Understanding who your business affects and how they affect your business is key to long-term success. If you only focus on customers, you are falling way short. To truly take your business from local to national and on to global levels, you have to consider all the ways your company interacts with the world around it and, most importantly, what stories you are telling.
Stakeholders and sustainability
Stakeholders are looking to invest (whatever that investment might look like) into a well-run, profitable company that is ambitious and moving forward. Sustainable investing is on the rise and more than that, companies that invest in managing their resources show higher investment returns.
When we take a step back from the ‘feel-good factor’ of sustainability and think about it from a governance perspective, we can see what is so obviously true. We know that good governance leads to higher performance in a company and by demonstrating that you are able to run your company with solid, integrated reporting on your financial and non-financial KPIs, you can demonstrate to your stakeholders just how well-positioned and efficient you are.
With a new wave of financially independent millennials on the rise, we have to accept that they are going to be controlling the wealth of future generations. When they’re looking to invest in companies, those that show a clear consideration of their impact on the environment and society around them will be more attractive.
A business case can be made for sustainability, not just from a future-proofing standpoint:
“Investors engaging in sustainable, responsible and impact investing . . . rely on information like a company's energy emissions, employee policies or executive pay structure to better evaluate the long-term health and future financial performance of their investments. Many are broadening their focus to include corporate governance, invoking investing's fundamental tenant — diversification — as one measure of a board's ability to minimize risk and maximize shareholder returns.”
— Peter T. Grauer, chairman of Bloomberg LP and co-founder of the U.S. 30% Club, excerpted from Investment News
What do your stakeholders want to know?
Ultimately, stakeholders want to know what kind of company they are doing business with. One of the key indicators for a public company's success is their quarterly earnings reports. These only measure one thing, though: bottom-line profit. The reports don’t show how the company got its revenues, or just how much it affects the share price.
In 1994, when John Elkington coined the phrase 'Triple Bottom Line,' it kickstarted a revolution of business owners that didn’t want to be held hostage by a 90-day profit cycle. Instead, those who wanted to consider the environmental and social impacts of their work could add a ‘bottom line’ figure to report on.
Today, we see many different ways this has developed, from advances in reporting by organizations such as the Global Reporting Initiative or Integrated Reporting, all the way to the growing movement of companies becoming certified B Corporations.
With the planet running out of resources, it has never been more important that we start to look at new ways of doing business. We are investing more than ever in reporting our sustainability efforts and we know that it’s what our stakeholders want, as well.
The question now is how you take all of the data you use to create your reports and make it accessible — and meaningful — to your stakeholders.
How to tell your story
The ability to control the narrative of your company in the eyes of your stakeholders is incredibly important for efficient operations, investment potential and growth plans. We recommend a very simple process for ensuring that you are using the right stories from within your company to drive conversations:
Sustainability, put simply, is the ability to manage your resources so that you don’t use more than you put back. If you are doing great work towards a more sustainable future for your company, then why not tell the world? Be part of a wider conversation that will drive more revenue to your bottom line while carefully managing our shared resources.
The investing landscape is evolving, and asset managers must adapt their practices in response to a general trend toward passive management.
Active management holds a significant market share of assets invested, a total market value of approximately US$10 trillion, compared to the close to US$6 trillion in passive management, according to Morningstar.1 However, the investing landscape continues to change rapidly, and the trend toward passive management is accelerating. In fact, “in the past four years, passive investments have gone from one-fifth of long-only assets under management (AUM) to one-third today,” according to Bloomberg.2
Environmental, social and governance (ESG) investing can help active managers differentiate their offerings, and ultimately offer greater value to investors. As the investment landscape continues to evolve, institutional shares, retirement shares and platform/wrap-up programs are expected to surge. Given these predictions, active managers should consider ESG as a means of creating wealth for their investors. By incorporating ESG strategies into their mix, asset managers can differentiate from passive management strategies by enabling clients to customize their portfolios based on their needs and preferences.
The rise of ESG investing
Sustainable investing has experienced remarkable growth over the past half-decade. Almost US$9 trillion, or one-fifth of all AUM in the United States, is now invested with ESG considerations, according to the US SIF.3 This number represents a 33% increase since 2014. A study by Calvert Research and Management found a positive link between corporate sustainability efforts and financial performance, which suggests that adoption and implementation of sustainable business practices can create efficiencies that increase shareholder value and mitigate risks.4
Several trends have emerged as a result of the continual growth of sustainable investing and the shifts in the investing landscape:
There is more than one way sustainable investing can be integrated into a portfolio, so active managers may benefit from greater flexibility in meeting individual investment goals. ESG-focused passive investment products exist, but they cannot be tailored specifically to meet investors’ values. Through adoption of sustainable investing practices, active managers have the opportunity to both mutually enhance returns and increase rigor in risk management.
Adopting an individual ESG product or tool alone will not suffice to future-proof against the rise of passive investment. A holistic go-to-market offering will allow active managers to use their unique position of understanding investor needs to create a robust investment strategy. A robust offering should embed sustainability throughout the business practice, including: (1) leadership governance; (2) an ESG-focused investing strategy; (3) tools; and (4) reporting.
