What kind of qualifications or studies can a chartered accountant pursue to advance their knowledge in the sustainability and the ESG space?

• The University of the Witwatersrand, Johannesburg, offers an online CVO (Chief Value Officer) programme which addresses sustainability. See more here
• Audencia Business School offers an Executive Master Chief Value Officer which is a graduate degree. See more here.

What are your views on Taxonomy?

• The panellists recommended all boards and management teams consider sustainability reporting in two ‘layers’, namely, principles and practices. Principles provide high-level guidance, with universal application. In contrast, practices are organization-specific implementations of the guiding principles. As such they are idiosyncratic. Such a categorisation should enable leaders to think more clearly about what they are trying to achieve (principles) and how (practices).
• Another categorisation concerns organisational type. To date, many people have sought guidance by industry. If the principles and practices taxonomy is embraced, industry-based distinctions become less relevant.

I enjoyed Peter Crow’s comments on director’s duties regarding ESG. What does ‘good look like’ in terms of directors’ fiduciary duties to obtain success in terms of people, planet & profit (prosperity)?

• Fiduciary duties are specified in the Companies Act (or similar, the name varying from country to country). Fulfilment of duties is necessary, but not sufficient. Given the duty to ensure the on-going performance of the business, directors need also to consider corporate purpose, external factors, strategy, performance measures, and stakeholder engagement. The Learning Board Framework is an exemplar in terms of ‘good’ board activities. The Strategic Governance Framework extends the LBF (it adds relevant capabilities and behaviours) to provide a more holistic expression of the practice of governance and priorities if boards are to have any impact beyond the boardroom including, importantly, on sustainable performance.
• The embrace of ‘people, planet and prosperity’ is realised through purpose and strategy. Boards and executive teams should specify overarching goals to be achieved, how these various capitals will be use in the conduct of business and pursuit of strategy, and then report the impacts (by capital category) having operated the business.

Is a framework available for private company boards to assist with this way of thinking or with matters to consider?

• The ESG Exchange’s How-To Playbook equips participating directors with the competencies and capabilities necessary to govern their organizations effectively in respect of sustainability matters, resulting in the company’s production of assurable sustainability reports as per the adopted and applicable international standards. This includes a sustainability governance framework, associated governance policies, terminology, and questions which need to be answered.
• At a higher level, the guidance provided in ISO 37000, and its Organizational Governance Framework, both help boards focus on relevant matters.

What do you believe are the short-term and long-term effects on organisations for boards that neglect / refuse to implement?

• Bruce says it well at the end of the webinar when he said that the opposite of sustainable is unsustainable. Short-term impacts will probably be very limited while the reporting systems are implemented, and report quality improves. However, over the medium to longer term, organizations that do not report on sustainability matters will be seen to only be reporting on part of the story regarding the stability of the organization.
• Peter Crow noted in his opening remarks that organizations and their governing bodies should have been doing this “all along”, that this shouldn’t come as something new or as a shock. In recent years, stakeholders, especially the providers of capital, are holding organizations, and their governing bodies, accountable for exactly this. There are various reasons for this, including the current social and climate impacts, but whatever the reason, stakeholders are demanding that organizations now disclose “the whole truth”.
• The main lever to achieving change is reputational pressure. Once directors and boards realise that refusal may (will?) have an impact on their personal and professional reputation, expect changes to follow. The challenge, of course, is to embrace the benefits, and specifically the opportunity to drive towards higher company performance. Boards that continue to think in terms of compliance will, over time, find themselves on the back foot.

I fully agree with Peter, there should be an intersection between sustainability and viability / feasibility. This is where we see success in real sustainability.

• Joanne supported this perspective and provided guidance in how this can be done. This is largely in the murky waters of materiality. Reporting on those matters which are “material” for the organization’s sustainability in its economic, social and environmental contexts.

