About this ATalk
Ed Packshaw, Director of Governance & Sustainability in the consultancy firm Rivel is the guest speaker in this episode of ATalk.
Ed shares the current state of affairs within the sustainability world over the last 5 years and explains how the role as a Chief Sustainability Officer (CSO) has evolved and business strategies to avoid greenwashing. He also shares some of the corporate sustainability challenges that especially concern SMEs.
Transcript
Joana Alves, Co- Founder at APLANET, interviewed Ed Packshaw for this ATALK. You can find the full transcript of their conversation below.
| Joana Alves | Welcome to ATALKS where sustainability has a voice. At APLANET we have created this space so that we can discuss some of the most important topics around sustainability, and for that we interview relevant sustainability professionals from different sectors across the globe so that they can share their experiences with us. And today we are delighted to have Ed Packshaw with us from the UK as a guest and to introduce our guest speaker Ed Packshaw is the director at rival overseeing ESG advisory work for the UK and European clients. He advises both public and private businesses on ESG strategy, structure and disclosure, supporting and guiding teams through their ESG journey and is a sustainability specialist with over 12 years of experience with expertise in UK and EU regulations and compliance frameworks like the TCFD, SASBI and the Sustainable Development Goals. Additionally, he is a qualified environmental manager and assessor as well as a carbon accounting manager and has worked in a range of industries from construction to education. Ed, you have an impressive CV. Thank you so much for being with us here today. |
| Ed Packshaw | Thanks. Delighted, delighted to join you today. Thanks for having me. |
| Joana | Thank you so much. So I think we can get straight into our chat. I have a few questions that I want to ask you and to begin with, at the moment you are the director of sustainability and Governance, UK and Europe approval and but you also have a long journey working as a sustainability professional, so you have worked as a sustainability professional for more than 12 years. So I wanted to ask you, from your experience, what have been the main challenges when trying to convince the organizations you have worked for to put sustainability in the center of businesses? |
| Ed | Yeah, thank. Thanks for that question. And for me personally, it’s amazing to see how much things have changed over the last ten years or so, especially over the last five years. It’s actually made my job quite a bit easier in terms of convincing people that this is important that has an impact on businesses and that businesses can create opportunity by working in a more sustainable way. So that’s good news, but the conversations that we’re having have got a lot more complex. A lot more detailed. And and I think for me the speed of change is such a big challenge for organizations. You know from my personal experience you know five years ago I was working as head of CSR for a construction company and our interaction with senior management we probably produced two to three slides for a kind of annual general meeting communication with the Senior Board and senior leaders. We might do a little bit of comes to the to the wider company once a year and produce an annual CSR report that probably very few people actually read. And nowadays my job is working with CFO, ISRO CEO’s and senior leaders across some of the biggest businesses in the European Union and in the UK and discussing with them how to make these things work. And so that shift is just is monumental. And just in terms of conversations so so so keeping up people like myself have had to work very very difficult to to keep ahead of of things and and I think that creates a real challenge for businesses is you know, how to keep up how to keep ahead of the changes and and and and understanding fundamentally what the impact of this sustainability thing that we see today is on your actual business you know and I think that the challenge that that creates further is is for businesses to understand how to tell their own story, you know? Climate and social issues, inequality, all these things, these are kind of macro global issues and they impact us all. We all have a responsibility to engage with them positively, we’d all like to live in a theoretically, we’d all like to live in a more socially and environmentally positive way. But that creates a bit of distraction because it’s looking at a kind of macro global problem and and it creates a challenge for businesses to honestly understand how to engage with these issues. You know to understand again how does it impact my business? Why are we doing this in the 1st place here? What’s our story? And understanding how to kind of break free from that knee jerk reaction which is “Oh well we’re a company who’s who’s saving the world and and and and doing wonderful amazing things to to benefit the whole planet” Ad actually you know more understanding where your limits lie and and creating a kind of genuine and trustworthy incredible story for your business. So you know we’ve got that kind of macro issue that’s created. Sometimes it can drag companies to have that knee jerk reaction to think, OK, well how do we solve this macro issue? And I often find that it’s more valuable for businesses to look OK. Well here is where our impact lies, here’s what’s impacting our business. Let’s start there. And I think the final thing you know for me in terms of challenges is that corporate communication, trust in corporate communication, the way that businesses express themselves that what they claim to be doing. It is pretty low right now. You know, companies are… lots of companies claim to be sustainable. This or the best that or whatever and It makes it really hard to create a trusted comparable, you know, honest story for businesses. And we see that a lot in some of the businesses which are a bit more purposefully focused and that are sometimes coming under quite significant challenges for not doing enough and. You know, I think that people naturally think, well, you know, you would say that you’re the best. I often like to explain it with a particularly ridiculous analogy. So, indulge me. The World Cup’s coming up, right? And given ourPortuguese hosts, I’ll indulge you with it this story I often say to people, you know, if I sat here and said to you I scored more competitive goals than Cristiano Ronaldo last season. Um, you would look at me and say that’s an utterly ridiculous claim. It’s complete madness. There’s no way that you did. And the reason why it’s so ridiculous is not because quite clearly I’m a world superstar footballer but some or clearly I’m not. The reason why it’s so ridiculous is because you can just Google Edge back sure and you can see on on there that I’ve scored no goals I’ve played in no professional matches and actually my footballing issue paints a pretty poor picture online so. But a business can say, you know, we’re the most sustainable business in on the planets and and and and it’s really, really difficult for an individual