
“The system is broken,” Gonen said. “The good news is there an opportunity to fix it to the benefit of industry, the consumer and the environment, by moving a linear take-make-waste economy to a circular economy in which materials are shared, re- used, and continuously cycled.”
Today companies like Starbucks, McDonald’s, Nestle, Coca Cola, Amazon, PepsiCo, Walmart, and Unilever are all working with Closed Loop Partners to identify circular opportunities in their companies.
For John Coyne, Vice President and General Counsel at Unilever, “When we talk about the circular economy we are talking about sustainability. If we’re going to have a circular economy we need to be able to grow our business and demonstrate progress financially to those marketplaces we serve. We have to make sure our environmental footprint shrinks and that is part of a long-term strategy.”
Key to Unilever’s commitment in the circular economy is having targets, he added, as part of its transparency to the marketplace. The company’s Sustainable Living Strategy includes 60 time-bound commitments, “and the direct accountability for meeting those targets lies with senior
Tim Fleming, Director of Enterprise Sustainability at AT&T, said the “transformational change” coming with the 5G network would put all the existing technologies “on steroids,” and allow society to get off a linear path to a more exponential trajectory that would enable more far-reaching change at scale.
Nathan Truitt, Vice President of Strategic Partnerships for the American Forest Federation pointed out that the sequestering carbon through trees is a widely available and financially feasible approach but often overlooked. About 12 percent of US emissions each year are offset by existing forests, and the EPA estimates that could be as much as 20 percent if we changed the way we manage our forests. Reforestation is one big opportunity, and another is management of existing forest for carbon on private lands, he said.
“If all private lands (which make up about 56 percent of all land in the US) were managed with climate as the goal, it would sequester almost 300 million additional tons of carbon per year, which is about a quarter of the nation’s Paris climate agreement,” Truitt said.
Tom Murray, Vice President at the Environmental Defense Fund, who runs the organization’s EDF+Business program, working with leading companies to try to embed sustainability more deeply and drive measurable outcomes, said it will be important to collaborate across the industry and supply chain. “It is no longer enough to tend your own sustainability garden, if you want to have a bigger impact. Setting big context-based or science-based goals is also critical to unlocking big change. And policy leadership will be important. We know what it takes to solve climate change, it requires putting prices and limits on carbon. That will unlock solutions and generate more innovation.”
management and the CEO and the Board of Directors. We’ve also adopted an internal price on carbon for all of our operations to show the market we are serious about reducing our GHG emissions. Everything we do requires a full LCA.”
One of the best examples of Unilever’s approach in action, he added, is its sustainable agriculture program. “The life cycle begins for us when someone plants something in the ground. And that has a lot to do with biodiversity, crop yields, community resilience, labor standards, gender equality, income equality. We have to be true to those principles and standards if we are going to be contributing to a circular economy.”
DECARBONIZATION AT SCALE: COLLABORATING ACROSS THE VALUE CHAIN
To achieve the 1.5-degree Paris climate target requires ambitious collaborations across industry value chains. From transportation to buildings, companies are collaborating to accelerate the adoption of renewables across the value chain.
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IF WE’RE GOING TO HAVE A CIRCULAR ECONOMY WE NEED TO BE ABLE TO
GROW OUR BUSINESS AND DEMONSTRATE PROGRESS FINANCIALLY TO THOSE
MARKETPLACES WE SERVE
reproduce any nylon product without any limitation. “Textiles are a high waste-producing industry, with one garbage truck of clothes sent to landfill every second, enough to fill
1.5 Empire State buildings every day,” Boazzi said.
Ron Gonen, CEO of Closed Loop Partners, a center for the circular economy, said his firm identified
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3COMPANIES AND INVESTORS SEARCH FOR COMMON GROUND ON GROWING ESG REQUIREMENTS
THEME 3: COMPANIES AND INVESTORS SEARCH FOR COMMON GROUND ON GROWING ESG REQUIREMENTS
THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
W ith investor interest in environmental, social and governance (ESG) investing exploding,
the market is increasingly in need of credible and comprehensive ESG performance data to make its assessments. However, the lack of consistent reporting standards for ESG data makes it a challenge to find common ground in providing the information that investors need and companies are able to provide.
At the Ethical Corporation Responsible Business Summit 2019 in New York, companies and investors grappled with finding a better way forward to seize the momentum in ESG investing.
The numbers are compelling. Globally, according to McKinsey, there are now $22.89 trillion of assets being professionally managed under responsible investment strategies, an increase of 25 percent since 2014.
“This number is so large it needs context: it exceeds the GDP of the entire US economy,” Mindy Lubber, CEO of sustainability nonprofit Ceres told the audience.
In the US, one in four dollars of professionally managed assets (amounting to USD 13 trillion) now consider sustainability principles, according to the US Forum for Sustainable and Responsible Investment. In addition, the global
impact investing market is valued at $502 billion, according to an April 2019 report from the Global Impact Investing Network (GIIN).
