How sustainable is your global mobility business?

Employees, investors, customers and clients are increasingly looking at the sustainability and environmental impact of companies they do business with. Incorporating Environmental, Social and Governance (ESG ) criteria into the core of your strategy can make your brand more attractive and will futureproof your business.

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This article is taken from the latest issue of Think Global People, the new home of Relocate Magazine.
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ESG is the new buzzword in finance and technology. It’s what keeps CEOs up at night. There is now huge demand from employees, stakeholders, shareholders and consumers for businesses to be environmentally and socially responsible and to be able to demonstrate good corporate government. This goes much further than a mission statement – it needs to be reflected in ALL business decisions from the C-suite to the employees on the ground.What is your sustainability business model? How can you demonstrate that you are making efforts to ensure your business is sustainable, has minimal impact on the environment, and adheres to standards around corporate responsibility, good employee governance, and operates with integrity?It is now one of the most important criteria for millennials when considering a new company to work for, along with flexible working conditions and a sense of corporate purpose. The new talent that will be leaving school in the next five years are passionately interested in ESG criteria, in their shopping, leisure and employment opportunities.What’s more, it is not enough to “woke wash” your company with a meaningless ESG statement or indulge in “greenwashing” where you claim your environmental policies are greater than they are.Companies large and small are increasingly being expected to demonstrate in hard data what impact their ESG measures are making. This means your global mobility business needs to be examining how you manage your people, what impact your business has on the world, and what you can do better to measure and demonstrate your progress.

ESG - does it really matter to a global mobility business?

The short answer is yes. If you are looking for investment, wanting to recruit and retain new employees, looking to expand and build your brand, protect your business reputation and build a futureproofed, resilient business, then ESG criteria need to be built into the DNA of your company.This is particularly the case for companies who are looking to recruit young people, who are keenly aware of the impact of companies on the  health and sustainability of the planet. It also matters if you want financiers and investors to lend you money. The market of impact investing is already large (worth US $714 billion according to GIIN, the Global Impacting Investing Network) and growing rapidly (it has grown 46% per annum over the last five years).Indeed, ESG has shown resilience even during Covid times, and is now expected by shareholders and by regulators. Rather than seeing ESG as a burden, managers can seize it as an opportunity. It can be a great boost for your business if your ESG vision is managed well and is fully integrated with the purpose of your company. It can differentiate against competition and engage employees, leading to a more attractive brand to potential talent and a way of retaining existing employees. Already, large investors like pension funds are switching their holdings to sustainable funds in order to adhere to new regulations and in response to consumer demand. As ESG moves to the mainstream, your business needs to embrace it, not ignore it.“Sustainability is important but it’s hard in our industry,” says Rob Fletcher of Heart Relocation. “You put people on planes and their belongings on boats and you can’t really do anything about that. But when you look at sustainability now and the ESGs – the new buzzword – it’s also about creating an environment for change.”Olivier Djololian, Head of Workplace Practice at CloudStratex, says managers will also need to rethink business travel.  “I suspect that business travel will still have a role to play over the next couple of years, but a shift will occur in terms of priority and necessity,” he says.“This will result in a more thoughtful and less routine approach to travel: ‘do I really need to attend this meeting in person?’ And this is something that will continue postpandemic. Perhaps a targeted approach is best, prioritising key interactions and business events such as meeting new potential partners or presenting as part of a bid process.”
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How is sustainability moving to mainstream?

