Last Updated on Thursday, 15 December, 2022 at 12:30 pm by The Malta Business Weekly
James Sammut is a Partner & Chief Sustainability Officer at NOUV
American environmentalist Paul Hawken had stated “sustainability is about stabilising the currently disruptive relationship between earth’s two most complex systems – human culture and the living world.”
I do believe that ESG principles will lead to better societies. I also believe that mankind needs to understand that if things remain the same, we are bound to experience severe climate conditions. We all need to do our part, grow up and disrupt the way of doing things.
The values of ESG were introduced with all the good intentions however today, many have started to feel that the term could already be sounding abused and overused.
We only need to go back to what had happened with GDPR in 2018. Back then, we missed to understand the real spirit of this new regulation and most people classified GDPR as solely a legal requirement when in actual fact, GDPR dealt with a much wider spectrum of challenges including data mapping, changes in operational processes and technological controls.
With ESG, we are still in time to communicate its real spirit. We know that the new Corporate Sustainability Reporting Directive (CSRD) expects scoped organisations to start monitoring their ESG performance for baseline year 2024. These organisations need to have a level of preparedness before 2024 in order to pre-empt ESG-related risks that take a long time to resolve due to the multi-disciplined approach needed. In simple terms, organisations need to determine the applicable ESG disclosures (using established ESG standards such as ESRS, SASB or others), the measurability needed to report on the performance and the systems needed to sustain the evaluation. Improvement will be instigated and implemented as a result of risks and opportunities identified.
Whilst it is good to incentivise and allocate funds for private enterprise to actively engage in ESG and related best practice, the first key step is awareness to understand the principles and raison d’etre of ESG, gradually moving into the design, implementation and maintaining of such a system.
Surprisingly, I see a lot of interest from scoped organisations that are already looking into ESG and exploring ways how they could effectively honour some of the expectations that their stakeholders, rightly so, expect from them. I also find encouraging the fact that not only seek ways and means to establish and implement actions, but they are also asking for professional advice.
However, although many companies investing in ESG values could be sending the message that climate change can only be solved by business, governments have a vital role because they are the ones who can ultimately empower whole societies through education, policies and also enforcement. Furthermore, at a local level, the government needs to consider and ultimately determine a competent authority assigned to regulate ESG. The earlier this is set up the better for all interested parties.
The concept behind the recently set up ‘Malta ESG Alliance’ is to be lauded because I have always been a firm believer that when it comes to addressing challenges, together we will always be stronger. And the environment issue is presenting us with noticeably big challenges that require a united front. My only concern is that this alliance may turn out to be a selective and exclusive entity and several stakeholders especially other smaller but focused service providers who have a lot to offer, will be left out.
But the ESG market is sizeable and in due time, all organisations will find themselves roped in. All businesses, need to keep persisting with their commitment to the highest standards, partner with industry experts and provide the best possible service to their clients and assert their expertise. This is what will sustain further business growth.
Having said that, whether it is for profit or not for profit, there are many organisations who want to be deeply committed to sustainability and a better environment. The biggest challenge remains a cultural one and the mindset is still not there because unfortunately, doing things right never happens naturally. We got accustomed to needing an incentive or a financial reward to do what is right or to act more responsibly.
This is why many companies could still be looking at ESG as a cost rather than as an investment for a better future. We need to look at things long-term and businesses need to understand that in the very near future, companies are going to be assessed on their ESG commitments and outcomes.
Luckily, the current young generations are more environmentally conscious, and they carry a stronger emotional value when it comes to matters that protect the environment. Today’s major companies need to bear this in mind because these younger generations are tomorrow’s shareholders and investors.
Organisations will soon be obliged to embed ESG practices across all their supply chain including all their external service providers of products and services. This will definitely happen, and the spill-over effect is going to be huge. Nurturing a different mindset towards environment and sustainability will prepare us for this shift.