Companies should go beyond ESG box-ticking compliance and adopt a sustainability mentality for long-term futureproofing, writes RP Satpathy, business unit head, manufacturing and utilities, TCS Australia and New Zealand.
Environmental, social and governance (ESG) practices dominate corporate agendas today, but now is the time for businesses to not only pledge commitment, but act in fostering an ESG-centred mentality and invest in long-term strategies.
According to the TCS Asia Pacific Digital Sustainability Index, as Australian businesses seek ways to create value and improve resilience they have turned to embracing and growing their sustainability credentials. However, businesses need to do more than just tick the boxes because it is clear embedding sustainability at the core of a business will amplify opportunities for growth and build positive outcomes for people, profits and the planet.
People power to shift business outlook on ESG practices
Alongside the environmental pillar, there is a growing prevalence of the social and governance aspect of ESG practices. This is because the voices of consumers and employees calling for companies to align with these values are getting louder. Key stakeholders are increasingly vocal in calling on companies to improve their societal impact.
As a result, companies need to shift the way they think about ESG practices and place equal value on the social and governance components as they do on environmental. According to leading studies, environmental, social and governance are intersectional, meaning people have the power to voice their concerns about the social impact of the climate-change emergency and companies must respond and consider how they action ESG practices, taking onboard growing social concerns.
In Australia, taking such action is necessary as there are already immediate social issues at stake in the climate crisis, where specific Australian communities could be disproportionately impacted by the global shift to meet sustainability targets. Therefore, Australian businesses that invest in going green but overlook social issues face significant commercial and reputational risks.
Adopting an ESG-centred mentality beyond compliance
Establishing a clear transformation journey aligned to an organisation’s purpose is critical for a company to determine which areas of sustainability to focus on first. At TCS, our experience has shown that sustainability journeys are optimised when a company exercises steward leadership across its ecosystem of internal and external stakeholders, which includes the value chain, industry and markets.
Developing a mature ESG-strategy mentality takes time. While this process is underway, each stakeholder group has a unique role to perform so momentum is sustainable.
Data-driven business strategies
A lack of clarity in corporate purpose, and surface-level commitment to the green transition often leads to an exterior of sustainability, but with no structured proof. In that scenario, businesses begin to abuse ESG disclosures as the process is primarily self-reported.
As the use of ESG language becomes more prevalent, there is a trend of growing transparency and credibility among organisations. However, TCS research has uncovered approximately 20 per cent to 30 per cent of the data required by global financial institutions to assess climate risk is unavailable for meaningful analysis.
Data-driven sustainability can help in collecting and using data to make decisions that guide measurable and responsible business practices. Whether it is lowering greenhouse-gas emissions, optimising supply chains or reducing waste, insight from sustainability data can power positive change while increasing profitability.
In Australia, corporate watchdog the Australian Securities and Investments Commission (ASIC) is gearing up to take enforcement action in egregious cases of greenwashing as Australia and the rest of the world prepare for harmonised sustainability standards.
To build a resilient enterprise, data and sustainability analytics are critical. Automated data collection and analysis empower organisations to make strategic, real-time decisions – the kind needed to achieve sustainability goals. In addition, advanced technologies can uncover deep insight from data, opening a world of innovative ways to support sustainable practices across organisations.
Accountable governance and leadership
Amid growing calls for a new “social contract” between 21st-century governments and its people to bring about more equitable prosperity for all stakeholders, the importance of steward leadership in promoting green growth, social justice and strong governance will only grow.
The latest five-yearly environmental report released by the Australian Government in July 2022 revealed that average land temperatures across the nation have increased by 1.4 degrees Celsius since the early 20th century, while sea levels have risen faster than the global average, posing a significant threat to coastal communities and precious ecosystems such as the Great Barrier Reef in Queensland. This is further proof that decisive leadership and urgent action is needed if we are to harbour realistic hopes of creating sustainability for future generations.
The sustainability journey will not be a smooth or rapid one. However, governments and companies that adopt realistic ESG goals and operate with integrity and transparency can be well assured they are on the right path to a more impactful future.