1. Promoting ESG investing through leadership governance
Delivering any effective and successful go-to-market offering requires a well-established framework and leadership governance. An individual ESG product or tool may provide an investor access to the market, but a new go-to-market offering with a leadership-driven strategic vision will enable active managers to meet investors’ needs and drive an increase in AUM.
Understanding the importance of a clear strategy and vision, JP Morgan Asset Management formed a leadership framework to develop a sustainable investing strategy and help investors achieve their ESG investment goals. This framework is called the Sustainable Investment Leadership Team (SILT), consisting of “senior leaders, portfolio managers and client advisers at JP Morgan AM and led by the joint head of strategic product management and ESG lead for global investment management.”6
Large active managers can capitalize on establishing a strategic leadership framework by bringing leading practices across investment capabilities and asset classes, and cross-departmental collaboration. With the rapid growth within the sustainable investing sector, active managers will benefit from a clear vision outlined by a strategic ESG approach. As a result, active managers can deliver the ideal mix of ESG data reporting, tools and asset classes to continually grow their AUM and establish themselves as premier players in the industry.
2. Introducing an ESG-focused investing strategy
In the past few years, different asset classes and investment vehicles have been engineered with the aim of providing greater customization. With this increased availability of products, an ESG-focused investment strategy can be constructed while also considering investor goals and risk profiles. Additionally, active managers may use the private markets to access products that generate a higher impact, while passive ESG instruments lack this flexibility.
There is a range of asset classes and investment vehicles available to asset managers seeking to structure an ESG-focused investment portfolio. The list below highlights some examples:
Asset managers should re-engineer the traditional risk profile questionnaires provided to investors, to include questions relating to ESG-specific preferences and goals. As evidenced above, asset managers may choose from numerous asset classes and investment vehicles to shape their investors’ ESG investing strategies, depending on their goals and risk profiles.
Crucially, asset managers can work with prevalent industry players such as MSCI and Sustainalytics to target the issues most demanded by investors and differentiate their offering. Asset managers can also provide individualized vehicles to meet the needs of investors through launching unique indexes or ETFs. MSCI allows clients to create thematic indexes to enable investing based on a demographic trend.7 Similarly, Sustainalytics allows the creation of ESG and sustainability indexes with the backing of their sustainability research and support services.8
3. Enhancing tools
Digital innovation has evolved clients’ expectations of financial services and investing. Investors are demanding more tools and educational materials, in addition to an enhanced user experience. Institutional and retail investors are demanding better tools within sustainable investing to enable them to make more informed investment decisions. Some players in the industry have already rolled out products, but with the continual growth of ESG investing, more tools and educational materials will continue to emerge to satisfy this increased demand.
State Street recently announced its launch of a new set of analytical tools aimed at capitalizing on the appetite for responsible investing. To help in its effort, the Boston-based bank has facilitated discussions with more than 15 research firms, including MSCI, Sustainalytics and TruValue Labs, to license their data. State Street plans to add those companies’ research and ESG ratings alongside its existing risk-management and analytics systems for approximately 300 investors. The plans follow efforts by State Street’s money-management division, State Street Global Advisors, to add several ETFs and other offerings that invest in assets that screen stocks for environmental and social-justice criteria.9
In 2017, Scotia iTRADE rolled out Canada’s first sustainable investing tools for direct investors. The new tools provide detailed ESG data. The ESG research and ratings underpinning Scotia iTRADE’s sustainable investing tools are provided by Sustainalytics, a global independent provider of ESG research and ratings to asset owners and investment managers. This tool also enables investors to access a holistic view of a company and easily identify ESG leaders and laggards within an industry group.10
4. Providing ESG reporting
Recent studies show that, in the long term, investments with ESG considerations tend to outperform those without, and prove to be a more effective way to manage risk. With performance concerns dissipating, the current obstacle impeding ESG integration is the lack of ESG data and reporting. According to a study by State Street,
60% note a lack of industry standards for measuring ESG performance as a significant barrier to full integration. 46% of retail investors want to see more companies reporting ESG performance-related data and 46% say they need more ESG data from other sources to make educated decisions.”
Governmental and regulatory agencies have not yet established a gold standard reporting framework, but several players, such as MSCI, have recently released “good practice” guidelines aimed at creating a more consistent approach. In 2017, the London Stock Exchange also issued guidance which sets out recommendations for “good practice” in ESG reporting. The guide responds to “demand from investors” for a more consistent approach to reporting that is now a core part of the investment decision process and enables investors to make more informed investment decisions. The creation of ESG indexes will “support common approaches to ESG investing, and help institutional investors more effectively benchmark ESG investment performance.”12 ESG indexes combined with “good practice” guidelines will not only standardize, but scale the ESG movement.
As reporting and data standards mature and achieve standardization, asset managers should invest in this space to provide the ESG considerations demanded by investors. In the next decade, the expectation from the industry is that institutional investors will be pushing ESG reporting to become part of the regulatory agenda, and that firms will be mandated to include this data in their public financial reports. Therefore, asset managers will be better positioned to face changes in reporting standards by regulatory agencies.
Large managers are putting ESG reporting into practice by reporting on performance from various sustainable investing lenses. Reporting at both a granular, securities level and an aggregated, portfolio level provides clients with a full understanding of their returns and the impact of their investing.
