Business performance used to only be judged on short-term financial returns — not anymore.
Most stakeholders today demand greater organisational transparency. They increasingly judge an organisation’s resilience based on how sustainable its business practices are.
As finance professionals, the sustainability call to action matters to us. We own the processes, systems, data, management information and reporting that will help our organisations become more sustainable businesses. We also support sustainable decision-making through analysing and assuring both financial and non-financial data.
Understanding the pillars of sustainability
The UN World Commission on Environment and Development defines sustainability as ‘development that meets the needs of the present, without compromising the ability of future generations to meet their own needs.’
Sustainability has three interconnected pillars, environmental, social and governance (ESG).
- Environmental (planet)
This pillar considers how an organisation takes care of nature. This includes what and how non-renewable resources are used in production, as well as the release of potentially harmful elements to the air, land or water.
- Social (people)
This pillar examines how an organisation manages relationships with employees, suppliers, customers and the communities where it operates. Social issues can range from human rights and health and safety to other responsible business practises, such as product marketing and privacy. Expectations around these issues, as well as environmental issues, define what is often referred to as the social license to operate.
- Governance (profits)
And this pillar deals with how well an organisation manages its business. Effective governance helps mitigate risks, oversee strategy execution and maintains a business’s social license. Specific governance issues include executive pay, regulatory compliance and shareholder rights, as well as internal controls and internal and external audits.
These three pillars are the foundation of the United Nations’ 17 Sustainable Development Goals (SDGs). The SDGs recognise that overcoming poverty requires strategies that build economic growth and address a range of social needs — education, health, equality and job opportunities — while tackling climate change and preserving our oceans and forests.
While the SDGs have a high-level scope globally, organisations like ours play a critical role in achieving them. Together, we have the global influence and economic power needed to make the difference where it matters most — in the communities where people live and work.
Environmental, social and governance and COVID-19
Corporate sustainability has mainly been driven by climate change, which is a massive but predictable risk. However, when the COVID-19 crisis hit full-force in 2020, organisations and governments learned quickly that they must take huge steps to protect their populations. The crisis has exposed the fragile nature of global supply chains and how much countries and people need each other.
As societies emerge from lockdowns, there are demands for national COVID-19 stimulus measures that help build more resilient and sustainable economies. In the Financial Times article, Business faces stern test on ESG amid calls to ‘build back better,' Linda Eling-Lee, the global head of ESG research at MSCI, notes that companies with high ESG rankings have outperformed competitors during the crisis.
The COVID-19 pandemic highlights how important all three core sustainability elements are for businesses.
As we reflect on how fragile human society is, we need to explore how we can embed sustainability risks and opportunities to make organisations more resilient in the future.
Sustainability matters to finance professionals
With the pressing needs of today’s society and the uncertainties that crises like COVID-19 bring, sustainability is no longer a stretch goal for most organisations. We must become sustainable or risk losing our profits, people, resources and (ultimately) our planet.
In a follow-up piece, we will explore specific ways that businesses and finance professionals can use to help encourage sustainable practices in their organisations.
This post is an excerpt from our report, Sustainability and business — The call to action: build back better. Read the full report to learn more about how you can understand and implement sustainability measures in your organisation.