IOD SPECIAL TALKS - Fostering Partnerships for Embracing ESG

Your Excellencies, ladies and gentlemen, good morning.

Welcome to this 2023 IOD Global Convention. I would like to use my time today to share some thoughts on the Board’s role on corporate governance and sustainability. In the ever-evolving landscape of the global economy, corporate governance has emerged a critical pillar of sustainability and ethical leadership. A Board’s role is not just about compliance, it is about catalyzing positive change and steering organisations to a more responsible and prosperous future for all.

Over the last few days, many of us have been glued to the BBC so I believe it may be fitting to use them as an example today.

Since its first broadcast over 100 years ago, the BBC now reaches a global audience of almost 500 million people. Last year in the UK alone, people spent around 53 billion hours, consuming BBC content. Broadcasting and production at this mega scale comes with a sizeable carbon footprint. For the year 2020, BBC reported that their global greenhouse gas emissions were 1.3 million tonnes which equates to a little under 300,000 round-trip flights between London and New York.

The BBC is also one of the world’s frontrunners for sustainability – in broadcasting and well beyond. One of the company’s founding principles is to inform, educate and entertain, and they decided to use all their programming and platforms to consolidate the sustainability message. In effect this meant making all their actions sustainable, from planning to commissioning to producing, with key messages built into their content, and how the messaging is delivered to the world.

Onscreen, electric vehicles and recycling bins are subtly inserted into episodes of EastEnders, and more obviously into behind-the-scenes productions. The series Top Gear showcases eco fuels, and the hero of the Ladhood goes door to door, selling solar panels.

Offscreen, they have an active, multi-pronged ESG approach to net zero targets – underpinned by science and covering carbon action plans for travel, waste, and supplier relationships.

As of last year, an stounding 96% of all their output completed sustainable production certification. Their sustainability team has a clear remit: to achieve net zero by 2030 across the entire global organisation. This is neither a small task nor a mean feat, especially when we consider that it was only in 1998 that they set up an in-house CSR team to deliver on community affairs. That is where their sustainability journey began.

A Board’s role is not just about compliance, it is about catalyzing positive change and steering organisations to a more responsible and prosperous future for all

For many years, for all of us on Boards, the magic word was CSR. In the last decade, it began changing to ESG. In the last couple of years, we have added DEI. This lexicon of three-letter words – ESG, under which sit CSR and DEI – now serves us as sustainability’s ABC. And if I may add, it should.

It may be new vocabulary in many boardrooms, but ESG is fast becoming the language of Boards, from familiarity to fluency. We have enough data from the last two decades to know that it is neither fad nor fashion. It is here to stay, and we must prepare to stay the course.

If Boards don’t include ESG as part of long-term strategies, the hard fact is that somebody else probably will. Regulators, activists, customers or the general public may do it for them, in ways that will be costly in terms of resources, respect, and reputation. Some litigation of recent months proves this point painfully.

(1) After battling wildfires, record heat, severe rain and snow, California filed a lawsuit against five oil giants, alleging they misled the public for decades about the dangers of fossil fuels.
(2) In Libya, residents of Derna are not only investigating government mismanagement and neglect but demanding the dismissal of all authorities associated with their horrific dam tragedy.
(3) More recently the Security and Exchange Commission of the US has charged DWS Investment Management Americas for misstatements about its ESG investment process. ‘Their actions do not conform to their words’, was the judgement order, and attached a penalty of $19 million.

Disparate and different these cases may be, but the net is widening and seemingly everybody is under scrutiny – cities, countries, companies, and corporations.

From a corporate perspective, ESG programmes have largely operated free from oversight or interference. We have long viewed sustainability as a voluntary undertaking that is devoid of legal or market risks. Things have changed.