to go online and find out whether that’s actually true or not. So the solution to this type of problem is exactly the same solution that stops me from claiming that I’m a star footballer, which is transparent, comparable standardized information that’s available to all. It’s the perfect antidote. So. Poisonous distrust and so building credibility on this foundation of transparency and comparable data metrics and understanding what metrics impact your business from a honest position is such a powerful tool for organizations but it can be quite difficult because most businesses through their you know 2030 year history have been claiming well we’re fantastic and nothing is wrong. So you know that that change from moving towards more open and and and transparent communication is a really big challenge to get by and internally so that there are loads of challenges for businesses and and and and it changes very very quickly but you know for me I think moving forward and embedding it, getting your head around some of these changes and then understanding what your story is, where you lie in the big, in the big puzzle, what you can have an impact on and what you don’t. And really importantly, what’s the impact on your business. |
| Joana | Exactly, totally agree at… was very insightful. But I think I don’t know if you agree that the first challenge is that companies recognize the importance and that they are aware that sustainability has to be a part of the DNA of the business model. It cannot be treated as something ancillary like there’s a sustainability department there are different from the rest of the company and sometimes I still feel around the world that there are many companies that still look at sustainability as philanthropy. They don’t understand that it even doesn’t mean that, oh, it’s something that will be good in a long term strategy. I think it’s something that is urgent for a short term survival. So I don’t know if you think that it’s awareness is general. For instance, you work in the UK, but you also work in several countries in the European Union. Or you think it’s just for a few companies that are more pressured? |
| Ed | Yeah. I mean integrating sustainability into your business model is the solution. You know, creating a business, that is where everybody is thinking about sustainability as part of their day-to-day it becomes business as usual is the solution that we’re looking for. When I was studying with Hyemin Institute of Environmental Managers and assessors, my supervisor said to me, you know, your job is to build a business where there is no sustainability department. And I think that’s quite insightful bit of it, but bit of way of thinking about it for both sustainability practitioners and for individuals working out how to tackle this is, is the, is the goal is not to become a company that looks sustainable. It’s to integrate it such that you don’t need to have individuals employed for sustainability. And you know often I hear a lot about green jobs and the need for green jobs, which is certainly true, but we also need to help individuals understand how to green those jobs. So, so integrating that is a really really important step forward. It’s not easy, you know, for a business to go from zero to fully integrate it, it takes a long time. You know, we’re thinking if you took this away and kind of said and put it in a business context and said OK, we’re going to start a new business line and it’s going to fundamentally provide a service that we are not currently providing and it’s going to impact all parts of our business. You wouldn’t be surprised if it took a while to you know, 5-6 years to develop a really robust system that allows you to deliver a really high quality service. Is that the same with sustainability, it takes time to integrate it. You look at any business that’s doing these things well and has a good image and a good, good reputation, credible, good investor platform, all those types of things from a sustainability perspective, they’ve almost certainly been doing it for a while. Now, they might not have been doing it right for a while, but they’ve been doing it for a while and they’ve probably committed to understanding, you know. Where are my limits? How does it impact my business and what are we trying to work towards? And I think it’s the reason why it takes time is because not everyone is an expert in sustainability. Not everyone gets it. It’s a newish concept. And you’re so right about this philanthropy comment, you know it’s. For me, one of the classic mistakes that businesses make when trying to address this is coming from that philanthropic point of view. You know, and you touched on it about the need to really adopt this quickly. But from a philanthropic point of view, it’s a really difficult it’s almost a nonstarter because you position yourself emotionally and you know I’ve seen this in many many companies throughout my history. Because I used to be CSR which was philanthropy. And I remember you know when I arrived in a company to take on a CSR role and they were doing the classic thing of giving money and buying park benches and sending a couple of staff off to somewhere in a developing nation to build bridges and and doing a few fun runs. Good stuff. Very important stuff very valuable stuff but. You know, it was all about doing the greater good, you know? For me personally, I kind of bucked that trend that a business can be involved in the greater good. It’s a businesses function is to do the best of the best interest of its overall stakeholders. That’s not always the greater good. And just like the charity stuff, breaking free from this sort of altruistic, philanthropic way of thinking helps you understand that one of the reasons why companies should be charitable in its efforts is that it’s great for the public image. People enjoy it. It’s good for your physical and mental health. Employees are attracted to this type of thing. It’s also great training. You can go and apply your train in a different circumstance if you know, help a charity do something that you’re good at. Support the local community. All of this adds value to a business. The overall human resource capital of the business, the professional ability of staff, the health, the happiness and the overall image of a business. Those sound like great reasons to be philanthropic and breaking into that side of things. Umm, you know, for me it is a good way of thinking about how to break away from this kind of philanthropic view in sustainability and start to integrate it. It’s such an important start. First, you know, you first of all say. Yeah, we’re being philanthropic because it’s great for us and it’s great for you as employees, it’s great for you as stakeholders. It’s great for those people who don’t use our business yet maybe get a free possibility to engage with. It’s good for our reputation. So that’s why we’re doing it and you know, in my experience, defining why you’re doing philanthropy or sustainability from that employee and direct stakeholder. To get there, buying is really, really valuable, comes back to honesty, it comes back to business. Understanding business impacts that credibility of