does-sustainability-need-financial-metrics?

While the Covid-19 pandemic set again the style trade financially, anybody who thinks sustainability initiatives will now be brushed beneath the company rug is sorely mistaken.

At April’s Fairchild Media Group Virtual Sustainability Summit, the “Sustainability’s Financial Dividends” panel considered sustainability by way of a monetary lens. Experts weighed in on not solely why it makes monetary sense for corporations to spice up sustainability investments, however how they’ll’t afford to not.

Speakers included Vicki Kalb, Head, EMEA ESG analysis, group analysis analytics & communications, UBS; Janice Noronha, companion, sustainability & local weather change, PriceWaterhouseCoopers LLP; Sophie Rifkin, director, company analysis & engagement, NYU Stern Center for Sustainable Business. The panel was moderated by Sourcing Journal writer Caletha Crawford.

“In many ways, sustainability has only ramped up with the Covid crisis,” stated Noronha. “We have seen this topic elevate, not only with investors and broader stakeholders, but with the new generation: millennials. Businesses are rethinking the purpose of their organizations and refreshing a transformational model.”

The motion has gathered a lot momentum, from shoppers to buyers to companies, inertia is carrying it ahead.

Noronha famous that PWC has seen among the huge pension funds, institutional buyers and asset homeowners actually tackle sustainability, and it’s turn out to be a part of the monetary due diligence course of, as effectively. “They’re embedding it into everything they think about, from ESG [environmental, social and corporate governance] ratings to the way they think about valuations, and even investment portfolios themselves from a value creation perspective.”

Kalb, the UBS ESG skilled, agrees. “When discussing ESG issues with investors, we try not to separate environmental and social because quite often they’re very tightly interlinked.” she stated, noting that Covid has pushed much more of a concentrate on social points. “We get the sense that investors are watching social issues, in this industry in particular, very carefully.”

The drawback, agreed the panelists, is that “squishier” social points are more durable to measure and quantify. Sustainability groups lastly have a seat on the desk with CFOs and company boards, however the subject’s extra qualitative nature is commonly misunderstood. “We need to really put sustainability into the language of business—financial metrics,” stated NYU’s Rifkin.

That stated, corporations and types should nonetheless reply financially to Wall Street and buyers, however the dialog is shifting as they’re beneath strain to additionally reply to shoppers. To assist corporations strike the precise steadiness and actually perceive the worth of their sustainability initiatives, NYU Stern Center for Sustainable Business developed a technique known as the Return on Sustainability Investment (ROSI).

“We help companies unpack their investment and understand how sustainability is driving things like greater operational efficiency, enhancing supplier relations, reducing costs of capital, just to name a few,” Rifkin stated. “With retailer REI, for example, we were able to monetize how their investments in being a purpose-driven company are yielding significant employee-related outcomes in areas like greater engagement and retention. With Eileen Fisher and Reformation, we help them understand how their investments in circularity are identifying other brands values as well.”

Boosted collaboration

Another space that’s gotten a lift is cross-company collaboration—notably the Higg Index, which brings collectively suppliers to quantify emissions of their complete provide chains. The data can be utilized by quite a few manufacturers to attain shared objectives.

“We’re also seeing a lot more collaboration with think tanks,” stated Noronha. “The United Nations Sustainable Development Goals are now being very clearly linked to sustainable fashion and the apparel sector. Meanwhile, the United Nations has set up alliances and The Ellen MacArthur Foundation has started to set up alliances enabling the big brands and suppliers to come together and think about innovation and solution sets to drive the industry forward.”

Such collaboration is key to the success of the sector and the sustainability goals. “We really see value in bringing together companies in collaborative ways, and organizations like Textile Exchange or The Fashion Pack are trying to figure out how to help brands implement on things like raw material sales and circularity,” Rifkin stated.

For corporations with restricted assets to spend on sustainability, Noronha suggested focusing investments on knowledge, knowledge, knowledge. “You absolutely need to measure to manage. That’s always the first step,” she stated. “A good baseline will help you understand where you’re starting from, then you can use that to pivot towards progress and engagement. With data comes a strategic understanding of how your business can really drive the sustainability agenda.”

After all, with out really understanding how investments assist drive worth, an organization’s decision-making acumen is weakened. That in flip additional hampers an organization’s capacity to inform its stakeholders a compelling story concerning the affect of that work.

“What we do to devise strategies and how we impact different stakeholders is the very beginning,” stated Noronha. “If you don’t already have your story told, make sure that you own and control the reputational brand value that it dictates.”