NestlΓ© CEO sees shift in customer priorities towards sustainability
Mark Schneider cites data suggesting that effects of climate change and biodiversity loss have shot to the top of the agenda....
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June 18, 2021 β’ by Vanina Farber in Leading in Turbulent Times
There is a growing need to provide executives with the tools to takeβ―a more integrated approach to impact and businessβ―β and to change mindsets when it comes to financial decision-making....
With the proliferation of so manyΒ buzzwordsΒ around sustainable business models andΒ social and environmentalΒ impact,Β executivesΒ and financial decision makersΒ are increasingly looking for a roadmap toΒ navigate the impact economyΒ and post-COVIDΒ world.Β Β
WorldΒ economiesΒ have suffered greatly from the COVID-19 crisis and issues such asΒ poverty,Β inequality andΒ otherΒ social issuesΒ haveΒ affectedΒ economicΒ outcomes.Β Yet despite the massive destruction that the crisis caused, a silver lining can be found in this pause in human activity, dubbed the βAnthropauseβ.Β Β
βTheΒ environment flourished,Β and we now have the chance to build back better,β saidΒ eleaΒ Professor of Social Innovation VaninaΒ Farber, who led the webinar. βSo, in the βwithΒ COVIDβ world, we need to change the way we do business. The idea of indefiniteΒ growth without thinking aboutΒ theΒ boundaries of theΒ planet is not possible anymore.βΒ
As businesses look to ramp up their operations after the crisis, there is a unique opportunity for executives to sharpen their focus on making their business models more resilient and sustainable, andΒ catalyzeΒ socialΒ and economic change.Β In part thanksΒ to innovative financial instruments,Β corporationsΒ canΒ speed the pace and increase the scale at which theyΒ bring sustainability into the core of their strategic choices.Β Β
More than two-thirds of webinar participants agreedΒ thatΒ corporationsΒ are serious aboutΒ this transformation.Β However,Β key barriersΒ remain such as: balancing sustainability with growth targets, difficulty quantifying potential ROI, financing the transformation at scale, lack of attention or support from leadership, difficultyΒ identifying the key ESG issues to focus on, and the volatility and complexity of regulatory requirements.Β
ManyΒ corporations are now movingΒ beyond aΒ profit-only lensΒ toΒ think about the impact of their business models on society.Β βBeginning with boycotts of South Africa and companies doing business there in the 1990s to push the end of Apartheid, there has been a steady push toward investing withΒ intentionality,β said Farber, whoΒ walked through the range of options available toβ―investβ―for impactβ―through private market vehicles andβ―investβ―with impactβ―through public market vehicles.Β Β
The purpose of the webinar was to understand how corporates can leverage impact investing and sustainable finance to support their business model transformation around sustainability.Β Here, corporations can increasingly draw from a wide menu of optionsΒ presented in the webinar. From engagement withΒ social enterprisesΒ to co-create innovative and sustainable products to securing funding for specific green projects through green (or sustainable) bonds, firms can leverage the experience and expertise of diverse actors to transition.Β
Transitioning to a sustainable business model is also increasingly a priority for firm survival. Average company lifespans on the S&P index are decreasing; in 1960 it was 60 years,Β while by 2020 it was only 20 years. By addressing material ESG issues, firms can tackle both innovation and sustainability challenges simultaneously.Β
To ensure financial returns with these types ofΒ corporateΒ investment strategies,Β FarberΒ suggestsΒ analyzingΒ howΒ ESGΒ materialityΒ can impact the bottom line.Β There isΒ someΒ evidence that byΒ focusing onΒ material ESG concerns, companies canΒ grow theirΒ shareΒ prices and expect better portfolioΒ performance.Β Β
Investors areΒ also startingΒ toΒ exert pressure,Β pushing for companies transform their business models. Through proxy voting, activist investors have been able to elect three board members to Exxon.Β ActivistΒ investorsβΒ engagement with public companies through shareholder meetings is poised to grow in the coming years.Β
With the expanding range of possibilities to kickstart the transition to sustainable business models, executives have a chance to increase collaboration with investors,Β Β NGOs, civil society, and entrepreneurs toward the cocreation of a sustainable future. COVID-19 might just be the final push that was needed for us to collectively realize that business can, and must, change to become more resilient, vibrant, and just. The time is right, now.Β
elea Professor of Social Innovation, IMD
Vanina Farber is an economist and political scientist specializing in social innovation, sustainability, impact investment and sustainable finance.Β She also has almost 20 years of teaching, researching and consultancy experience, working with academic institutions, multinational corporations, and international organizations. She is the holder of the elea Chair for Social Innovation and is the Program Director of IMD’s Executive MBA program and IMD’s Driving Innovative Finance for Impact program.
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