that story. You know, I think we can all probably understand the situation where, you know somebody says “Ohh, our charity of the year. We’re, you know, we’re giving money every year to Cancer Research” Or whatever, an amazing charity like that. But you understand that it’s just a bit of a cursory effort, right? So your level of engagement is reflective of that? Right. That’s very natural human behavior. If you get some really emotional, gearing up person who comes in and says “guys, charity is amazing and this is brilliant and do all these things, then you’ll probably be really excited for a while and that might give you a boost”. And you might do a few things and you might get sort of 60 -70% of the business getting involved on this, on this buying. But fundamentally, if you want people to do philanthropic activities, you want people to volunteer, you want people to engage, you should probably enumerate them for it in some way incentivize them in some way. You know, if I’m, if I’m the CEO of a business and I walk into the CFO’s office and I say “I want you to find a way to cut our overheads by 10%.” You wouldn’t be surprised to see if that CFO said OK. So what happens if I achieve this? And I would probably respond “well, your bonus will be X or I’ll give you this or you’ll get this incentivized in some way”, perfectly normal. That’s how people get motivated to do their job. For some strange reason, people view sustainability in a totally different way of thinking. This philanthropy, greater good, save the world. You know, from a business perspective, it’s not a, it’s not always the best starting point for engagement. Because it means that paying somebody to do that seems kind of. You know, a little uncomfortable. Well, I shouldn’t have to pay you to do something that’s good for the greater world, right? But it’s good for the business. It’s good for costs. It’s good for overheads. It’s good for health. It’s good for happy. It’s good for business resiliency. It’s good for risk management. It’s good for opportunity creation. It attracts people to your company. All sorts of different things. So the real truth about integration and getting overall buy in is just to start thinking about how people are going to be renumerated, how they’re going to be incentivized doesn’t mean you have to pay someone you know £1,000,000 to get you to net zero. But if net 0 by 2030 is one of your major targets. Then, just like any other business target, it would make sense if you trickle down incentivization through the whole business to engage people on that. And I have seen this happen live in a business and seen the change. You know when there are some simple tasks, simple things that you can do, we align the expectations from an HR perspective of how an individual should behave to align with volunteering and community engagement, so alongside you know, is a great communicator, is an expert in their field, is an ambassador for the business, is also a volunteer and a community engager. And setting those things is action to implement it into the DNA. Not words that talk about what DNA is, you know if you want to talk about DNA then splice it up. Look at the genome, get it, let’s have a look you know and the numbers so when we talk about implementing these into the DNA if you can’t unzip a business and see metrics targets goals and how your business is remunerating or incentivizing people to deliver those. Then it’s really going to be a challenge to integrate it, no matter how passionate your leadership might be. |
| Joana | Totally agree Ed… And totally agree. And it still amazes me that it’s not shocking for some companies to remunerate people that do harmful activities to the environment and society, but when there are pro bono activities that will impact positively their organization and the society. In general, it’s something that still is not seen as almost fair to be paid. So it’s something that I think that it has to be a systemic change. But I also think that as you were saying that implementing a good sustainability strategy has to start with, for instance, the materiality analysis, because it doesn’t make sense to create an initiative. It can be even philanthropy if it’s not aligned with the values of the company. Right? So this and this journey takes time and what I see in companies is sometimes the great blocker is the top level because if you have the CEO or the CFO really under pressured about their short term profitability. If they don’t understand the long term sustainability that the time that it has to take to implement a proper sustainability strategy and that sustainability means profit. So I think that, even in companies that were there, there is no sustainability department. Sometimes there is more awareness from bottom up, but then there’s a blocker if the budget for instance, is not allocated to something like this because it’s not considered a priority, like doing immateriality analysis, hiring a consultant… What’s your opinion on this? |
| Ed | This, yeah, I mean it’s you’re spot on, I just, I think that I agree with the top level stuff and the importance of top level buying, that has changed so much in the last couple of years. You know, I used to find myself feel like I’m kind of banging the same old drum for a long time. You know sustainability has value to your business that you will see in the balance sheet and protect the environment because it’s good for the company and treat people better and they’ll stay longer and all these types of things and it kind of falling on deaf ears and then you keep banging the same drum and doesn’t matter how good you are it’s just oh here’s they’re back with his bloody drum again and he’s talking about that sort of thing. I think for a lot of senior leaders in businesses what I’ve seen especially in the last three years is the penny has dropped. Most smart senior leaders have worked out that there is a direct impact to their business from the EDS and the G or sustainability or whatever you want to call it. And if you don’t understand how it’s costing you, that means that you don’t understand your business properly. Because there is definitely a cost now, in five years or in the future regulations, the cost of not doing something, the cost of doing something poorly, the cost of environmental or errors is growing exponentially. Conversely, the opportunity cost, so the opportunity cost is really low. It’s quite easy to get credibility for engaging in sustainability, for making those steps forward, investors want to see its stakeholders want to see it. And we’re so we’re starting to see change and the great news about senior level buy in. Is that we’re not getting this, as you mentioned that kind of bottom up banging of the drum do something. You know? Which responds to OK, we’ll do something which is probably not very much to the understanding that there is a clear effect, there is a clear impact. So the response starts from position of senior leadership mentality which is risk opportunity and understanding what is material to your business and so it’s no surprise that at Ravel we are now doing more and more and more materiality assessments and for viewers that are not quite