August 9, 2022


Simple Impartial Business

The Best Policy For Business To Meet Sustainability Goals


Henning Ohlsson, Director Sustainability Epson Europe

The year 2021 was one in which the world learned that climate change is “widespread, rapid and intensifying.” The International Panel on Climate Change (IPCC) reported that, without largescale reductions in greenhouse gases, we are likely to miss the 1.5-degree warming target, with potentially catastrophic implications for the planet.

Perhaps more than any other event, COP26 in Scotland brought the reality and immediacy of the climate emergency home to millions of people across the world. Before Glasgow, climate change was “a concern.” After Glasgow, it became “the concern.”

It’s focusing the minds of consumers as well as those of companies and investors who are beginning to understand the impact that climate change will have on businesses, economies and communities. This, in turn, is spurring action, with many businesses now reporting on their environmental impact and sustainability actions.

The issue is that these efforts are currently largely unregulated, which could summon the specter of greenwashing. And I believe that transparent disclosure is a business—and existential—imperative that we simply cannot leave to chance.

Transparent Disclosure: Not A Choice But A Necessity

Sustainability has been high on the corporate agenda for a long time now, but the pressure is mounting to turn what has been a discretionary choice into a formalized obligation. The impetus comes from growing consumer awareness as well as activist investors. A cursory glance at the business pages over the past few years shows that some of the world’s biggest companies have already had that choice taken out of their hands, with more ambitious targets or sustainability-focused board members, imposed rather than adopted.

The findings of my company’s 2021 Climate Reality Barometer highlight that consumers now see companies as key players when it comes to the climate crisis. While governments are seen as “most responsible” (27%), a significant 18% point at businesses.

Sustainability action and reporting as a choice—much like the world’s ability to avoid the climate crisis—is running out of time.

Transparent Disclosure: A Triple Threat

To address business needs, we have seen the growth of a host of sustainability frameworks, guidelines and standards. These are designed to help companies identify, mitigate and report on their environmental impact and sustainable operations. It’s known as transparent disclosure. The cornerstone of this kind of reporting must be honesty so that we can all see where we’re succeeding and where we’re not.

The issue is that there is no globally agreed standard around which the business community can coalesce. With no single framework, consumers and investors can struggle to understand how a company is progressing, and it’s virtually impossible to make informed comparisons between companies that use different reporting systems. With some research suggesting that there are in excess of 600 reporting resources and requirements out there, it’s confusing.

Epson adheres to the world’s leading standards and frameworks, but we recognize this is a hugely complex environment for smaller companies at an earlier stage of their sustainability journey. Further, if it’s confusing to the business community, it must be indecipherable for consumers. Effective action demands an end to ambiguity.

Failure to do so represents a triple threat: consumers lose confidence in businesses to address sustainability issues; investors may balk at companies that cannot definitively prove progress; and ultimately, the chance to take meaningful action toward a more sustainable future is lost.

Transparent Disclosure: Zeroing In On Agreed Standards

In the absence of this global gold standard, governmental regulation must fill the vacuum. Without it, we will not be able to address climate change and its impacts. It’s encouraging, therefore, for me to see that governments across the world are stepping in to mandate Environmental, Social and Governance (ESG) requirements, encompassing the transparent disclosure of sustainability actions.

Regulation is an important business driver. It helps eliminate practices that are harmful to our planet while also driving innovation. Tighter regulations, for example, push businesses to discover more efficient ways of using natural resources.

As China races to de-carbonize its economy by 2060, the country is rapidly enacting comprehensive new reporting requirements. The European Commission is strengthening and widening its sustainability reporting demands. In the U.S., pressure is more investment-driven but with similarly unavoidable mandates as powerful investors now see ESG as a baseline requirement. Bloomberg reports that “The APAC region has seen drastic regulatory change over the past decade…” driven by ESG.

While there is a current absence of an agreed global standard, this too is being addressed, although slowly. Five of the world’s biggest reporting organizations announced in 2020 that “… a shared vision of what is needed for progress towards comprehensive corporate reporting—and the intent to work together to achieve it.”

Transparent Disclosure: The Future

It’s becoming clear that sustainability, and the impact we all have on our planet, has shifted from a niche business driver to a primary motivation. I believe that this isn’t a cynical change: while consumer and investor pressure has undoubtedly played its part, there is also widespread recognition in the business community that it must act. As new data is reported by the IPCC and others, businesses must see climate change as a threat to its continued existence.

While transparent disclosure is currently too flexible a concept, efforts are underway to build robust and agreed standards that will make it a meaningful measure of progress toward sustainability, inspiring confidence in consumers and investors alike. The issue is, will we be in time?

I believe that, in the not too distant future, the only successful businesses will be those that make a positive environmental impact. And regulation, global standards—and “widespread, rapid and intensifying” climate change—suggest that honesty is not just the best policy, it’s the only one.

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