Why Corporate ESG Goals are Now a Necessity: A Q&A with Kathy Alsegaf of Deloitte

by | Apr 19, 2021

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We recently caught up with Kathy Alsegaf, Global Internal Sustainability Leader with Deloitte, for her views on the importance of corporate ESG goals and trends in the space over the next several years.

Do you see a link between ambitious ESG goals and the financial performance of a company? If so, please explain.

We know in the marketplace that the value of intangible assets is increasingly driving market valuations. Many of the intangible assets that companies have relate to ESG drivers, such as diversity, equity, and inclusion measures, human rights management, and environmental performance. One example of a direct impact I heard recently, from a notable leader, was that once his company took strong action on environmental measures, it became much easier to attract excellent talent, presumably driving down recruiting costs. Additionally, customers and investors increasingly are looking at a company’s ESG impact when making purchasing and investment decisions.

On the other hand, you can also see how reputational damage (stemming from failing at some of the intangibles listed above) can lead to financial losses to a company, so these “intangibles” are becoming increasingly important to a company’s success.

Deloitte’s annual Resilience Report found climate change to be the number one risk business leaders face over the next decade. What are some specific examples of how companies can join the fight against climate change?

The first step is the foundational piece: to understand and record what your current carbon footprint is. Then you have to set feasible targets and manage accountability.

(Kathy Alsegaf, Global Internal Sustainability Leader with Deloitte. Credit: Deloitte)

One of the things that companies are increasingly starting to do is think more deeply about the risks posed by climate change to their company. What are the risks from their supply chains? What are their risks to their facilities? In fact, in a new survey we just completed, business leaders said operational impact of climate-related disasters was the issue already impacting or threating to impact their organization.

Then, a vital step is to translate those risks into financial terms, because it makes it easier for management to judge risk through a language with which they are familiar. This is what the Task Force on Climate Related Financial Disclosure recommendations is all about.

And the final step is to use our collective voices and welcome both cooperation such as within your supply chain as well as “coopetition,” where competitors collaborate for the greater good. For example, Deloitte recently signed agreements with several US airlines to encourage the purchasing of sustainable aviation fuels – so that helps both the airlines meet their sustainability targets and it also helps Deloitte reduce its air travel footprint. And Deloitte also worked with a project spearheaded by the World Economic Forum to identify a core set of ESG metrics curated from the work of recognized standard setters to advance transparency and comparability.

How can companies move from ESG goals to real action to ensure they are meeting stakeholder demands ahead of 2030?

First, it’s important to start with a focus on transparency and governance: Transparency, through publicly reporting performance according to commonly accepted standards, allows tracking of progress and creates accountability. That, coupled with senior level oversight, helps to focus attention from the right level of management on the areas needing action

Next, it’s important to think about how a company can use its “superpowers” to effect change. At Deloitte, for example, we recognize our pool of talented professionals across the globe as one of our superpowers. So we’re rolling out a training program to equip all 330,000 of our professionals worldwide with the knowledge, tools, and inspiration they need to act on climate change, starting with our #iAct campaign in April which will be followed with more structured learning in May. By educating our professionals on their own impact — including the impacts resulting from of what they consume, use, and buy — we will enable them to take action at home and through their work, and create a multiplier effect as they influence others.

Additionally, part of our carbon goals includes having 67% of our suppliers set science-based targets, similar to how we at Deloitte have set our own science-based targets. So, we’re working to influence not only our own community, but also the broader community of our suppliers.

Over the long term (next 20-30 years), what do you see as the biggest ESG issues facing organizations worldwide?

I think the biggest ESG issue is how to really embed ESG, so that it’s not a niche initiative, but strongly rooted in all parts of a company’s overall business strategy. To do this, executives and boards need to have a solid understanding of ESG so they are as comfortable and conversant considering ESG issues as they are financial issues.

This not only applies to the “E” part of “ESG” but to the “S” as well. On the societal side, many companies have more years of experience in discussing these topics than on the environmental side, but even for societal issues – for example, take some of the recent discussions around diversity, equity and inclusion – leaders need to understand how those aspects should be considered in driving the business strategy and management decisions, and that will come from ESG becoming truly embedded in corporate culture.

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