comfortable or don’t fully understand what a materiality assessment is, you know it’s comparison of the issues related or associated to sustainability, how important they are to your stakeholders compared to how important they are to your business. So for example, if you are a furniture maker and you produce wooden furniture. The global existence of trees is probably quite important to your business, because without it you’re going to really struggle to make Modern furniture. And the preservation of biodiversity is also important to your stakeholders. So that would come right in the top right hand corner of this X&Y axis. Between the two, you know, and we do it through a combination of surveying individuals and some interviews and get some really in-depth knowledge. The reason why it’s suddenly got more popular is not because it’s a cool fad or because somebody puts something about it in regulations. It’s because it’s a good way to make a decision and show your working. You know? We… Companies especially from sustainability, they should think of themselves like you know, a kid in year 8 math, you know that’s that’s that’s not been doing very much homework for a while. You know? And the teacher is the stakeholder group. So when you start handing in your homework and you’ve got all the answers right, your teacher’s going to think where did you get these answers from? And you must have googled them or copied of somebody. So you have to show you’re working, you’ve got to put your calculations in there. You’ve got to do all these sorts of things and materiality is showing you’re working. And I think that’s what lots of people misunderstand about it. It’s creating that further internal buying, we just spent a long time talking about buying, you know, it’s creating that internal buy in from investors, from employees, from strategists. So why are we doing this? Why do we, why should we be investing in biodiversity as a goal right from this tree company? |
| Joana | And also the focus is important, right, because it’s like I see companies that support the 17 SDGs and want to create initiatives for the 17. And in the end this, the impact of the initiatives is not great because there was no focus, right? |
| Ed | Yeah, yeah. I mean, I mean that’s what materiality does for you, right? It creates that focus. It says, you know, we have three major risks to our business. You know, we know that there are risks to our business and we know that stakeholders value them very highly. Those are two excellent reasons to do strategy. What are not good reasons are well I read an article that Greta and she said the SDGs are really important so I don’t want her to come in and and and say how dare you in my office I’m going to do everything but but when we come back to honesty to understanding how real things work to to breaking free of this emotional thinking and thinking about the business terms. If you said we’re going to do everything you know if somebody said oh we’re going to sell. Uh, I don’t know. Makeup products. And and and you said brilliant, we’re going to sell every makeup product under the Sun. You probably think these guys aren’t really serious about what they’re talking about. They’re not. They haven’t sat down and thought. OK, which what? What are we good at and what are we not so good at? Oh, it turns out that we can make this and we can’t make that. So same with the 17 SDGs, right? Again, if you are a furniture maker and you make wooden furniture. If you say we have all 17 SDGs, then it would be very reasonable for a person in your business to say hold on a second, but I’m pretty sure life on land. That’s the one that we need most. And and and most needs us. Good business, good business practice. We can participate positively with that bad business, bad business practice, we’re going negative. So if I’m an employee and I look at the 17 SDGs, I’m thinking, OK, fair enough. Like yeah, we want to help lots of different types of people but, that one really affects us and really affects us in good and potentially bad ways, much more so than peace, justice and fair institutions. And I agree with peace and justice. Great but, I’m a furniture maker and if we don’t solve that problem then we can. It doesn’t matter about peace and justice. Because we won’t have a business and therefore we won’t have part of it. Whereas conversely if an individual stood up and said obviously we’re the tree guys, so we are our number one goal is to do as much as we can with life on land. We also we want to be a responsible consumer. So responsible consumption is part of our register as well. Fair employment because we employ lots of people from different regions. That those are three things. Once we’ve solved those 3 problems and we don’t have to worry about biodiversity when everyone’s equally employed and when we are responsibly consuming and managing our product, then great, let’s tackle fair institutions. Justice, peace. Let’s get on to 0 hunger. But until those things are done, then you can’t expect to reasonably do them. So how can you expect an individual to reasonably get behind it? So whether you use a materiality matrix or SG framework or a TCFD or whatever it is, you know these are tools to help you understand what the impact is on your business and success and failure in this is, it begins there. If you start thinking about anything else apart from the first question, it’s got to be “What’s the impact on my business?” If you’re thinking differently, then it’s time to try. Maybe, maybe have a conversation with someone like us and start to think differently about it. And again, just going back to materiality, you know, if you’re an individual and you’re struggling to get by it, materiality is a great place to start because it stops. You know, when I stand up in front of senior leaders and we present something materiality matrix, I’ve got lots of things thinking about what they could do, what they should do and how they should do it, right. But when I do materiality matrix and I use that data that position that info, it’s not Ed’s plan. It’s not Ed’s idea. It’s your stakeholders, your plan, your idea. And so they’re not criticizing my thinking. They’re immediately thinking, OK, well, is this one in the right position? Maybe we should rethink a little bit more. That one’s quite important to us and it’s associated with our values. Maybe we need to focus on that. And even though it came quite low on the… suddenly we’re now talking about solutions, right? We’re not investigating whether whatever problem you’ve highlighted or whatever solution that is, is the right one. We’re saying, OK, how is this the right way of thinking? Are we going to tackle these problems? Where do we go from here? And again when we come back to reasonable employees or reasonable investors or you know and people are reasonable, right, most people and when you say to them here’s materiality matrix in the top right corner of the things most important to us. So we’re going to focus there. Suddenly everybody starts thinking great OK how do I get involved and CEO’s can say stuff like so if you want to do something brilliant and impressed me this year do one of these things in the