Active managers must react to the realities of the evolving investing landscape. Sustainable investing products and services provide asset management firms access to a previously untapped 18% of the market, equating to an over US$4t market. In order to capitalize on this ever-growing demand for ESG products, asset managers need to establish a strategy to offer clients with enhanced customization that meets their needs and objectives.
Through a holistic go-to-market offering — encompassing leadership, an ESG-focused investing strategy, tools and reporting — active managers have the opportunity to offer clients improved portfolio customization based on their preferences and can more effectively serve an industry that will only continue to evolve.
1 Morningstar Direct Asset Flows Commentary: United States,” Morningstar, April 2017.
2 “These Charts Show the Astounding Rise in Passive Management,” Bloomberg, December 2015.
3 “Report on UN Sustainable, Responsible and Impact Investing Trends,” US SIF, 2016.
4 “The Financial and Societal Benefits of ESG Integration: Focus on Materiality,” Calvert Research and Management, 2017.
5 “Asset Managers Yield to Pressure on Fees,” Institutional Investor, May 2013.
6 “JPMAM creates sustainable investing team following ESG fund launch,” Investment Week, March 2017.
7 “Global Indexes, Delivering the Modern Index Strategy,” MSCI, 2016.
8 “Index Research Services,” Sustainalytics, 2016.
9 "State Street Offers New Tool to Gauge Environmental, Other Social Risks,” Morningstar, March 2017.
10 “Scotia iTRADE announces Canada's first sustainable investing tools for direct investors,” Yahoo Finance, March 2017.
11 “State Street’s Center for Applied Research Reveals Industry-Wide Shift as Investors Find Sustainable Value through ESG,” State Street Newsroom, March 2017.
12 “MSCI ESG Indexes,” MSCI, 2017.
How can company boards tip the corporate scales towards equitable, sustainable and inclusive leadership? The recent FutureBoards Corporate Governance Summit explored some of the answers.
Corporate business is under fire from shareholders, under pressure from legislation and (seemingly) under-engaged with sustainability and the SDGs. However, whereas the credibility of top management has dropped to an all-time low, boards have fared better, retaining the trust of the public to a much higher degree.
Consequently, there is an increasing call for boards to step up in promoting equitable, sustainable and inclusive leadership, and in doing so to make their companies “future-fit”.
It is this opportunity that the FutureBoards Corporate Governance Summit chose to address at Chitra House in Oslo recently. Sustainability Hub was invited to observe the session on how investors and boards can contribute to achieving the UN Sustainability Development Goals (SDGs).
Long-term value creation.
The Summit brought together leaders, investors, CEOs, board chairs, politicians, regulators and academics to exchange insights and explore cases and best practices on how business owners and governing bodies can best respond to expectations and scrutiny from stakeholders.
The delegates agreed that the scope of the challenges boards face requires changes to both their composition and the way they work. Moreover, they seemed to reflect a wider stakeholder consensus that emerging governance principles, such as purpose, corporate citizenship, responsibility and sustainability, all point to a renewed focus on ensuring long-term value creation.
“How and by whom should companies be governed in the future?”
Turid Solvang, Founder & CEO of Future Boards, emphasized the importance of arriving at a common understanding of how, and by whom, companies should be governed in the future.
Sven Mollekleiv, Senior Vice President and Head of Corporate Social Responsibility at DNV GL, underlined the importance of business addressing this together, defining roles, and turning risks into opportunities. Citing Paul Polman, CEO of consumer goods multinational Unilever, he said that in order to create long-term shared value, boards need to understand how ensuring social prosperity and dignity is good business and how the SDGs can support that work.
Chief Corporate Governance Officer Carine Smith Ihenacho explained how Norges Bank Investment Management (NBIM), which invests in 9000 companies across 70 countries, works with boards to encourage focus on long-term value creation. NBIM actively engages in board composition and develops expectation documents on issues such as climate change, human rights and anti-corruption, which are used for dialog with companies and for mapping progress against the SDGs.
“Convert words into numbers, and focus on reporting.”
Carine urged the delegates to help boards convert words into numbers and to focus on reporting. She suggested that a better reporting framework with meaningful criteria for individual issues is needed, mentioning both the OECD guidelines on corporate governance and the Carbon Disclosure Project’s reporting platform as good examples.
Quoting chairman of the international integrated reporting council Professor Mervyn King’s comments about the “plague of short-term capitalism,” Turid Solvang reminded delegates how boards make final judgment calls that affect all of us, and how vital ESG (environmental, social, and governance) reporting is for informing investors of a company's impact on the world.
Engaging with the Sustainable Development Goals
The delegates also took a close look at how investors and boards can engage with the United Nation’ SDGs. Sustainability, is one of the new perspectives on the purpose of companies that re-define their role in society and pose fundamental questions about the future work of boards.
Per Heggenes, CEO of the IKEA Foundation, explained how its vision of a “better everyday life for people” seen through the filter of the SDGs had resulted in a focus on children/youth in crisis in Sub-Saharan Africa. The Foundation now engages with the worst impacts of climate change and population growth by investing in Sub-Saharan Africa, where most population growth will happen. It has also initiated a process with the top seven global climate change NGOs to co-create an agenda for engaging with business and climate change.