Given the size of the ESG, sustainable investing and impact investing markets, investors are critical to helping accelerate the responsible business agenda. But understanding what investors really want and how companies can improve their disclosures and engagement on ESG information is not always straightforward.
UNPRECEDENTED TRANSPARENCY DEMANDSAt a keynote on ESG disclosure on the first day of the conference, Lubber, Matthew Welch, President of the SASB Foundation; Michael Garland, Assistant Comptroller for Corporate Governance and Responsible Investment for the Office of New York City Comptroller, Matthew DiGuiseppe, Vice President, Head of Americas Asset Stewardship, State Street Global Advisors, and Abishek Humbad, CEO of Goodera, tackled the issue of meeting unprecedented levels of transparency being required around ESG disclosures.
“Ten years ago, shareholder resolutions on ESG factors were less than a dozen, now there are hundreds and hundreds of ESG-related shareholder resolutions,” Lubber
said. “This is not about campaigns trying to embarrass companies. We want to move corporate boards in fundamental ways, and that will only happen with the force of investors.”
Welch talked about the role of the Sustainability Accounting Standards Board (SASB) to connect businesses and investors on the financial impacts of sustainability. Its standards are
WE WANT TO MOVE CORPORATE
BOARDS IN FUNDAMENTAL
WAYS, AND THAT WILL ONLY HAPPEN
WITH THE FORCE OF INVESTORS
BY DIANA ROJAS
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developed based on extensive feedback from companies, investors and other market participants as part of a transparent, publicly documented process.
SASB standards are also industry-specific, enabling investors and companies to compare performance from company to company within an industry. He acknowledged that SASB was not addressing ESG reporting needs alone. The Global Reporting Initiative (GRI) with over 8,000 companies reporting to GRI Standards, is another well-established approach.
“There’s been an evolution in the reporting landscape, with a number of different reporting frameworks out there, and each framework has evolved for different purposes,” Welch said.
To provide greater clarity, SASB is part of the Better Alignment Project of the Corporate Reporting Dialogue platform. This is a two-year project focused on driving better alignment in the corporate reporting landscape, to make it easier for companies to prepare effective and coherent disclosures that meet the information needs of capital markets and society.
“We’re seeing a convergence of ESG
big data, but the next challenge is how do we create the discipline and the systems to pull that data from across the globe from many different pockets, and that is where Goodera is trying to help fill that void,” Ramseyer said.
LARGE PENSION FUNDS LEVERAGE INFLUENCEThe New York City Pension Fund has a long history of engaging companies on responsible business practices, Garland said, historically focused on human and worker rights and for several years also focused on “the existential crisis of climate change.
The US utility sector is responsible for 28% of GHG emissions in the US, Garland said, so with the power of its holdings in some 10,000 companies around the globe, the New York City Pension Fund demanded that the 20,000 largest utilities—responsible for half of those GHG emissions—achieve net zero emissions by 2050 and to disclose to investors benchmarks and their pathways on how they expect to achieve that target. In other sectors, the pension fund has also asked boards to disclose quantitative GHG emission reduction targets.
reporting and sustainability standards which will help companies get past the hurdle of providing the information to the markets,” Welch said.
BRINGING POWER OF BIG DATA“We are using this information as part of our investment process in order to create an incentive. If companies know that ESG information is driving capital, they’re far more likely to provide the information to have capital flow their way,” DiGuiseppe of State Street said “And that comes from transparency in the investment process, letting companies know how we are using that information to drive investments overall.”
Jeff Ramseyer, Vice President of Goodera, a technology platform for managing social and environmental development, sees an important role for big data in addressing the inconsistency of data. Goodera’s goal is to use big data to better capture ESG information, both in quality and comparability, and perform more detailed analysis to enable companies to make better decisions.
“The C suite at companies has for the most part bought into the value of
THE ROLE OF RANKINGS AGENCIESRankings and ratings agencies play a central part in helping to address the quality and comparability of ESG information by providing a lot of additional analysis to serve investors. Scoring also helps motivate companies to create, adhere to and disclose their ESG policies. There has been some criticism however that ratings agencies are subjective with biases, such as larger companies obtaining higher ESG ratings, and oversimplification of industry weighting and company alignment, according to a recent report from the nonprofit American Council for Capital Formation.
One of the most respected firms offering sustainability information benchmarking is Robeco-SAM. The SAM Corporate Sustainability Assessment (CSA) is an annual evaluation of companies’ sustainability practices and assesses over 4500 companies globally each year and has 100 billion euros of assets under management. The CSA focuses on criteria that are both industry-specific and financially material, and has been doing so since 1999. It also collaborates with S&P Dow Jones Indices, providing asset managers with a range of reliable and objective benchmarks for managing sustainability portfolios.