top right corner and now everybody’s thinking all right. Well actually the waste company that I’m responsible for procuring doesn’t actually send their emissions data to us they’re irregularly. So we need to switch that because we’re not getting enough data. Or, ah, I’m responsible for buying pens and paper in the office. I’m going to go and find a lower footprint pen and paper. Right now it’s we’re talking about a company that’s integrated, that’s doing things, finding solutions and if you’re tracking and measuring these things you’re starting to tell a great story, so, you know I think one of the things that I’ve seen change majorly is how we create that story and how companies find that narrative moving away from kind of “Let’s save the pandas”, which is very important but not for a tree company in you know or maybe actually these important for a tree company, maybe not for you know for another type of business and really trying to work out how everybody’s engaged in it. And it’s also really, really important that businesses start thinking about this now because there are regulations coming down the line and they’re coming really, really, really fast. |
| Joana | I wanted to ask you now that you’re mentioning regulation, you just mentioned that top level is getting more and more worse, so they’re starting to integrate sustainability in their businesses. And regulations are growing across the globe. So for instance in the UK there are thousands of businesses that will not have to disclose their non financial information according to the TCFD and you as a sustainability professional you can relate with the pain points of sustainability managers that can sometimes feel overwhelmed with all this ESG information that they have to manage and report. And I I think that sometimes companies stay stuck with this reporting Trump, so I just wanted to ask you, do you think that the main driver for this top level to change their business model is compliance issues? Or is there something else and do you think that is it enough? This regulation pressure isn’t enough because, for instance, then it won’t affect all the supply chain. It will affect indirectly, but not directly so, there has to be a systemic change, right? A systemic… |
| Ed | Yeah, I mean. I’ve been as you mentioned, I’ve been working in this sector for 12 years. I studied zoology at university with Biological Sciences. I’ve worked as a field biologist living in the rainforest in Mauritius in a shipping container for two years. I’ve you know, I’ve spent many, many hours scuba diving and traveling all over the world and very, very passionate about this. I’ve seen lots and lots of change. It’s regulation that is driving us to the position where we are now. I would love to live in a world where showing videos you know from where when I was growing up that David Attenborough was showing us was enough to motivate the planet, the people to start engaging in this positively but clearly that hasn’t happened you know in the last 10 years we’ve continued to emit more so from a macro perspective, regulation is the major driver for the position that we’re in now. And it’s so, so, so important. So I think if you’re a sustainability professional and you’re like, Oh my goodness, this is madness, first of all, it is madness. You know, I hear you. I feel you. It’s crazy what is going on at the moment. They’re changing all the time and they’re adding new things. They’re adding new layers. It ‘s mad. I mean it’s a great thing that’s happening here, but we it’s also important to remember a little bit of history and where we are and how this political process normally works and all those types of things. So you know 2015 we had cop 21 if you recall back to that wonderful landmark moment when world leaders came together and signed a piece of paper that said yes to doing something right? Paris Agreement 2015. What wasn’t really particularly well communicated is one of the major goals of Paris 2015, and part of the ratification of that agreement was that countries were signing up to spend the next five years trialing voluntary reporting standards, frameworks, that sort of thing. With a view in 2020 at COP 26 to say here’s what works, here’s what doesn’t. Now we’re going to regulate and mandate. And so the European Union encourages everybody to participate in things like GRI, right, and and then a few other things popped up. TCFD came and CDP before that, and STI popped up a bit later on SASBI and SASB being. All these different frameworks and some companies bought into using these frameworks really well, understanding how they’re how valuable they are and all these types of things. But most businesses went it’s voluntary. So they applied the same amount of ban mental bandwidth and financial bandwidth as you would to a voluntary process. Right. OK, cool. Well, we’ll have a look at it, see if it impacts us, see if we can find some opportunity. OK, cool. So we’ve done GRI. It’s a bit of a headache. Fine. Fast forward to 2020 or 2021. It turned out to be because of COVID and everyone turns up a cop 26 with not much to show for it. And that landmark moment led to the explosion of a lot more regulations. The UK and the European Union jumped forward first. Umm. And the way in which they’re doing it, CSRD, the EU taxonomy, the UK Green Deal, those are all these different things. Effectively they are the same. They’re built on the same premise. We’re trying to look at risks associated with non financial metrics, non financial information on financial data and bring them into the risk registry. So are you managing and mitigating risks of your enterprise, overall role of the leadership. And so um. Some worked really well, TCFD for example, which the UK has backed, so it’s mandatory for most listed businesses beginning in 2023/24. Depending on your size etcetera and the idea about that is that it talks about climate risk in a language that’s risk managers, IO CFO’s are used to talking about and that investors are used to seeing. So it helps companies understand how to identify and manage risks. OK, so we’ve… And the UK have regulated around that, so you have to do a TCFD report. If you don’t have to do one in the next year or two, you will eventually have to do one. |
| Joana | And add can you explain to our the people who are listening. So TCFD is a framework that is specially applied in the UK, but the focus is more on environmental, on the E part of sustainability, right? |