The path forward will grow increasingly treacherous, too. There is greater pressure to ensure comprehensive ESG programmes that achieve high-level of performance, and must be accompanied by accurate, complete, and aligned statements and communications. The explosion of ESG-based funds will amplify the litigation risks associated with incomplete or inaccurate information, or failed performance. We are also seeing a proliferation of voluntary frameworks, and governments turning elements of these into mandatory disclosure obligations.

This is how I summarise the situation: We must be at the table or we will become part of the menu.

Most activism agendas fall under the ESG heading, but they do cover several dozen sub-concerns. For instance, climate alone has multiple sectors, and any one of them can be a company’s hottest issue. Social matters come with controversies of their own, and active discussions on gender equity, inclusivity and discrimination against minorities make them red hot topics.

Of course, governance tends to lag behind, perhaps because it is the last letter in ESG. But this is the arena where items like Board makeup and structure, voting rights, and shareholder powers are battled over. The ‘G’ covers all the proxy tools used to advocate ‘E’ and ‘S’ matters, and activists know how to use them to good effect.

How a Board shapes itself to oversee ESG also comes with its own challenges. In this context, we must heed that every Board doesn’t need a climate scientist, an environmental lawyer, or a human rights advocate. What we need is commitment: the authority, the resources, and expertise to drive initiatives effectively and quickly.

What we need even more is unity: more dialogue, greater participation, and higher levels of engagement. Unity is a frequent theme for the UN General Assembly, when leaders and representatives of nearly 200 nations get together. But as the world gets increasingly polarised, it is pockets of unity, and mutually beneficial partnerships, that will help us save the planet.

As the world gets increasingly polarised, it is pockets of unity, and mutually beneficial partnerships, that will help us save the planet

I was born and raised in India but lived in the UAE for a little over 40 years, and I am proud to showcase this small country as a sterling example. The UAE will host COP 28 in a few weeks from now, and one of its central themes is to make it as inclusive as possible, allowing voices to be heard from industry to indigenous people.

The focus is on partnerships that emerge from outside diplomatic negotiations, alliances that bring together individuals, industries, governments, and civil societies – in diverse configurations, for different initiatives.

The UAE dons the mantle of unity with great ease, as is evident by the pivotal role in the success of the India-Middle East-Europe economic corridor; the I2U2 partnership between India, Israel, the US and the UAE.

After the success of the UAE-India CEPA, I believe it is the turn of India and the UK to look forward to the finalising of the FTA, with untold prospects for trade, business and inter-industry collaboration.

It is this kind of engagement – and I add, these kind of marriages – that will drive a safe, stable, and sustainable future for all of humanity.

IOD India has been championing responsible capitalism for many years. As members connected under this aegis, we must take pride that IOD has addressed and upheld several causes before they became in vogue or vital for corporate leaders.

It is this fellowship and comradeship we must bring to our respective pulpits – to preach and practice ESG. We already have the unity and ability to move from promises to performance. Let’s just use it.

We are not going to get away from using oil or plastics for at least for the next decade. We are not likely to give up driving or flying. We are probably not going to fill up dinner plates with plants. But if we are part of the problem, we must become part of the solution. We must help create solutions for someone else, in fact for everyone else.

The BBC says it is committed to being both at the same time – a net zero company and a nature positive organisation, and they want to deliver more good than harm to the planet. This should serve for all of us as inspiration and motivation, irrespective of the size of our company or the nature of our industry.

What we do know about ESG has changed today and will probably change again tomorrow. Instead of focusing on ultimate outcomes, let us focus on our next moves. There is always something we can do today to get a little better, to move a little closer, and to put ourselves and our organisations in better positions for tomorrow.

It is not pretty. It is not sexy. It is not fast. And it will not make for success stories all the time. But over time, it will work. We have to make it work.

Thank you very much for listening.

*Excerpts from the ‘Keynote Address' delivered by Mr. Eugene Mayne, Founder and Group Chief Executive Officer, Tristar Group at the ‘Inaugural Session’ of IOD's London Global Convention held on October 17, 2023 in London.