At the top level, governments are getting involved, and sustainability is likely to be a key plank of the new Biden administration in the US. In Europe, Arun Srivastava, Fintech and Regulation Partner at Paul Hastings, the global law firm, says both the UK and the EU Governments, among others, are trying hard to direct capital flows towards sustainable investment.“Clearly, the view at government level is that Government intervention is needed to give impetus to this issue and avoid issues like “greenwashing” (i.e. promoting something as ESG compliant when it is not),” he says.New mandatory disclosure requirements are coming into force in the UK and the EU, and mandatory sustainability screening requirements will be implemented in 2022.“These will make firms tackle sustainability issues head on, and level the playing field when it comes to sustainable investment – all managers and advisers will need to address sustainability issues in their processes and make public disclosures around what they are  doing,” he says.If different jurisdictions have different legislation, it will make it extremely difficult for companies to operate effectively unless they have a coherent policy. For example, the United States is less educated on ESG regulations than the EU, but the latter has made is clear than any company wishing to operate or trade within its borders will also have to comply with its new disclosure obligations.“For large businesses with cross-border operations this might not be a problem, but it might mean applying a highest common denominator approach,” he says. “Aside from that, having a global standard to which companies have to comply when it comes to ESG will ultimately make regulations more effective and easier to enforce.”Sustainability is a broad concept, and it is important for businesses, especially those with a global remit, to remember that.“Sustainability is not just confined to environmental issues, it encompasses a plethora of others, including the gender pay gap, remuneration, anti-bribery and corruption, and diversity and inclusion,” he explains.
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ESG - What is driving the change?

Celene Lee, Principal and Senior Investment Consultant at Buck in the UK, the human resources consulting agency, says there are three key components which are coming together.“Firstly, regulatory drivers, starting with banks, insurers and institutional investors such as pension schemes, who are required to take sustainability into account when it comes to risk assessment,” she says. “Naturally these are large asset owners and therefore drive changes in the behaviours in the companies they invest in and therefore impact on sustainable investing.”The media is another key component, taking the message and communicating change to a much larger audience, as well as acting as a forum for ideas and momentum building.“Finally, the ultimate enabler of sustainable investing – improved and widely-adopted technology – which provides sustainability metrics to companies and consumers that allow them to make better business and buying decisions in real time in some cases,” she says.There is real momentum behind responsible investment. Regardless of whether it is motivated by ‘good intentions’ or the need to comply with regulation, high levels of demand mean that institutional investors continue to put pressure on asset managers to up their game on sustainable investing.“ESG is not just about ‘doing good’ in a vacuum, it has to be put into the context of the real world,” she says. “Ultimately the future for ESG relies on capital flows: the hope is that companies that engage in sustainable businesses will find it cheaper and easier to raise capital. Making people aware of this realworld success is essential if ESG is to maintain its momentum and continue to stay relevant. Ultimately, businesses are there  to create wealth. ESG and wealth creation therefore have to go hand in hand for sustainability investing itself to be sustainable.”

Your employees are already engaged and looking for you to take the lead

The shift towards sustainable investing has largely been driven from the bottom-up, says William Burrows, Managing Director at AHR Private Wealth “Grassroots climate change movements, #MeToo campaigns, and investors have all led the charge and applied pressure to businesses to change their image and place sustainability at the heart of what they do,” he says.Governments have also been influenced by these movements to encourage sustainable investing, an example being the UK where the decision to phase out diesel  engine cars has increased the value of hybrid manufacturers such as Tesla.”“Five years ago, I would have agreed there’s an education gap,” says Ryan McNelley, managing director at Duff & Phelps’ Valuation Advisory Practice. “Today, however, I’ve seen a dramatic shift and ESG is now at the top of the agenda for the industry as a whole.” Robin Penfold, partner at TLT, and an expert in green finance, says we can “all be change makers”.“Green finance and green investment has to become an integral part of the daily lives of people and businesses for this to really gain momentum,” he says. “Technology will play a huge role in this, as we have seen in other aspects of our lives and the way we control our homes with our smartphones.“It is not just top-down action from the major financial institutions  and investment firms that will help the UK meet its net-zero climate target, but tools that make investing in green and sustainable investment products attractive to investors and enable investors to make simple changes to the way they view investment opportunities.” Ilaria Calabresi, Sustainable  Ilaria Calabresi, Sustainable Investment Lead at J.P. Morgan Private Bank says companies – large or small – are realizing that integrating sustainability is needed in order to stay competitive.“Some corporates might have started this journey towards sustainability, though still have low awareness of what factors asset managers and rating agencies are focusing on when looking at companies’ performance on ESG considerations,” she says.“Asset managers can play a role in supporting companies by helping them to understand those specific factors as well as teaching them that becoming a leader on ESG factors has been proven to increase profitability, reduce risk and allow access to cheaper capital.”

