Findings from our ESG/sustainability event
We reflected on whether a level playing field for ESG/sustainability reporting is possible and what companies are doing in the meantime.


Russell Reynolds Associates hosted a virtual event joined by a group of FSTE100 Chairs to welcome Conor Kehoe, Chair of the International Integrated Reporting Council.

Friedman is dead: Shareholder return has been joined by people, planet, and purpose in the list of corporate responsibilities

  • There is pressure on corporates to demonstrate their commitment to sustainability from boards, from investors, employees, consumers, and regulators (including central banks). In the EU, the European Central Bank is being coopted by politicians as the instrument by which pressure should be brought to bear.
  • The EU is attempting to codify this: the European Commission’s EFRAG (European Financial Reporting Advisory Group) is now due to announce metrics for enhanced reporting on these issues at the end of February as part of the EU’s review of its Non-Financial Reporting Directive The metrics will include civil society-derived reporting, which focuses on the negative externalities of business activity (e.g. the GRI approach), and investor material, focused on the risks to business value (e.g. the SASB approach).
  • The IFRS (International Financial Reporting Standards) has also launched a consultation on sustainability reporting, which proposes a newly formed Sustainability Accounting Standards Board (SASB). Stock exchange commissions may also play their part under the auspices of IOSCO, they are focused, of course, on the investor perspective.
  • There is now a consolidation of some of the voluntary actors that support and develop ESG reporting : IIRC has merged with SASB, for example.
  • While the ESG reporting world is characterized by risk reduction, impact reporting refers to contributions to the UN SDGs. The Global Impact Investing Network offers ‘KPIs’ for SDG-aligned outcomes.
  • Central banks are now coming under pressure to incorporate sustainability criteria (esp.climate) in risk calculations.

All of these factors bear on boards and how they operate.

During the discussion, the role of regulators, governments and capital markets was explored, as well as what companies are doing while waiting for a shared framework:

Governments and timing

There was concern that politicians were expecting banks to bring change ‘by the back door’. Repricing credit for the big emitters is one thing, but punishing SMEs for their shortcomings, without Government support, is another. There is a fear that politicians cynically hope no one holds them responsible for a changing risk-rating of assets the mechanics of which are abstruse even for bankers.

Given the advent of the Biden Administration, it may be that there is an opportunity for alignment with the US. This would be a great achievement, if we could do that. It was noted that this change ought to be achieved through the capital markets and that time is pressing. The timing is opportune, but pressing, in Europe. The COVID recovery fund is about to be deployed, a clear framework for the billions of Euros it will spend is needed now.

We are all transitioning now

The assumption that companies are usually ‘bad actors’ is dated now, and do not necessarily need regulator intervention to implement sustainable activities. Most are trying to change and a glide path rather than a cliff edge is the route which should be offered to them. Commons units of measurement are critical to a managed and fair transition.

There is, of course, a big difference between the measurable elements of environmental pollution and climate change (science-based) and the real but sometimes immeasurable stakeholder impact which tends to be perception based. Shared concepts are required before shared regulation, but both are needed soon and both companies and investors are asking for them.

Investors are expecting corporates to report in 2022, and in the absence of this shared framework, companies are buffeted by conflicting pressures and have to define for themselves the ESG issues that matter to them and provide their own account of their response. Far from their yet being a level playing field, there is still a dispute about who owns the ball.