According to insights provided by Dan Wild, co-CEO and Robert Dornau, Director, Senior Digital Product Manager of Robeco SAM in various sessions, Robeco SAM has industry experts who determine materiality for the 61 industry areas in its system. A team of analysts looks into the data to make correlations and uses the predictive power of ESG data when it comes to financial returns. “It would be wrong to only use the quantitative data as we would completely miss out on the issues of future concern such as climate change,” Wild said.
Eric Fernald, Director of Issuer Relations, for Sustainaltyics, says his firm has introduced next generation ESG risk ratings, “adding a whole risk component to the rating, so investors
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THE ANNUAL RESPONSIBLE BUSINESS SUMMIT NEW YORK 2019
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FROM BOTH THE RISK PERSPECTIVE AND THE OPPORTUNITY PERSPECTIVE, WE NEED DATA TO MAKE AN ASSESSMENT
THEME 3: COMPANIES AND INVESTORS SEARCH FOR COMMON GROUND ON GROWING ESG REQUIREMENTS
example, based on consumer pressure, reputation, or license to operate,” says Bruno Bastit, S&P Global Ratings. He noted in 225 cases ESG has been a factor in either downgrade or upgrade in their rating.
Swami Venkataraman, Senior Vice President of Moody’s investor service said “Heat maps are our answer to the question, how do you measure materiality, when is ESG material and to whom? Heat maps provide relative ranking of various sectors along the ESG taxonomy of risks.”
As a final piece of advice, Dornau said, “Make sure your ESG strategy and data is connected to your business. It should not be a philanthropic effort that’s nice but not relevant. If you’re a bank your ESG information should be about financial inclusion, for example.”
GETTING THE RIGHT DATA: WHAT DO INVESTORS WANT? Data needs to be financially material, robust and comparable to be useful for investors. Understanding what investors want is often challenging to companies and has implications f or the data that companies collect and manage.
“From both the risk perspective and the opportunity perspective, we need data to make an assessment,” said Anne van Riel, Head of Sustainable Finance Americas for ING.
“I try not to use sustainability or ESG too much as most investors will leave the room if they are not ESG investors,” said Tjeerd Krumpelman, Head of Reporting & Stakeholder Engagement for ABN Amro. He offers three pieces of advice for tailoring ESG information to investors: Speak their language. Connect with strategy. Make it easy and logical.
Sandra Nessing, Managing Director Corporate Sustainability of American Electric Power said at as a member of the Edison Electric Institute, AEP is part of a working group of investor-owned utilities which developed
for understanding “the key material risks that have financial implications for the company.”
“The TCFD is really helping us to quantify the risks,” said Davida Heller, Vice President, Corporate Sustainability at Citi.
REPORTING ON LONG-TERM VALUE CREATION A holistic view of a business, not just a financial one, is driving investment decisions and the long-term future of businesses. Sustainability reporting and external pressure to disclose is providing genuine value to business strategy by demonstrating company resilience to risk, ROI of sustainability initiatives and the steps the company is making towards 2030 targets.
Reporting is playing a key role in moving towards a long-term sustainable, inclusive economic model. And according to Erika Karp, CEO of Cornerstone Capital, “there are two things that are most missing in companies’ reporting: transparency and consistency. At Cornerstone, we have an explicit definition of corporate sustainability: the relentless pursuit of material progress towards a more regenerative and inclusive economy’ and we won’t wait more than a nanosecond for the world to adopt our definition.”
According to Karp, this systems-level and inclusive definition of sustainability is what they look for from companies. “We see sustainable investing as the systematic analysis of the material ESG factors that go into every investment process.”
Yet, she advised, “companies don’t have to report on everything. They have to do what is material. Find out what investors care about.”
“We ask companies to define materiality for themselves,” said Laura Palmeiro, Senior Advisor at the UN Global Compact. “But I think we need to make sure that we arrive one day at a common set of definitions on reporting.”
a template for ESG reporting in collaboration with the investor community, both qualitative and quantitative, and today 30 companies actively report to the template.
“We meet with investors annually, to make sure we are still reporting the right metrics and to make updates as necessary,” Nessing said.
WHAT SHOULD BE MEASURED?Another tool for companies and investors is the Task Force on Climate-Related Financial Disclosures (TCFD)’s work to help monetize climate impacts. The goal is that climate-related disclosures, by including them in financial reports, will allow investors to enhance their analysis of risks and opportunities associated with climate change.
When it comes to what companies should actually be measuring, Brian Rice, Portfolio Manager of Calstrs, the second largest private pension fund in the US representing 930,000 public school teachers, said that SASB has been a useful tool in bringing clarity to the ESG reporting landscape because he said it can be “tricky” knowing which investor recommendations to listen to.
Similarly, Robert Fernandez, Director of ESG Research at Brekinridge Capital Advisors, said they rely “a lot” on SASB
can see how well you are managing your ESG risk.”
Materiality spikes where stakeholder issues impact creditworthiness, equity value, and an ESG evaluation, for
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