“Demonstrate the clear alignment between doing good and good profits!” Johann Olav Koss, President, Waratah Impact.
President of Right to Play, Johann Olav Koss, now also heads investor fund Waratah Impact, which provides good returns by making “externalities” such as climate change, into internalities/company costs and reducing risk through a fully integrated ESG strategy.
He suggests that “green/SDG washing” happens without agreed reporting frameworks and standards and supports hard law obligations, as incentives are not enough. Citing a Goldman Sachs study showing that companies whose ESG policies lack KPIs perform badly, Johann Olav encouraged investors to influence companies by discussion and engagement and to demonstrate the clear alignment between doing good and good profits.
Text: Kevin Reeder
These are unprecedented times.
While global economic growth and average lifestyles are in many ways at all-time highs, this has come with costs such as degraded environmental systems which otherwise support economies, societies and cultures. Other costs appear to include rising inequality, with the effects of automation only expected to accelerate.
Scientists predict that the next 20 to 30 years will be filled with severe challenges to our ways of life. We need look no further than the turmoil in Syria and Venezuela to see examples of the direct consequences of degraded environmental and social systems, and these may well grow exponentially if we don’t find a way to resolve these present day challenges.
Environmental challenges we currently face, or will face in the near future, include:
The social dimension, while at times overlapping with the expected outcomes above, also include a lack of adequate education, housing, financial, medical and communication services, as well as unequal access to energy.
Progress has been fragmented and uneven. China has made great strides in eliminating energy poverty, but these challenge remains in India. Conditions are improving for a rising middle class in developing nations, while in countries such as the United States and United Kingdom, large swaths of society feel increasingly left behind, leading to unexpected results from election cycles which have environmental and social ramifications.
The interconnected nature of the global economy and these environmental and social challenges are becoming clearer, and fortunately, so are solutions to these challenges. However, what is needed to fix these problems is not simple. Many categories of solution in fact appear to be necessary. The common thread for these myriad solutions is innovation for impact.
Sustainability has become an issue of global competitiveness, requiring innovative thinking in areas such as:
Countries and regions which successfully address these areas will almost certainly be the most economically vibrant in the coming decades. However, solutions to social and environmental challenges may have side effects and unintended consequences that must also be managed for. A full solution set must be multi-layered and complex by definition. A systems approach to innovation will be necessary, and therefore we see the need to run solutions within diverse areas, in parallel, for best effect.
Unintended consequences have already been witnessed in regions such as the Silicon Valley in the US. This region succeeds through a lens of innovation, leading to almost out of control financial success for the region in general, yet many remain economically left behind. An ideal systemic solution appears to require more considerations of the social dimension, creating opportunities for all categories of resident, while reducing inequality, in order to achieve the full economic and healthy lifestyles that all of its citizens might benefit from, but how to best achieve this outcome.
Key questions and imperatives, as a result, continue to emerge, such as:
This is what our new book Sustainable Innovation and Impact aims to achieve, namely a presentation of one possible interconnected system of environmental and social solutions, which if run successfully in parallel, might keep us from driving over the edge of the environmental and societal cliff that we are otherwise seemingly heading directly towards.
Turning challenges into opportunities seems to be the best way to drive future success and everyone wants a world that thrives.
What are these specific solutions and what do they start to look like? This is what we posed to recent students at Yale, Brown, Maryland and Concordia in Montreal, and some of the best solutions are featured within.
As we wrote in our previous book on sustainable investing, the future of investing now requires sustainability to be fully “baked in”, and for the environmental and societal outcomes we all seek, there needs to be a business case.
Millennials recognize this, and so do leading corporations, as well as an increasing number of investors from all walks of life. New business models have also emerged in the sharing economy, and global cities are rising up as booming and thriving metropolises where all sorts of solutions are emerging constantly from the positive energy of their citizens. This dynamic now needs to be experienced and implemented in all countries and regions to take full effect. Solving these problems is our biggest challenge, and hence our biggest opportunity.
We hope you enjoy this expedition and that this helps you find your own path forward. We all now need to play our part to help create the sustainable and economically vibrant future we all desire.
It appears to be the only way.
This is an adapted version of the introduction of Cary Krosinsky and Todd Cort newest book published by Routledge.
June is World Oceans Month, marked for spreading awareness of the earth’s oceans, coasts and marine life. It is specifically highlighted on June 8, entitled World Oceans Day. With all the attention marine littering has received over the past few years, corporate life needs to step up. This month provides them with the perfect occasion.
Oceans cover more than 70 per cent of the earth, it is perhaps strange that World Oceans Day hasn’t received the same recognition as Earth Day and Earth Hour. We've all seen pictures of sea animals trapped in plastic and have heard about the floating garbage patch, that's twice the size of Texas. It may feel a bit distant from Norway, with our northern location and breathtaking fjords of clear blue waters. Yet, the reality hit when attention was brought to the polluting cruise ships, the images of coastlines covered in trash and last but not least: the whale stuffed with plastic in its belly. It is even about to be exhibited in a museum.