| Ed | Aish, I mean it’s very climate focused. It’s the task force on climate related financial disclosure. But it’s also very strongly governance focused as well. How are you integrating Systems and processes to ensure that there is accountability across the business at a senior leadership and board level, so it is more climate focused. Um, and I think that’s because globally that’s our greatest risk. So the place to start is there. I think that finding for businesses, you know, I think that there’s been a really, really big change that’s been caused by some of these regulations in these frameworks. You know, first of all, it gets everybody on board, right? You’ve got to do it. So there are some people who want to do it, so they do the volunteer reporting. That’s probably, in my opinion, theory of change like that, 30%, something like that. 60% of people are open to it. Probably would do it, but don’t really get it. So hard to convince them unless you present it from a you know from a risk reward position and if you want to really show somebody the risk then regulate right. So it brings lots of people on board but it has another really important aspect is that it brings this type of conversation into a different room. It brings it away from the sustainability working group and into the boardroom and the C ways and that is a different approach so, You know it, it kind of forces generally entrepreneurial people. These are CFO, CEO, these types of people. And they start thinking OK well we’ve got to do this so we we’re gonna need we have to do it it’s part of the process it’s part it’s we’re regulated so entrepreneurial leaders will go OK how do we how do we stay ahead of the game using ESG, you know, it’s a way for us to identify ourselves as something doing something different of aligning with the regulations and being of doing what’s necessary to be compliant but also finding new ways of working and it kind of helps break away from the kind of passive objection where, you know, lots of people are kind of thinking. What I know about sustainability is that if I do it wrong, Greta is going to kick my door down and go, how dare you, you know? Whereas what you should be thinking is, is Elon Musk knocking on your door and saying electric cars made me a billionaire. And that’s a totally different mindset in that room. So these regulations are valuable and they make a big difference to how a business reviews risk, we have to start with climate, but if you’re an entrepreneurial person, if you think about your business from a holistic point of view, you think about the impact of your business of regulation, not the fact that your business has to follow regulatory compliance. Then you start to understand that there are some climate focuses but there are others that are very much social. And again comes back to this communication, honest communication, understanding if you are at a pharmaceutical business and all you talk about is your climate impact. A reasonable investor will go, but I don’t invest in you because you’re a purposeful carbon neutral company. I invest in you because your purpose is treating and helping patients. That should be your number one focus. TCFD, climate, it affects us all. So we should all be engaging with it. But it’s not the be all and end all and I I think that’s where some people get into a bit of of a model with the regulations. That’s one of the negative sides about regulation is that companies will go OK, well I’ve got to be regulated. So therefore I’m seeing this as a risk reduction strategy. If I don’t complete the regulations then I risk a punitive damage. Right, that’s bad. And therefore if I do the regulations, I don’t have that risk. That’s the opportunity. But you know, it’s actually these frameworks were whether it’s TCFD or or STI or whatever one of the billion acronyms you want to use. There are over 600 frameworks by the way the moment they are condensing but there are lots of them. These are drivers of business strategy of opportunity and of risk management and that’s where you should start with them. It’s a good thing that you know the risk register helps you be compliant that’s great news because you can identify, Uh, risks. Manage them and show your investors that you’re kind of creating a more resilient business because you understand your risks now from just going back to the UK European regulation side of things and TCFD versus CSRD or or whatever it might be. I mean, they’re rooted in the same type of thinking. It’s CSRD has a few more social elements to it and it’s part of the EU taxonomy and the do no significant harm and all those types of things. So it’s a little bit more… There are a few more social aspects you have to talk about for diversity. You have to talk about some social impact issues, that sort of thing. But again, there’s a lot of climate stuff in it. TCFD is a good place to start if you’re looking at the regulations and thinking how we’re going to get prepared for them because while each of the regulations UK, European, American, whatever, they have their own way of reporting, the content and is more or less the same. So getting yourself into a reporting cycle as a business of identifying what data points you need, collecting that data from the various different individuals in an efficient manner, it’s just a good process to get into. Because you know when you start looking at all the different data points that you need that indicate your non financial risks, some of those data will have gaps and then you have to fill those gaps and that takes time. If you wait until the regulations are mandatory tomorrow, you know if you wait until 2024 and you’ve got one week before you’ve got to submit your TCFD report then you’re going to be in trouble. So the earlier companies engaged the better and again you know the opportunity is now you know? No one gives you… No one, no investor looks up a company goes, Oh well, they filled out their, their, their accounting, their tax and their accounts they’ve submitted them on time for the last two years. Ohh have my money. You know, like minimum compliance is not a threshold for investment. So if you are just compliant because you do TCFD and that’s because somebody has told you to do it. You don’t get any prizes for your investors from your investors. The thing that drives investment in this area is business resiliency. Are you prepared for what’s coming in the future? And a good way to indicate that is not only to be compliant, but to maximize the use of these frameworks, of the data points of the you know, of the journey that you’re under, of the narrative, the image of the business, all those types. |
| Joana | Exactly. And because if you’re just looking to be compliant with the legislation, you want to transform your business in the way that it generates a great impact in your organization and society. So you really have to look inside, look at the values of what your company like you said, your materiality analysis and start generating a real impact because in the end it will determine if you’re going to survive or not, for instance. In Portugal… Portugal is a country of assemblies like Spain or even the UK. So not not all the companies are have to disclose their non financial information according to the law yet, at least directly. But I had a case of two SMEs that were textile companies and they exported to Sweden. So this client wanted of course to purchase the products and they have more or less the same product, the same price, but of course if this company is, if this big company in Sweden has to disclose their non financial information, they have to do it due diligence to their supply chain. So in the end if the small companies in Portugal don’t integrate this criteria in their business, it means that they won’t have any business. So in the end they were that one company had all the certifications and all they met all the criteria that’s the Swedish company needed, the other didn’t. So they lost the client. And this happens a lot. It happens many times. And it’s difficult because what I see is that companies are struggling. There’s an economic crisis with the Ukrainian war, there’s a lot of inflation. And then they’re like, Oh my God, I don’t have budgets, so…Sustainability. What is this? But then as you said that the this is they have to adapt their business in order to survive and to they cannot wait for the legislation they have to be proactive because otherwise their business will die right. |
