Climate Week 2023: Takeaways and Leadership Implications

Sustainable LeadershipLeadershipSustainability Officers
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Katie Nivard
October 11, 2023
10 min read
Sustainable LeadershipLeadershipSustainability Officers
Executive Summary
Climate Week 2023 convened global leaders to collaborate on urgent climate change issues.
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Climate Week 2023 brought together business leaders, political change makers, and civil society organizers across more than 400 events to ideate, experience share and co-create solutions for solving the world’s most pressing climate change challenges. This year’s theme We Can. We Will. reflects the determination, focus, and call to action needed to halve carbon emissions by 2030 and put the planet on a path to net-zero by 2050. Russell Reynolds Associates attended many of the events and identified some key takeaways below.

Despite the so-called “ESG backlash” in the US, strategies are not changing – but regional approaches might be.

  • Panelists and participants alike acknowledged the likelihood that the planet will exceed 1.5 degrees of warming but were equally clear in the assertion that this should not stop the critical momentum that has begun to build.
  • Although some conceded the additional challenge posed by the US-specific “ESG backlash”, the prevailing consensus was that – to the extent that sustainability is properly viewed as a strategy for increasing resilience and reducing risk – companies have no reason to deviate from their plans.
  • Some US companies may need to reframe language to accommodate some investors, but this stands in stark contrast to prevailing trends in Europe, Asia and Latin America where leaders are being pushed by investors, customers and other stakeholders to step up the sustainability action.

 

Leadership implications

  • To avoid “ESG backlash”, ensure sustainability strategies are grounded in value creation and risk mitigation. Companies who continue to view sustainability as primarily a tool for brand management are most susceptible to negative effects of the backlash, as investors rightfully hold companies to higher standards and target “green washers”. Framing your sustainability strategy around the contributions to top or bottom-line growth will ensure investors focus on the material relevance and not the politics.
  • Tailor sustainability messaging to the stakeholder group – and region. Regional divergence in sustainability approaches are increasing, meaning that global companies must tailor their communications, particularly to investors, to the regional context. Ensure that your investor relations and other stakeholder managers are liaising with sustainability leadership to craft a message that will resonate.

 

We have the solutions, but we lack the critical mass. Counterintuitively, the cure is more regulation and partnerships.

  • Panel after panel confirmed one cause for optimism – we already have many of the technological solutions necessary to support the transition to a sustainable economy. What we lack is the critical mass necessary to fund that transition at scale.
  • This reality is driving a surprising consensus from the business community: they want more regulation and ecosystem partnerships. They realize that the only viable pathway to a stable and prosperous future is if all businesses are held to common standards, but without regulation a “first mover disadvantage” persists.
  • The US Inflation Reduction Act (IRA) is already playing an important role to incentivize new investments in clean energy and clean tech; since its passage, companies have announced $242 billion in new clean power capital investments for t least 191 new projects in 41 states. 
  • Where regulation lags demand for standards, sectors are turning to ecosystem alliances to create frameworks and principles for self-regulation as well as collective action.

 

Leadership implications

  • Build ecosystem alliances across your value chain. Connect with peers and suppliers up and down the value chain to identify areas of common interest where all parties will benefit from regulatory clarity and consistency. This is especially relevant for supply chains (e.g., bringing adjacent companies together to increase buying power) as margin and spend continues to be a challenge in supply chain innovation.
  • Ensure your government affairs function is aligned to your sustainability priorities. Governments need engagement from private sector to create policy that is both responsive to the immense societal challenges ahead, while also targeted at the most realistic pathways for change. It’s important that your government and external affairs leaders are rowing in the same direction as your sustainability function.
  • Consider appointing leadership dedicated to policy advocacy, especially for startups. The most exciting technological innovations are happening within the startup world, but these companies are the least likely to have dedicated policy and government affairs leaders. Ensuring that the companies at the cutting edge of these technologies have a seat at the table in policy development will be critical to effective reform.

 

We’re still searching for the Goldilocks approach to disclosure.

While disclosure remains an important tool for transparency and coordinated action, there is growing recognition that it is simply a means to an end and does not provide a solution on its own. Panelists cautioned that spending too much time on regulatory disclosure risks delaying the deployment of actionable solutions. For their part, regulatory bodies are still seeking the right balance between prescription and pragmatism – too prescriptive, and they risk low adoption; too lenient and they risk being low impact. Most jurisdictions are still seeking the Goldilocks solution that will place them somewhere in the middle.

 

Leadership implications

  • Ensure your company’s disclosure “tail” is not wagging the strategy “dog”. Disclosure should be a tool for communicating your company’s sustainability priorities and progress back to stakeholders, but it should not be the driving force of that strategy. Companies that approach sustainability with a “disclosure first” mindset risk accusations of gaming the system and greenwashing.
  • Engage with standard setters to support productive dialogue. Companies and standard setters need to see themselves as on the same team, with shared goals. But too often an adversarial dynamic develops that benefits neither party and further challenges the path to net zero. Both parties must commit to productive dialogue to reach the “Goldilocks solution” that both seek.
  • Connect enterprise-level targets with individual-level objectives. Connecting the company ambition to individual- or team-level objectives is the most direct way to ensure that disclosure does not become an end in and of itself, but rather a tool for driving action. Start at the top of the house by translating enterprise-wide sustainability goals into concrete, specific, and measurable objectives that leaders can feel in their day-to-day work.