Norway has a long history of being a sea and fishery nation. We are also present on the seas with oil production – with plans of extracting oil in areas that will affect marine life and the fish we live off. As oil also is used in the making of plastic, one cannot help but think of the irony: advocating for less interference with the oceans’ ecosystems is something we increasingly do, at the same time as petroleum is Norway’s most important (and profitable) industry.
This year, more than 80,000 Norwegians expressed an interest in taking part of Strandryddedagen – a national initiative to clean beaches across the countries. That surely says something about an increased awareness of what state the world oceans are in. An increased awareness of how companies behave is also implicit here. They are not only expected to be against damaging initiatives, but also to walk the talk. In order to do that, they need real strategies (big or small) that deliver what they promise.
The faster they are at making these changes, the better, with the European Union considering a ban of disposable plastics such as cups, lids and cutlery. Joining in to do good will help building a future-proof reputation. Making these commitments during World Oceans Month is the perfect timing to “dive in”.
The risk of drowning in plastic turns out to be just as scary for a business. It’s time to not only walk the talk, but to swim it. Let’s hope more companies are ready to take the plunge.
Miljøhippiene solgte dommedag og fikk betalt i forbud og avgifter. Nå, mer enn 30 år etter Brundtland-kommisjonen, går kapitalistene i spissen for å redde kloden. Bør kapitalistene få gulrøtter for innsatsen? Eller må de piskes til lydighet og betale når de ødelegger livsgrunnlaget vårt?
Meld deg på frokostmøte hos Geelmuyden Kiese den 20. juni kl. 8-10 her. Der debatterer vi om kapitalistene bør få betalt for å redde kloden.
Siden 60-70-tallet har en liten bastion miljøhippier jobbet beinhardt for at næringslivet skal ta større ansvar for naturen, klimaet og samfunnet vårt. For å motivere til miljøkamp har de fortalt fryktinngytende historier om naturkatastrofer og dyredød.
Miljøhippiene brukte lenkeaksjoner for å sette de fossile industrigigantene i gapestokken. På TV, i avisene og i sosiale medier. Og de svingte pisken for å få politikerne til å innføre flere forbud, høyere avgifter og strengere krav til næringslivets samfunnsansvar.
Men nå, 200 år etter Karl Marx sin død, er en ny bevegelse i ferd med å erobre samfunnsansvarsbegrepet. Bærekraftkapitalistene er på fremmarsj.
Bærekraftkapitalistene anser samfunnsansvar som en integrert del av forretningsstrategi og merkevare. De er på jakt etter muligheter og løsninger som gir avkastning både finansielt, miljømessig og for samfunnet.
Larry Fink, styreleder og CEO i Blackrock, verdens største investeringsfond, er en typisk bærekraftkapitalist. Han har ikke tillit til at myndighetskrav og reguleringer alene kan løse samfunnsutfordringene vi står ovenfor. Sosial ulikhet, lav lønnsvekst, automatisering og klimaendringer truer selskapers langsiktige vekstpotensial, og påvirker finansielle risikovurderinger.
Derfor sendte Fink ut et brev til 17 000 administrerende direktører i januar i år. I brevet krever Blackrock-sjefen at selskapene må vise samfunnsansvar og skape verdier for flere enn aksjonærene. Hvis ikke trekker Blackrock investeringene sine.
Toppledere i næringslivet er i ferd med å innse at monsterbedrifter er dårlig business. Og at samfunnsansvar og bærekraft er blitt et knapt gode som er mer verdifullt enn noen gang.
Da Poul Poulman ble administrerende direktør i Unilever i 2009 overtok han et synkende skip. Unilever er en av verdens største produsenter av dagligvarer, en bransje kjennetegnet av tøff konkurranse og svak vekst. Det første han gjorde var å samle 175 000 ansatte i over 150 land rundt tydelige mål for bærekraftig vekst.
Bærekraftstrategien har gitt resultater. I starten av mai rapporterte Unilever at de bærekraftige merkevarene vokser 76 prosent raskere enn resten av selskapet. Unilever-aksjen har de siste to årene gitt en avkastning på 25 prosent. Til sammenlikning har konkurrenter som Procter & Gamble og Kraft Heinz fått redusert aksjeverdien med henholdsvis 10 og 33 prosent.
Et monumentalt skifte er på vei. Næringsliv og finans er i ferd med å skifte fokus fra å maksimere en verdi – aksjonærkapitalen – til å inkludere samfunnsinteresser i investeringsbeslutningene sine.
Men mange er skeptiske til om markedskreftene klarer å redde kloden på egenhånd. Er bærekraft i ferd med å bli så lønnsomt at myndighetene ikke trenger å involvere seg? Eller må samfunnsansvaret lokkes frem av stadig større statlige gulrøtter?
Vil bærekraftkapitalistenes grønne grådighet være nok? Eller må synderne straffes med tøffere piskeslag for at vi skal nå Parisavtalen og FNs bærekraftmål?
Velkommen til debatt hos Geelmuyden Kiese 20. juni kl 08.00!
Først publisert på www.gknordic.com og Gjengitt med tillatelse fra Geelmuyden Kiese.