| Ed | I mean you can always adapt right? I think the survival of the businesses is dependent on that and my comment to small medium enterprises is that this opportunity is huge at the moment, absolutely massive. Because if you are exactly the example that you used, everywhere around the world, we’ve got large companies mostly through regulatory pressure that are starting to look at their supply chain their procurement processes and how that impacts their footprint and their overall image and understanding that there is as we’ve known for a long time, mega risk in the supply chain. There’s financial risk in the supply chain, there’s productivity risk in the supply chain, there’s reputational risk and there’s sustainable risk. There’s all sorts of different risks in there. We’re very comfortable with looking at our supply chain and trying to work out how reliable a factory is going to be to produce products on time regularly, every single month, every single day, every single week, right? That’s fine. No worries about that. But looking at it from a sustainability point of view is more difficult, more challenging. For some reason. It’s OK. I always encourage people to go back to that way of thinking, right? Think about it as a bit, why are you doing this for your business? What’s the impact of your business? What can happen? So the fundamental reason why you’re doing it for your business is the opportunity. Fundamentally, companies are more likely to purchase from an SME if they have some kind of sustainability credentials to back up what they’re doing. Right?, regulations are saying reduce your carbon footprint, reduce your scope 3. If you sit in Scope 3 and you can reduce a supplier above you, if you can reduce their footprint because you have a lower footprint product, then you’re instantly more attractive. And therefore you can price that accordingly. So for SMEs, that’s the reason why this is important. There is huge value in doing this. Now, the problem is, or the challenge I would say, is resource allocation. Big companies have the same issue with resource allocation. You know, they might have a whole range of different things to look at and not much resources and sustainability, maybe two or three people to try and manage our whole supply chain which might have, you know, if you’re a lot, if you’re a multinational, you might have 100,000 or a million different suppliers in that overall tier structure. That is a lot of work to manage. If you’re a smaller business, you have a much smaller, that thing to manage, but obviously you don’t have the resources to pay an individual person to do it. Or you might not have, but you know you might not know what type of person you want to employ, or you might not know where your limits are, or your or your… Your impacts lie. So resourcing is always going to be a challenge and we’ve got another challenge is that a lot of the tools that we have: standards, frameworks, regulatory pressure, things like materiality, assessments, data, all that sort of stuff, a lot of it is orientated at the larger companies. So you’ve got a lot of you know, you can walk into the offices of you know a mega company and say oh, you know, can you design a software platform for our business that will help us manage ESG risks across a million different suppliers. Yeah, great. That’ll be £50 million please, you know? Obviously that’s not possible for a smaller business. Most of the things that are available are there, most of the frameworks are orientated to ask questions like just really simply, like take SASBI for example. Right. If you’re a smaller business, you’re going to get put into one of their 72 industries specific things. Now if you’re a big business, you probably fit into, you know a one of these categories quite well and all of the different requests, information requests are probably relevant to your business or relatively relevant. If you’re a medium sized company and you’re responding to 15 questions about sustainability, whether it be CDP or SASB or TCFC. Some of those questions don’t really apply. Right. So there might be questions like what is your scope 3 emissions TCFD? I’m an SME. I don’t have resource to do that. I’ve got no idea what it is. Also, it doesn’t really affect my business at the moment, positively or negatively. So why am I being forced to measure my scope 3? You know, somebody might say… Uh. Implement a diversity and inclusion plan. If you employ nine people, it’s quite hard to have a diversity and inclusion plan. You know, these are challenging things. I’m not saying you shouldn’t, of course, but it’s a challenge. And so the tools that we have and the recommendations that are coming through are difficult and they make things challenging. And. So the response is often to say, oh, this doesn’t really work for us and this doesn’t really work for us. And we’ve done a bit here, but it’s really hard to know how it really impacts everything’s for the big companies. It’s all designed to help them. Umm. It comes back to what we’ve been talking about the whole time. How is it affecting your business and how is it going to create opportunity for you? Because It might say, you know, we deal big, big companies or small companies, we respond all the time to this. Yeah, if it’s not relevant to your business, it’s absolutely fine to say this is not relevant to our business for the following reasons. It says to a reasonable investor, to supply chain manager, to an asset manager at a company. Oh, OK, cool. They’ve thought about this and it doesn’t impact them. Good. That’s a company that understands their business impacts and those sort of things. So for SME’s the place to start again is what are your what? How is the same? Is he going to impact your business from positive and negative way? How? What are the opportunities that lie? Is it around your scope one and two emissions? Is that going to make you more attractive? In which case go for it. Measure your scope one and two emissions if you can. It’ll be probably for a small medium company, relatively simple and not too complex tasks. If you’ve got growth plans. Then doing this, now getting these, getting into the swing of regular reporting is a great way to go. Good place to get started. Now the larger you get the more difficult it does to implement these sorts of things. So for an SME, I think it’s kind of you can be overwhelmed by these things, right? You think, oh God. And then you have to overlay this idea that if you don’t do it, something terrible might happen. Right. It’s kind of climate in a nutshell that, isn’t it? Right, I should probably recycle. You know? My cup