Business leadership in accelerating the transition to a sustainable world

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18 October, 2018


Insights from the CEO



Peter Bakker

We live in a period of economic, political, social and environmental volatility, aptly named ‘the turbulent teens’ as part of WBCSD’s Vision 2050. Vast amounts of people across the world feel that the economic and political system simply isn’t working for them, though life today is a better experience for more people than it would have been at any other time in our history.

At the same time, we have, thanks to the Sustainable Development Goals (SDGs), a clear and comprehensive agenda for global development towards 2030, representing an unprecedented opportunity to put society on a truly sustainable and equitable pathway. For its part, the Paris Agreement is a major step forward by all governments of the world to safeguard the future of life on our planet. The agreement heralds a new relationship between governments, business and other non-state actors to work together to accelerate the transition to a thriving, clean economy with equitable access to sustainable development for all.

Put simply, the SDGs and the Paris Agreement signal the need for a deep change in the way our economies work, and in the way our energy, mobility, urbanization, food and social systems contribute to planetary and societal well-being.

Here at WBCSD we advocate that business has a leading role to play as the world embarks upon this vital journey. In fact, forward-looking companies are not only integrating sustainability at the core of their strategy, decision-making, and disclosures; as long-standing masters of innovation, they are also ideally positioned to become the implementation partner of choice to capture opportunities across systems change, which can yield at least USD $12 trillion in business value by 2030 while generating up to 380 million jobs.

At the same time, businesses need to redefine their conception of “value” to go beyond traditional financial terms. It’s only by taking the integrated approach that we will create a socially, environmentally and economically successful future.

It all starts with better business decision-making. If companies can get better at understanding and disclosing environmental, social, governance-related (ESG) risks, they will better inform their decision-making processes to improve over the long term. Companies need to future-proof their enterprise risk management processes to capture and prioritize ESG risks and improve their corporate governance.

Key developments in this respect are recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). These focus on improving processes, disclosures and scenario-analysis which will have a material impact on corporate governance. In time, these recommendations will completely overhaul our understanding of fiduciary duty, while establishing new parameters for corporate governance.

Governments and other stakeholders are also pushing for better corporate transparency. Because of this, business is increasingly expected to know how to reduce negative social and environmental impacts. However, many businesses do not disclose any ESG information and those who do are mainly focused on backward-looking data, whereas what we need is to measure and manage the risks in the future.

Boards need to ensure that the businesses they oversee are transparent, and management needs to disclose investment grade, forward-looking and decision-useful ESG information to meet the demands of their investors and better understand their risks and opportunities, while adhering to their fiduciary duties.

Doing so will allow investors to integrate the sustainability risks in their valuation models and as such lower the cost of capital for more sustainable companies.

To report consistent, comparable and meaningful information, we need prescriptive, generally accepted methodologies to assess non-financial information, such as natural and social capital.

The new World Benchmarking Alliance, which will create benchmarks within sectors against the SDGs, is going to help drive compatibility and disclosures in the conversations between corporates and investors.

Beyond that, the implementation of the recommendations from the TCFD, maturing reporting standards and mainstream adoption of ESG disclosure will ultimately change the way we make decisions and govern our companies, integrating all impacts and benefits for business, people and planet.