Shareholder pressure paying off as net zero climbs on corporates priority list

It seems fierce shareholder pressure is starting to pay off, as more and more British companies are increasingly zooming in on net zero considerations.

In fact, a fast-growing number of corporates are making green policies climb on their priority list, an industry insider has told Net Zero Investor.

Daniel Docherty, Director of Strategy at Advanced, who has over 18 years of experience in core business and finance solutions, told this publication that while - still relatively low - net zero is rising as a priority as only a fifth of respondents considered it a priority in 2020, while, last year, that number hit a record 36%.

Docherty explained this is primarily a business decision, as he discussed the results of a survey his company recently held.

“As enterprises with strong ESG credentials draw modern investors, it is paramount for CFOs leading the finance function to understand the potential of ESG and learn how to put it into practice," he said.

However, nearly one in four respondents don’t believe their organisation is open and transparent about its ESG goals and achievements, and a third note they couldn’t provide tangible evidence to support its ESG progress.

Meanwhile, 69% of respondents say they aren’t working with suppliers to lower emissions.

“Given the extent of the many problems confronting the globe and the growing severity of environmental risks for businesses, the E component of ESG has gained increasing relevance, said Docherty. as he breaks down the key environmental standards in finance.

Benchmarks 

Businesses should not strive to accommodate all dimensions when creating ESG policies, Docherty argued. 

Instead, choose three to five quantifiable ESG criteria that matter to your company and audiences and match them with a corporate strategy. 

"For instance, fracking oil and gas companies should assess water and waste management and its effects on precious natural resources.”

Carbon footprint

Companies can now assess their carbon impact using computerised technologies built for this purpose. 

"These tools provide spaces for inputting all possible company activities, and they may determine their carbon footprint for each given action, as well as the total environmental impact," he said.

Double materiality

The concept of double materiality describes how corporate information can be important due to both its implications about a firm's financial value, and about a firm's impact on the world at large - particularly with regard to environmental considerations.

"Corporations should address the ESG concerns that affect their business as well as their impact on society and the environment," Dochterty stressed.

Exclusion list

The financial department might create a list of initiatives it will not support due to environmental issues or other concerns of the business or its shareholders.

"Excluded activities may be governed by national ESG regulation or international agreements, restrictions, and best practices," he noted.

Contextualising information

Finally, Docherty stressed ESG data does not exist in an informational vacuum and requires suitable contextualisation for clarity.

"This context may partly derive from the firm's relative performance, having as benchmarks firms in the sector or historical performance.”

“Businesses that handle ESG challenges under the direction and participation of the CFO are better equipped to produce enterprise value, while fulfilling ESG legislation reporting requirements and wider stakeholder expectations for responsible risk management,” Dochterty concluded.