from Costa. If I don’t recycle my cup from Costa, I’m participating in a bigger problem. But I don’t really understand what it is that’s causing that problem, and whether I’m the one that takes it from a potential problem to a real problem. You know what I mean? There’s a lot of… It can be really easy to disassociate yourself from the reality of what’s happening because fundamentally like if I don’t recycle my coffee cup, right, nothing bad happens, right? I don’t get home and you know, there’s a bengal tiger sitting in my bedroom being like, well, that’s me dead, you know, like… These things don’t happen. So. So you can kind of go, OK, well I should do something. But I know if I don’t do anything now, nothing directly bad happens. And that’s a really easy way of thinking to get into for a business if you start to think about the opportunity. So if you start to think about, OK, the reason I’m going to recycle is not because it’s something bad might have. It’s because I’m gonna feel great if I walk across the road but that recycling bin. Because I’m going to start to engage a little bit more about in the process. Oh, now I’ve started to learn that actually the inside of this coffee cup is not, not recyclable. So I’m not gonna purchase from that particular coffee company anymore. I’m going to go to a different one and now you’re start to engage positively, you’re looking for opportunity to improve your life. Exactly the same with business. I’m not doing it because I’ve got fear of regulation or some kind of thing or this greater good or we should do it. I’m doing it because it’s a great opportunity. I’m doing it because I can make more money and more resilient business and more attractive business. Business that large companies want to buy from. And the opportunity also now is pretty easy right? There’s loads of opportunities to invest in software systems to start thinking about this positively, to write policies, to follow frameworks, to .., you know loads of resources available online. And lots of people willing to support you as well… It can be, you can get really, really good credit for engaging in an open and honest way and and and you’ll start to see it on a balance sheet if you do that so, I understand for sure the SMEs struggle. It’s so difficult now, particularly when you start to look at the cost of living crisis and all of the other issues and the various different changing platforms and stuff and all of those types of things. You think, oh God, where do I start? And then you, you know, if you don’t start, then Oh my God, something terrible is going to happen. But the for me that do it because there’s a great opportunity to do it and do it because your business will feel better, a better place to be. A better place to work, a better place to come in every day, or if you’re the owner or the manager, or better place to buy from, or whatever it is. These are good business reasons to do stuff so, I, yeah, I always encourage businesses to think more from an opportunity point of view. What can we do to identify that opportunity, how do we make it work for us and then be trusting that it will work in the future. I mean, you’ve gotta be aware as well that there are some costs that are going to be associated with it. But like any business decision you if you want to do this properly then and you want to seriously shift your business to measure, mitigate and manage a new type of thing or things. You know, then it’s reasonable to spend a bit of money on that. Right. And if I wanted to offer a new service in my company? Then it’d be reasonable to expect to probably have to hire a few people to do that. If you want to start measuring and being more sustainable, then you probably aren’t going to have to invest. So start thinking about how much that’s going to cost you. You know whether it’s what the opportunity is or how you’re going to do it. All these types of things from a business impact first and you’re already in the right position. |
| Joana | Thanks Ed, that was very very insightful and I think it was a great note to end on and it it’s definitely great advice for all the SMEs that are listening to this today so they can start their sustainability journey. I’m going to make you one last question. Who would you like to be here into interviewed at ATALKS? |
| Ed | Oh, who would I like to be here Interview in the ATALKS? . That’s interesting, I mean. Ohh, I’d love to hear from some SME’s that are doing this. What? Doing this right right we at the moment, we’re always talking about big businesses doing wonderful things, you know and from a lot of what we talked about, we know that it’s… You can get good credit for doing quite small things and big companies are really good at taking credit for stuff. So we kind of have mostly we hear about that. So it would be great to hear about smaller businesses doing brilliantly hearing about why that’s that’s valuable. I talk a lot about with companies, especially leadership teams. I talk about the impact of the employee as a stakeholder and sustainability and the importance of becoming more sustainable to be, to remain an attractive employer. Um, so it’d be nice to hear from, you know, companies, employees and companies that have been working to be more sustainable. What attracts them to the businesses, why they chose it, all those sorts of things. We’ve got mountains of research that says, you know, even the baby boomers, 66% of baby boomers want to work for a more purposeful company. You know, it makes sense, right? I mean, yeah, I think fundamentally we’d all probably rather to work for a company that feels purposeful in some way, you know, rather than working for an evil company. Some people don’t mind it, that’s fine. But I think given the choice, we’d all like to earn loads of money in a really purposeful way, right? So yeah, hearing it from employees would be nice as well. And then maybe if you can get a regulator or government figure in here that would be fun as well to grill those individuals. I’ve seen some excellent speakers at some good conferences recently from Members of Parliament and from government. And then also some people who took a good game. So be interesting to hear from a bit more about that regulatory future of the United Kingdom and across the European Union, how they’re tackling it, what the plans are because there are many, many more legislations coming. I mean just look at some of the highlights from copper the last couple of weeks. |
| Joana | That’s great. Great suggestions, uh, and I’m, I will bear it in mind when I will invite another guest. And it’s great to have this community in this place where we can share each one and working in a different sector. Some people like you, already have a long journey and sustainability. Some are just starting and taking baby steps. But everyone has a role. So everyone, this has to be a systemic change. So as you said SMEs is a great example, the regulators but also people at an individual level, right. So that was great. Thank you so much for being with us here today and for everyone who’s listening, I hope you have enjoyed it and see you in the next ATALK. |
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