Purpose-driven brands can build stronger emotional connections with consumers that go far beyond a transactional relationship, according to the newly released 2018 Cone/Porter Novelli Purpose Study. Nearly eight in ten (79 percent) say they are more loyal to purpose-driven companies and would tell others to buy products from those companies (78 percent), while two-thirds (66 percent) say they would switch brands and over half (57 percent) would pay more.
The study asked a random sample of over 1,000 Americans over the age of 20 about their expectations and behaviors towards companies that lead with purpose compared to traditional brands. More than three quarters (78 percent) of consumers believe it is no longer acceptable for companies to just make money, they expect companies to positively impact society as well. Companies that meet those expectations seem likely to gain new customers and market share, while benefitting from amplified messaging.
“Purpose-driven brands are able to develop much deeper relationships with consumers by connecting on issues that matter,” said Brad MacAffee, CEO of Porter Novelli. “Consumers of Purpose-driven brands are redefining modern-age loyalty, and brands can seek to benefit from this meaningful personal commitment.”
Consumers want to share the stories of purpose-driven companies
Three quarters (77 percent) of Americans said they feel a stronger emotional connection with purpose-driven companies than traditional brands, while two-thirds (67 percent) also felt that they care more about them and their families. 70 percent feel proud to be associated with purpose-driven companies, which may explain their interest in sharing purpose-driven companies’ stories and higher levels of engagement. Three quarters (78 percent) of those surveyed said they would tell others to buy products from purpose-driven companies and nearly as many (73 percent) would share information or stories about that company. Consumers also want to play a role in advancing the positive impact that company seeks to make, with nearly two-thirds (65 percent) saying they would advocate for issues that company supports.
Beyond positive word of mouth, they’re willing to share purpose-driven companies’ content with their social networks. Consumers are not only more willing to share such companies’ content over that of others, but they are willing to share more than just information about commitments to society and the environment (66 percent). They are just as likely to share product information (66 percent), closely followed by promotions and sales (64 percent) and the company’s overall mission (62 percent).
“Consumers’ willingness to tell a Purpose-driven brand’s story means that company will have an expanded reach to entirely new audiences,” said Alison DaSilva, EVP of Purpose/CSR at Cone Communications. “They are being introduced and ‘endorsed’ based on their role in society and shared values versus a transactional and transient benefit, further expanding a company’s future loyal consumer base.”
Purpose is hot on the heels of quality and cost when it comes to purchasing decisions
When asked to choose between supporting purpose-driven, low cost or quality brands, purpose proved to be a close competitor. Quality remained the primary factor in consumers’ purchasing decisions, loyalty and recommendations to others. Regarding purchases, quality was most important for 41 percent compared to cost for 29 percent and purpose for 20 percent; for loyalty, 40 percent chose quality, 33 percent chose purpose and 27 percent chose cost; and for telling others to buy a product, quality was the most important for 44 percent, while cost was for 29 percent and purpose was for 27 percent.
However, purpose reigned when it came to emotional connection (50 percent vs. 30 percent quality, 20 percent cost), willingness to defend a brand when someone speaks badly of it (48 percent vs. 33 percent quality, 19 percent cost), sharing information or stories about or from a company (45 percent vs. 33 percent quality, 23 percent cost), and being proud to be associated with that company (42 percent vs. 40 percent quality, 18 percent cost).
The importance of emotional connection with customers is not to be taken lightly. 71 percent of survey respondents said they expect companies to connect with them emotionally on issues that matter to them personally, including ones that fall well outside of their operational footprint. Nearly four in five (79 percent) Americans believe companies should work to address social justice issues. The majority of respondents feel companies should have a seat at the table to solve complex and hot-button topics including: privacy and internet security (86 percent); domestic job growth (86 percent); access to healthcare (85 percent); sexual harassment (83 percent); racial equality (81 percent); women’s rights (80 percent); cost of higher education(76 percent); immigration (74 percent); climate change (73 percent); gun control (69 percent); LGBTQ rights (63 percent); and fake news (56 percent).
“From #MeToo to March for Our Lives, the last year has seen unprecedented levels of support for critical social justice issues that connect with Americans on a far deeper and vastly more emotional level,” said DaSilva. “While no company should stand for all these issues, organizations should look within and use their unique Purpose to determine which issues they can authentically support.”
Consumers believe all industries, employers should lead with purposeNo industry seems to be exempt, either. When asked among which industries it was most important to have and communicate a sense of purpose, health and wellness (87 percent) topped the list, followed by food and beverage (81 percent) and technology (81 percent). Still, more than three quarters also believe it is important for industries such as manufacturing (79 percent), automotive (78 percent), retail (77 percent), financial services (77 percent), professional services (76 percent), and footwear and apparel (76 percent).
The study also supported previous findings that purpose is increasingly important to maintain its license to operate and its ability to attract talent. 85 percent of Americans would support a purpose-driven company in their community, 68 would work for that company, and 54 percent would be more willing to invest in that company.
“Purpose is more than a marketing tactic or bolt-on strategy,” said MacAfee. “It must be deeply embedded into the business, the brand and the experience that is delivered. And those companies that integrate Purpose into the very bedrock of the business will stand to build deeper bonds with existing consumers, expand the consumer base and enlist those brand advocates to share the brand message.”
