Transforming Sustainability: Breaking ESG Silos for Success

Corporate sustainability programs are evolving from isolated efforts into holistic, cross-functional initiatives that break down traditional barriers between business teams, including finance, marketing, and legal departments.

The ESG regulatory landscape is complex and this requires companies to include members from all traditional corporate disciplines. Regulatory bodies around the world are beginning to mandate that companies include high-quality, auditable climate and sustainability information in reports and financial statements, and companies have to be prepared to facilitate collaboration across all functional departments in order to comply.

Here, we’ll take a closer look into the transformative journey companies are undertaking to break the reporting silos to ensure compliance, foster innovation, and drive value creation.

The Changing Landscape of ESG Reporting

The world of sustainability reporting is changing. According to Persefoni, “Environmental, Social, and Governance (ESG) reporting is moving from a voluntary effort conducted by the few to one that regulators and investors mandate…

• Investors and regulators expect ESG data to be accurate, timely, and auditable.

• Investors, in particular, are now looking for assurances on the ESG metrics of their portfolio companies to understand how a company’s sustainability and climate risks translate to investment risks.

• Investors need ESG data they can trust and be confident the data is accurate to make critical investment decisions.

In short, they need “investor-grade reporting,” for ESG metrics.”

Where Should Companies Begin?

Provide Sustainability Training

Sustainability is now a finance and accounting matter, and to ensure compliance, finance teams need to be well-versed in ESG and climate matters. Companies should provide ample sustainability and sustainability and ESG training opportunities for finance team members to prepare them for the future of reporting.

Gain Leadership Authority

Creating dedicated, cross-functional teams are critical for ESG initiatives, because they bring together diverse perspectives and expertise. However, simply creating a cross-functional team isn’t enough. Teams need clear mandates from executive leadership and the authority to make decisions affecting the company’s sustainability efforts.

Incentivize Sustainability Goals

Many leading companies are now linking employee incentives and executive remuneration to ESG performance. By integrating ESG metrics into performance evaluations and bonus structures, these sustainable incentive plans aim to encourage employees across various departments to contribute to sustainability goals.

Real-World Sustainability Initiatives Drive Value Creation

Sustainability is a clear and compelling message to customers, and companies that incorporate sustainability into all aspects of their operations often see financial benefits.

Unilever

Unilever launched its Sustainable Living Plan in 2010, a comprehensive plan aimed at decoupling corporate growth from environmental impact while simultaneously increasing its positive social impact within a decade. This company-wide initiative, enabled by cross-functional collaboration, not only enhanced Unilever’s environmental performance but also drove economic growth. In 2018, Unilever reported that its Sustainable Living brands grew 69% faster than the rest of the company.

Patagonia

Patagonia, an outdoor apparel company, is another leader in corporate sustainability and activism. Its integrated approach to ESG engages every part of the company, from sourcing sustainable materials to its legal team’s involvement in litigation to protect public lands. Patagonia’s commitment to sustainability across all departments has enhanced brand loyalty.

Integrated sustainability programs can enhance competitiveness, reputation, and operational efficiency, while also contributing to societal and environmental well-being. However, many organizations fail to allocate sufficient resources to their sustainability programs, hindering their growth.

It’s crucial for finance teams to budget for ESG initiatives, including investments in sustainable technologies and practices. Without adequate resources, ESG cannot effectively drive value.

Don’t develop a sustainability strategy. Develop a sustainable business strategy.

Integrating sustainability into core strategies and operations allows companies to unlock significant value, ensuring long-term success and resilience in a complex and volatile global environment.

The future of sustainability programs hinges on their ability to integrate across functions, leveraging the collective strength of finance, marketing, legal, and other departments. This comprehensive approach not only advances corporate sustainability but also promotes innovation, resilience, and a competitive advantage in the market.

Are you ready to take the next step in your company’s sustainability journey?

Learn how OBATA can help you break the ESG silo.