Building sustainability into your business has always been a good idea, but attendees at this year’s Davos are focused on turning that good idea into a good business. Techonomy and Wipro hosted a session that laid out the challenges and opportunities that businesses face daily.
One of the themes of the conference is that sustainability needs to include more than just the environmental impact, says Susan Kenniston, VP Global Head of Sustainability at Wipro, an information technology, consulting, and business process services company. “It’s really much more about value today, business value, and thinking of it as kind of capital, natural capital, social capital, and advancing the outcomes of the business and the organizations.”
Fundamentally, sustainable business is just about using resources more efficiently, according to Charles Giancarlo, chairman and CEO of Pure Storage, a company that delivers all-flash storage servers for businesses. Giancarlo pointed out that “if you use fewer resources to produce the same result, and produce less waste at the end of life, you’re creating a more sustainable environment because you need less energy [and] less extraction resources…whether it’s plastics, metals, semiconductors…By producing less waste, you put less cost on society.”
Unfortunately, sustainability initiatives are often hampered by the complicated and confusing landscape of carbon monitoring and accountability. There are various stakeholders demanding numbers, shareholders, investors, government bodies, and even environmental advocates. And they all have different requirements. The easiest thing for companies to do is simply purchase carbon offsets to provide the appearance of emissions reduction, even if the company isn’t reducing its own emissions. “I think a lot of metrics allow a lot of coverups and a lot of greenwashing to take place,” says Giancarlo. “But it also puts a big burden on the industry as a whole because it requires, in many cases, double, triple, quadruple, counting [on] every organization doing it for itself.”
One company attempting to standardize data collection and reporting is S&P Global. The company supports the International Sustainability Standards Board’s efforts to create new accounting standards, ensuring consistency in how companies measure and report on sustainability.
“We have to normalize and make consistent all of that massive information,” says Richard Mattison, President of S&P Global. “And that is not just about scraping data, it’s about engaging with the organizations that create that information and challenging whether the data is correct.”
The model is very similar to the role that credit ratings play, according to Mattison. “We have a view, and a company has a view, and we challenge, and so this is what we’re doing on sustainability as well.” By challenging the self-reported metrics, S&P Global aims to reduce the risk of greenwashing and improve real accountability.
For some companies, past sustainability investments are paying for themselves now. Mattison points to the green bond that Apple posted in 2015 to finance a large solar array for its data centers as one example. At the time, it seemed like an extravagant expense.
“Today, that looks like a genius move,” he says, “You’ve gone off grid. Effectively, you’ve secured your own supply. Solar is now well within the cost curve of coal, which was the cheapest source of energy in the United States. The cost of capital to finance that is cheaper, because there is demand for green bonds.”
In many ways, sustainability is about expanding the time frame of your company. Mattison says “[Apple] invested in the vision, which was not just about the price today, but the price over five to 10 years.” That is how accountants think.
Indeed, one of the most dramatic changes in the economics of sustainability is where it fits into the company’s org chart. Most business leaders say there needs to be buy-in, both from the executive team and the employees themselves. But increasingly, sustainability efforts are being managed by the accounting and finance teams.
Wipro’s Kenniston says she has seen leadership on sustainability change in the last few years as the responsibility for sustainable efforts moves from the CEO and marketing team to the CRO, CFO, and accounting departments. “This is part of the responsibility of the company, the value of the company, and how they assess the risks [and] the opportunities, and so you’re seeing more leadership engaged,” Kenniston says. “It is really a new way of doing business.”
You can watch the full interview below.