25 April, 2018 Sustainability Hub Norway, together with Scatec Solar, Statkraft, and Statoil, hosted its annual sustainability reporting event in collaboration with the World Benchmarking Alliance and the Dutch Embassy. It was a particularly monumental day for S-HUB, as the 'State of Sustainability' report was launched in addition to S-HUB's first annual report.
The 'State of Sustainability' is based on S-HUB's previous editor, Pia Lefevre, masters thesis at NTNU. She conduced a survey on 115 Norwegian companies, enabling her to map out the current trends of sustainability in Norwegian companies. The report was prepared by S-HUB's leading member, Leidar Norway.
This year there were more than 135 people in attendance at the event, with 180 registered and a long waiting list. Similar to last year, summaries of each speaker as well as each speaker's presentation is included below as well as videos of each speaker.
Part 1: Sustainability Reporting
During the first part of the seminar, thought-leaders and corporations led discussions on trends, and showcased different approaches to sustainability reporting.
Game changers in sustainability reporting - TCFD
Johanne Ness a Climate & Environment Advisor from Cemasys presented the game changers in sustainability reporting including the Paris Agreement, Global Risks Report from the World Economic Forum, Financial Stability Board (FSB), and Network for Greening the Financial System (FGFS). The true kickstarter for this type of reporting was the Task Force on Climate-related Financial Disclosures (FCFD), which was created with the goal to assess and price climate related risk/opportunities and transparency. When reporting keep in mind:
Integrated reporting, an avenue to faith in sustainability indicators?
Hanne Thornam, Head of Sustainability Services Norway - EY, explained that companies in the 21st-century are knowledge based compared to product based companies of the 20th-century. Investors now want to see non-financial information such as a company's long term strategy for sustainability, which can create value in the short and long-term. Notable examples of sustainability strategy and indicators include: Storebrand, Tine, and Crown Estate.
Investor expectations of TCFD reporting
Lars Erik Mangset, a Senior Advisor of Responsible Investments at KLP made it clear that the most important aspect about TCFD reporting is just to start. He explained that investors realize that this type of reporting is new for many companies, thus as long as your company is committed to improving reporting methods such as standardizing over time and communicating even uncertainties investors will most likely be satisfied.
The design choices of Scatec Solar's 2017 sustainability report
Scatec Solar had high ambitions for its 2017 sustainability report - embarking on a journey to improve the report from last year - kicking this year-long process off by co-hosting the Sustainability Reporting event in April 2017, partnering with S-HUB and reaching out to various stakeholders.
Julie Hamre, Senior Sustainability Advisor and her team introduced GRI standards and aligned the reporting to criteria from external rankings such as Sustainalytics. Her topic tip is to work with your stakeholders, not just your investors to get feedback on how your company can improve in reporting.
The design choices of Statkraft's 2017 sustainability report
For Statkraft's 2017 sustainability report, topics were grouped by social, environmental, and economic GRI standard disclosures. Rachel Groux Nürnberg, SVP Head of Corporate Responsibility, praised the GRI questions for creating engagement on sustainability within the company, further saying that reporting is a vehicle that contributes to driving performance. From a practitioner's perspective a sustainability report should be: transparent and balanced, show the risks and opportunities, and tell consistent stories.
The design choices of Statoil's 2017 sustainability report
For this year's report, Statoil played with the idea of integrating its sustainability report into its annual report, however, it ultimately decided to focus on a separate sustainability report and also using web-based reporting to share underlying data. The sustainability reporting team, led by Sophie Tibble, Senior Advisor of Corporate Sustainability, determined that the report needs to be understandable in the eyes of lots of different readers, including those who actively use social media. Although Statoil's sustainability priorities do not change year to year, what the company focuses on does. Sophie says, "What we have to show is how business in contributing to sustainable development and we need to try to quantify that". This year Statoil's key focus was how to tackle SDG number 13, Climate Action.
Part 1: Panel discussion and Q&A
Cilia Holmes Indahl, the Sustainability Director of Aker Biomarine, led the panel discussion with the speakers from part one of the event. Topics included how much information should companies disclose, what is the strategy for companies setting goals around science based targets, and the complexities of applying GHG Protocol Corporate Standard classifications scope 1, 2, and 3.
Part 2: Measuring SDG impact
The second part focused on diving deeper into the Sustainable Development Goals, with presentations and discussions on how companies are already reporting towards them; challenges and solutions in measurement, and how investors are using this information.
How to report on the SDGs: What good looks like and why it matters
Anette Rønnov, KPMG's Director Sustainability Services Norway discussed the firm's research on what the biggest 250 global companies are doing in relation to the SDGs. To analyze these companies, KMPG developed 9 criteria for what good SDG reporting looks like that focuses on measurement, prioritization, and understanding. Key insights from the report include:
Measuring and comparing performance between companies
Gerbrand Haverkamp the Executive Director of the Dutch based, World Benchmarking Alliance, founded the organization with the goal of benchmarking companies against themselves as well as other companies as well as how companies contribute to the SDGs by a sector by sector bases.
