This article first appeared in The Edge Malaysia Weekly on March 1, 2021 - March 7, 2021

NATURE is striking back and corporations today know it all too well. Environmental hazards are among the top five risks facing businesses, according to the World Economic Forum’s Global Risks Report 2020.

Not only that, a question mark hangs over business models that are at odds with sustainable development. However, companies that are hooked up with the fossil fuel economy are hard put to change direction.

The evidence is seen globally in documents like the Emissions Gap Report of the United Nations Environment Programme, which measures “the ever-increasing burden of human activity on the Earth’s climate”.

The latest report states that greenhouse gas concentrations continued to rise in 2020, with the reduction in carbon emissions due to the Covid-19 pandemic “expected to have negligible long-term impact on climate change”.

Moreover, the messages from Nature are getting through more clearly to consumers and investors. In 2019, 15 extreme-weather events worldwide exacerbated by climate change caused more than US$1 billion in damage each, according to a Brookings Institute report. Four of these each caused more than US$10 billion in damage.

Not surprisingly, a recent survey by the Pew Research Centre indicates that seven out of 10 Malaysians place more priority on environmental protection, even if it comes at the expense of economic growth and the creation of more job opportunities.

Investors are also taking notice. A study on FTSE4Good stocks by the United Nations Global Compact Network Malaysia (UNGCMY) shows that they outperformed their peers 3.5 times during the first Movement Control Order in 2020. The FTSE4Good Index Series is a series of benchmark and tradable indexes for environmental, social and governance (ESG) investors.

With the evidence showing that being sustainable is good business, the responsibility then lies with business leaders to make sustainable development a core function of their enterprises.

This theme is a key point of the UNGC-Accenture CEO study of 2019. The report highlights the critical need for senior management to set the tone for their organisations to fully adopt ESG factors to promote innovation and sustained business growth.

But putting these principles into practice can pose a serious challenge for businesses.

“The first is the challenge of managing the triple bottom line — managing the financial or economic performance of the company while simultaneously contributing to the social and environmental impacts,” states the newly published CEO Guide to Sustainability-centric Decision-making — Malaysia.

This is just one of a series of internal and external challenges identified in the guide. Two other internal challenges are:

•     Getting buy-in from employees at the bottom level, and

•     Getting reliable data on supply chain factors that should be traceable.

Then there are at least three external challenges, says the guide, which is based on insights, feedback and advice from CEOs of public-listed companies. Firstly, investors’ support for sustainability needs to be much stronger to push businesses to change. Secondly, customers are generally not supporting the sustainability issue — owing to a lack of interest or because of affordability. Thirdly, the government is not taking the “stick” approach to taxing, unlike sin taxes or the sugar tax that is adopted to promote healthy consumer choices.

As seen from these views, there is still a significant gap between intention and practice in terms of adopting the sustainability agenda. For example, the CEOs’ view that customer support for sustainability is lacking contradicts the finding of the Pew survey that seven out of 10 consumers are ready to put the environment before economic growth or jobs.

“Corporate leaders are at an early stage on the path to developing a coherent strategy to implement sustainable development goals as a core function of their businesses,” UNGCMY executive director and a co-author of the guide Faroze Nadar tells The Edge in an online interview highlighting the role of the guide in promoting the sustainability theme among businesses.

For corporate leaders looking for a way to engage with the ESG wave, the guide provides an introduction to a planning framework, says Faroze.

The guide is the outcome of a collaboration between Capital Markets Malaysia and UNGCMY. Joining in the effort is the Centre for Sustainable Corporations and Nottingham University Business School Malaysia (NUBS). It is jointly authored by Dr Avvari V Mohan, Associate Professor of Strategy and Innovation and Director of Research at NUBS and Faroze.

A major portion of the guide is drawn from the views of C-level business leaders and industry executives that were shared at a CEO roundtable held in July last year and during follow-up meetings.

The key takeaway from the guide is contained in its last section entitled “8 Steps to Accelerate Your Sustainability Ambition”. Here, the authors move beyond the posers around the issue to take a practical approach to implementing change in an organisation.

The first step — establish a sustainability governance structure — sets the stage for board oversight of the organisation’s move towards sustainability. Once in place, this flows into the organisation’s culture, practices and business processes, which occupy a space that is more familiar to the average business. A good place to start, says the guide, is to focus on making the company’s products and services more sustainable (see figure).

Among other things, businesses can benefit from the insights shared by corporate leaders who have already gone some distance along the road to sustainability. For instance, on the starting point of sustainability for the organisation, a common thread discussed by the CEOs is to ask:

•     What is the role played by the organisation in the society it operates in? and

•     What should be the thinking for the organisation to be around for another 100 years?

These are big questions for a corporation, yet they are vital ones for a business that aims to last the distance.

Rash Behari Bhattacharjee is an associate editor at The Edge

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.