I believe that quality ESG reporting is especially important for State Owned Entities as it will provide a basis for enabling a better understanding of the economic activities, and impacts, in the country. Would it not be advantageous to have a principle-based standard for public companies (setting out the methods for identifying what needs to be reported, materiality, etc.)? Could this “public sector” standard then be narrowed down for private companies in the same geographic area?

• The base international standard (conceptual framework) should be the same for all sizes and types of organizations across the world. This standardization makes the information comparable and assurance against these standards makes the information more trustworthy. The same basic information is needed from all organizations no matter their size or type.
• Beyond the basic information (conceptual framework), countries will have their individual national imperatives, whether these are of a social, environmental or economic nature. In following a “building blocks” approach as promoted by the International Federation of Accountants, such imperatives would be “overlaid” on top the basic information. Those determining these “overlays” would need to ensure that comparability is not compromised and, in fact, supported to ensure that these additional reporting obligations meet the intended purpose of the disclosures.

The global targets for sustainable development are necessarily ambitious and we are far behind in meeting them – particularly in the private sector. How do we support the ESG movement to move beyond simply meeting mandatory reporting to meeting targets when we are still dealing with so much greenwashing? Does this require government intervention?

• The first step in effective sustainable development is, of course, understanding where you are. Thereafter informed decisions can be made, and improvement targets can be set. Reporting standards assist organizations to better focus their efforts on collecting, managing and analysing the right information.
• Although we are quite confident that market forces will positively respond to the international sustainability reporting standards, governments may be called on to determine which standards to apply nationally and the minimum acceptable standard of sustainability reporting which is required to meet the needs of their societies.
• Peter suggests that a close focus on ESG may be counterproductive, primarily because agreement as to what it is, and how it might be achieved, is yet to be achieved. Also, boards need to discuss relative priorities and the extent to which external expectations should be accommodated. Stakeholders are, increasingly, making their expectations known. That is fine, but boards are not powerless—decision-rights lie with the board!
  

How does this link with the alternate GDP measures that are being considered in government reporting?

• Government agencies have long considered alternate reporting options, most of which are underpinned by ideological preferences. A large body of literature, most of which has been created since WWII, that high company performance (economic performance, having considered social and environmental factors) is a precursor to economic growth and societal well-being. More directly, if companies perform well, society benefits.

My sense from listening to the panel is that companies need to decide what its critical ESG outcomes are, based on a defined materiality level, and then processes should be embedded into the organisation beyond the just finance department but in the business units themselves where the ESG impact is generated and then collated using IT to report and assure etc. Would my understanding be correct?

• Correctly understood, ownership for outcomes lies with the board. Sustainability needs to be a feature on board agendas, lest it be lost within the managerial hierarchy. A holistic (pan-organizational) perspective is crucial.
• While this understanding is correct, the determination of the levels of materiality would also need to be tested. This may require information in addition to that gathered only for those, already determined, material matters.

What are companies doing, or can they do, to fast-track the induction of existing organizational roles so that they are up to speed?

• Fast-tracking of understanding is only one side of the equation, the application of this understanding is equally important. This is why the ESG Exchange is promoting an implementation programme rather than training on its own.

How will the implementation of sustainability reporting influence those companies reporting under IFRS for SMEs (Small and Medium Entities)?

• Sustainability is equally if not even more important for SMEs. It is important that SMEs provide a comprehensive report on all material factors impacting, negatively or positively, their longer-term success / sustainability – across the various economic, environmental and social aspects.

Were the panel members surprised at the opposition to including the new mandatory TCFD reporting framework within the Resilience Statement (from the White Paper on Restoring trust in audit and corporate governance in the UK)?

• No. Many of the reporting proposals that have been created over the past decade have been birthed from a compliance mindset, with cursory attention paid to what is pragmatically relevant or cost-effective. Time will tell, but the regulatory-heavy approach common-place across the EU and UN/WEF may need to be moderated, if companies are to remain internationally competitive.