Benchmarking companies is seen as a driver for change not only across sector, but collaboratively, with input from companies, civil society, governmental organizations, and investors. This alliance aims to build on different and relevant principles, frameworks and standards of sustainability reporting.
What do investors use SDG information for
Matthew Smith, the Head of Sustainable Investments at Storebrand Asset Management
explained that the investment firm preforms sustainability rankings. Top companies that are rated 'solution stocks' are selected for dedicated sustainability funds, while the 10% worst performers in high risk industries are excluded from all investments. He also provided insights on why your company should use SDG information in investment analyses:
Part 2: Panel discussion and Q&A
Andreas Friis, the Managing Director of Sustainability Hub Norway, led the second panel. The biggest challenges for using the SDGs on not only a global scale, but also a more local scale were discussed. The term 'SDG-washing' was also brought up. This term basically means that companies often loosely integrate the SDGs into sustainability reports without holistically addressing how the company will reach the targets or goals. In other words, just starting to work on the SDGs is simply not enough, there are less than 12 years before the SDGs need to be met in 2030.
Text: Lauren Guido
Video: Mads Metz/ Litteraturhuset
Video editing: Esther van Langen
You might think fashion will be among the last industries to embrace environmental awareness and sustainable business. Global clothing retailer H&M is on a mission to change that.
Will it take a miracle to change the mindsets and habits of the growing ranks of fashionistas who obsessively follow clothing trends? Miracles are few in life, but marvelous ideas that combine environmental awareness and sustainable business are becoming a real force for change.
In the fashion industry, look to global mega brand H&M. Considering its beginnings in Sweden, there are good reasons why the company should drive the fashion industry towards sustainability. On the one hand, Sweden is ranked among the most sustainable countries in the world. On the other, the citizens of this wealthy social-democratic land throw away 8 kilos of clothes each per year (around 40 T-shirts).
Anna Gedda, Head of Sustainability at H&M group, visited Oslo recently. In a roundtable session, she gave Sustainability Hub the lowdown on how H&M is changing the clothing industry.
“We need to not only make fashion sustainable, but to make sustainability fashionable.” Anna Gedda, Head of Sustainability at H&M group
A long-term sustainability strategy focused on 3 pillars
“Mindset change is more important than checklists and routines – culture eats strategy for breakfast.” Anna Gedda, Head of Sustainability at H&M group
A set of ambitious goals
Supporting industry innovation
Supporting consumer awareness
“The emerging technology is fantastic, but it is only a means to an end. That end should be sustainable and circular business.” Anna Gedda, Head of Sustainability at H&M group
A letter from Sustainability Hub Norway's Executive Chairman, on the organization's ambitious journey during 2017.
Sustainability is a vague word. The task at hand is big. But why we set up Sustainability Hub Norway is easy: to bring those working in sustainability together to inspire, learn and stay up to date. Our community has a practical approach to the big promises states and companies made with the Sustainable Development Goals and the Paris Agenda.
Launched in March 2017, we focused this year on understanding sustainability in Norway, building the community and sharing knowledge.
We launched a report on the State of Sustainability in Norway 2017, executed and written by our former Editor Pia Lefevre. Key findings showed that the typical Norwegian sustainability employee does not usually have a formal education in sustainability, does not usually have budgetary decision-making power and experiences work capacity within their team as their biggest sustainability challenge.
We hosted larger inspirational events on measuring and reporting sustainability, showcasing concrete examples that combine theory with practice, seminars on sustainability in practice, and we co-hosted events at the Katapult Future Fest in May in Oslo, EAT Forum in June in Stockholm, Arendalsuka in August in Arendal. Generating a lot of interest for each event, it quickly became clear to us that people needed this community - also to dig deeper down into the sustainability matter.
People also needed conversations so we hosted Circles, smaller round table conversations, to address for example how communications directors best can communicate sustainability and workshops with UN Global Compact on the impact of the SDGs. These smaller conversations are creating the change the larger conversations originally inspired.
Our website showcases the latest events helping people to plan better and companies market events. The job portal gathers positions to be filled within sustainability and this has gotten a lot of attention. Our monthly newsletter reaches more than 500 sustainability professionals and decision makers and helps our community stay updated, while our Facebook community encourages online and offline conversations, as well as recommended readings.
Individuals, executives and companies have guided us on the way, shown great interest and provided very valuable feedback. The timing was right for S-HUB. To accelerate sustainable business in Norway, people and companies needed this community. And the community needed them because it is founding partners such as Storebrand and Samfunnsviterne, the leading members such as Statkraft and H&M and all our other corporate partners and dedicated individuals that have made S-HUB possible. Thank you.
With the trends we are seeing, we are planning the following in 2018:
Experimenting less, cementing more: We have learnt what worked and what needs to improve. We are planning three to four bigger inspirational events with external speakers to raise our understanding and knowledge of sustainability in Norway, while continuing to host smaller conversations that create change.
We will run the State of Sustainability report again and be able to show how the sector is changing. Moving outside of Oslo and reaching out to stakeholders in Bergen and Trondheim, making S-HUB a truly national organization.
Thank you again for joining us on this journey, to the board and all the crowd-founders working hard to help Norway reach the SDGs.
Andreas Friis Co-Founder & Executive Chairman Sustainability Hub Norway