Last week, our CEO Anna Lane and Head of Research and Operations, Josh Blundell, sat down with Harriet Howey, Global Non-financial Reporting and ESG lead at Diageo. During our webinar, The Climate Crisis: Corporate strategy eats product comms for breakfast, the panel covered the many complexities of the drive towards a more sustainable corporate future.
‘Flows of capital will change the world’
We all know that COP26 didn’t quite go far enough, world leaders have a lot of work to do to stop disaster from being a reality in a matter of years. And that’s why action from corporates, especially Financial Services companies, will really make a difference.
We know increasingly that entity level sustainability is a focus for the regulator and is seen as a mark of corporate culture. Yet so far, investment firms have been heavily focused on product set, taxonomy and language. Over the years, the solutions offered and how to communicate them have evolved hugely. This is welcome progress as these tactics have been key to building a relevant, accessible industry that serves the evolving needs of consumers.
However, corporate behaviour and strategy is important too. In our research, carried out in the past 18 months, we have seen that it is brand position and messaging that is key for most consumers. Investors with around £230bn in financial wealth are ready to choose a responsible or sustainable product themselves. However, the financial wealth of those investors who, at the very least, expect their money to be managed responsibly – sits at £1.9trn.
The bulk of the wealth is held by people who currently have a hygiene-level expectation that brands are doing their bit to be socially and environmentally responsible, but are financial services firms actually measuring up to that expectation?
Diageo is getting it right
We invited Harriet to join our panel as Diageo is a brand, which from board level, down to operations, is really serious about becoming sustainable. Its 2030 strategy has ambitious targets to create a more inclusive and sustainable world.
Harriet attributes the ambition and drive of the strategy to the really engaged leadership team. Leadership ‘truly believes it’s good for us commercially’, the strategy will perform against environmental and social targets, but it will also impact the bottom line – in a positive way.
Setting the strategy was a complicated process, Diageo is active in 180 countries and has 200 brands – what works for one, certainly won’t work for all. So the process involved meeting lots of stakeholders both internally and externally. And the result is a strategy that resonates across the organisation and has been great for the brand as an employer, as well as being popular with consumers and investors.
Investors can’t hide from climate risk, there’s no hedge against environmental disaster. Plus regulation is creeping in to make corporates report on these issues, soon there’ll be no hiding.
Reporting is inconsistent, for now…
Corporates are crying out for a global, common template for ESG. The Financial Services industry is also struggling with taxonomy right now, so how can an investor compare a company’s performance?
‘Reporting at the moment is so inconsistent that it’s not even comparing apples and pears, it’s more like comparing apples and chocolate bars.’
One of the successes of COP26 was the announcement of the international sustainability standards board. However, it’s important for people in ESG to offer their perspective on that process, and it’s our responsibility to ensure those standards work for everyone so that we don’t end up diverging.
Companies must think and move on these issues now and collaborate as much as possible. For those companies that haven’t even done the strategy piece, they’re scrambling to catch up.
Building a sustainable brand matters
Brands that have tried to claim a space which they’re not contributing to have had backlash – consumers are really tuned in to disingenuous cries of net zero and the like.
Now is the time for brands to get their sustainability strategy straight. What we see a lot of in the Financial Services industry is plenty of ESG products, but a more cautious approach to an underpinning strategy that would make a sustainable difference.
In an incredibly competitive landscape, The Wisdom Council can help you differentiate yourself from other brands and appeal to investors no matter where they are on their sustainability journey. Through our proprietary segmentation model, which is mapped to 13.8 million UK investors, we can identify where your customers sit and how to target them for greater success.