 

Biodiversity and nature positive solutions: the next frontier.

Biodiversity and nature-based solutions were a hot topic, with many panelists pointing to both the urgency of the need and the scale of the business opportunity. Whereas most emissions strategies are focused on reducing the negative impact of greenhouse gases, biodiversity strategies seek to create positive impact through the rehabilitation and restoration of natural habitats. As one panelist pointed out, “all supply chains end in nature” – without nature-based solutions, businesses risk sowing the seeds of their own destruction.

 

Leadership implications

  • Interrogate your value chain to understand the linkages that are most vulnerable to environmental degradation and habitat loss. Focus rehabilitation and restoration efforts on these points to increase supply chain resilience.
  • Identify the units of measurement that are relevant to your value chain. Whereas net zero strategies are built upon a consistent unit of measurement in the form of CO2, biodiversity strategies will require a greater diversity of metrics relevant to the given habitat (for example, ocean acidification versus freshwater depletion). Companies will benefit from partnering with civil society and academia to identify the relevant metrics for their business context.
  • Recognize that biodiversity risk represents financial risk and incorporate these into future scenario planning and risk management strategies.

Industry-specific insights

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Consumer: Improving transparency to improve customer decision making.

While the emphasis on disclosure and policy tended to focus on B2B businesses, there are significant implications and opportunities for consumer-facing industries as well. For one panelist from a leading consumer goods company, increased transparency is about creating a level playing field that rewards companies for investing in the “hard stuff” of sustainability. By giving customers the data they need to make informed decisions – such as a sustainability equivalent to nutrition labels – companies will inevitably start to see the return on investment of their sustainability efforts.

 

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Financial Services: Impact materiality is the new financial materiality.

We heard a lot of discussion of the importance of quantifying, measuring and reporting on impact materiality alongside financial materiality, in order to provide investors, lenders and underwriters with necessary data to accurately quantify risk and opportunity. Such transparency will be critical to achieving the significant transition ahead, which will require both investment in “dark green” solutions and those that will help shift “brown” to “light green”. As one panelists put it, “We need to focus on ‘financing emissions reductions’ as much as ‘reducing financed emissions’ – we cannot divest our way to net zero.”

 

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Healthcare: Moving beyond the ‘S’ to embrace the ‘E’ in ESG

Healthcare companies have historically approached sustainability through the lens of equitable access to healthcare, focusing on many of the social aspects of ESG. But increased scrutiny of their value chains is prompting many to address their environmental impact. Innovations around cold storage and biopharmaceuticals – such as growing medicines through yeast fermentation – offer promising paths to scope 3 reductions, although these too face their own regulatory hurdles.

 

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Industrials: Net zero involves counterintuitive tradeoffs when it comes to resource inputs.

We heard several examples of the counterintuitive tradeoffs that companies are facing as they chart their path to net zero, which highlight the importance of multilevel systems thinking for identifying unintended consequences. Electric vehicles (EVs) are becoming integral to many countries’ decarbonization plans, but with limited supplies of key inputs such as lithium, suppliers will have to make some counterintuitive choices to maximize the decarbonization utility of resources. Hybrid vehicles use half the amount of lithium while still providing emission-less travel for most daily uses, preserving valuable lithium for other vital uses such as solar and wind power storage. EVs also create roughly double the emissions of internal-combustion engine (ICE) vehicles during manufacturing, creating another challenge to car companies decarbonization efforts.

 

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Social and Public Sector: As we approach halfway mark of SDGs, ultimate priorities are becoming clearer.

At the UN Global Compact’s “Faster Forward” event, a new list of five action areas were unveiled to help focus corporate efforts on the priorities that have the power to accelerate progress across all 17 Sustainable Development Goals (SDGs). Far from signaling a retreat from the SDGs, these new action areas represent a helpful prioritization and consensus across the – at times – unwieldy 17 goals, highlighting where the private sector can collectively make the biggest, fastest impact by 2030. This should help focus companies’ efforts and provide clearer language through which to align coordinated action.

 

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Technology: AI for Good and Frontier Tech

Two themes recurred across the various tech-focused events: the power of “AI for Good” and promise of ClimateTech. Investors shared that early-stage product revenue is becoming increasingly important for climate tech startups, despite facing long development cycles before generating revenue. They also noted the importance of uniting creative minds, technologists, and those with a background in humanities to create a balanced and impactful product.

 

How RRA supports sustainable leadership

To future-proof your business, we work with you to recruit and develop leaders who understand why sustainability issues are vital to long-term success—and how to capture the opportunity.

  • Enhance your board’s sustainability credentials: Sustainable leadership starts at the very top. We find ways to strengthen ESG oversight by advising on how your board embeds a sustainability lens into its culture and structure, as well as directors’ sustainable leadership credentials.
  • Develop sustainable executives: Executive leadership teams need to work together towards your sustainability vision. We work with your top team to assess and develop executives’ sustainability capabilities.
  • Find leaders with a sustainable mindset: Our unique approach to assessment ensures we find CEOs, board members, and CxOs who have the mindset and skills to drive sustainability in your organization. In fact, 46% of the job specifications we create talk about sustainability.
  • Find world-class sustainability function leads: With access to an unrivaled pool of sustainability talent, we work with you to find best-in-class Chief Sustainability Officers, Heads of ESG, sustainable finance leaders, and leaders for sustainability business units.