Is your business keeping up?

New research by Addleshaw Goddard has revealed that large European businesses are making faster progress on sustainability than medium-sized businesses, with the gap expected to become even more pronounced over the next four years.The law firm found that financiers intend to turn off the funding tap to companies within at least two key sectors by 2025 if they fail to provide a carbon transition strategy, with real estate and healthcare most at risk. The combination of these factors could disproportionately impact the ability of medium-sized businesses to thrive in the medium term.Based on the views of 1,000 business and finance leaders, the research reveals that medium-sized businesses are falling behind on sustainability for several reasons.These include:• a lack of a joined-up response among industry (a barrier for 76% of mid-size businesses vs 50% of very large businesses);• difficulty in raising new equity finance (75% vs 56%);• government regulation (73% vs 52%); and• a lack of access to good quality sustainability data (75% vs 60%).Both mid-size and very large businesses cite pressure to keep costs low as the biggest barriers preventing them from becoming more sustainable (81% of mid-size businesses vs 75% of very large businesses).Sustainability was found to be a top-two boardroom priority for only 17% of mid-sized businesses compared to over a quarter of very large businesses (26%). 72% of medium-sized businesses expect that sustainability will become a top-two boardroom priority by 2025, compared to 82% of very large businesses.Amanda Gray, Partner,  Addleshaw Goddard, says small and mid-size businesses don't have the clarity they need to develop and invest in a zero-carbon strategy. Yet without one financiers are likely to cut them off within the next few years.“The government must work hard to provide every bit of certainty it can, for example through setting out binding interim targets,” she says. “This will allow businesses of all types to be confident in the knowledge that they are responding to the right metrics and that there is a level playing field among competitors.”The largest businesses also report having increased their financial investment in sustainability significantly since the start of the pandemic (41%), with 38% claiming that their boards have spent more time on improving ESG performance during the same period. This compares to under a quarter of medium-sized businesses that have increased spending (24%) and time spent by the board (23%).The research also highlights that mid-sized companies are less likely to be taking a strategic approach to ESG. Fifty-five percent of very large organisations say that ESG considerations are at the heart of their business strategy and shape everything they do, compared to 43% of mediumsized organisations. And almost half (47%) of medium-sized organisations admit to performing the minimum level of ESG reporting for legal and regulatory compliance, compared to 23% of very large organisations.

Make sure you mean it - the dangers of "greenwashing"

When you do decide to integrate sustainability into your global mobility business, you need to ensure that it has real meaning, both to management and employees.  New research from Quilter has found that greenwashing has been identified by investors as their biggest concern when it comes to responsible investing.Investments not being what they claim to be was identified by 44% of investors as being their biggest worry when it came to environmental, social and governance (ESG) investing. Investors have become increasingly sensitive towards the effects of greenwashing, where companies exaggerate their green credentials to capitalise on growing demand for environmental products, as concerns around climate change have increased.The Treasury Select Committee group of MPs recently argued the Financial Conduct Authority should be handed powers to tackle greenwashing as part of an effort to cut carbon emissions. Your staff will also be keenly aware if the organisation is only paying lip service to sustainability, corporate governance, and environmental concerns, and they will vote with their feet.Eimear Toomey, head of responsible investment at Quilter Investors, said, “Greenwashing threatens to undo all the good work and progress that has been made so far.”The explosion in popularity of ESG has been well documented, but it is encouraging to see investors and employees are not simply seeing it as a fad but want to make a real difference. They want companies to act in a more responsible way and it is clear that words and vague mission statements will not be enough to placate them. They will be looking for real action instead.

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