Executives from Bank of America, Mastercard, KPMG, and about 60 other large companies announced Tuesday they’ll be adopting a new reporting framework for environmental, social, and governance standards (ESGs) in partnership with the World Economic Forum.
Other companies that have signed on to this reporting framework include Salesforce, Unilever, Dell, and Sony.
ESG standards are a set of criteria used to measure a company’s performance on things such as how the company is impacting the environment (like its amount of toxic emissions), how it manages relationships with its employees (does it encourage employees to volunteer), and how the company runs internally (boardroom diversity).
If widely adopted, these standards, called “Stakeholder Capitalism Metrics,” have the potential to transform what it means to operate a large corporation. It could make it standard procedure for a major company to report its ESG metrics, just like it’s standard (in fact, required) for a company to report on its financial metrics.
Many in the business community see ESG metrics as a concrete way to advance stakeholder capitalism, the leading economic theory today that says companies are responsible to all stakeholders, including their employees, customers, the environment, as well as their shareholders.
“We have to deliver great returns for our shareholders and help drive progress on society’s most important priorities,” Brian Moynihan, CEO of Bank of America, and chairman of the International Business Council, said in a statement. “That is stakeholder capitalism in action.”
The next step in a trend
In September, the World Economic Forum and the International Business Council (IBC), run by Bank of America CEO Brian Moynihan, partnered with “the Big Four” accounting firms to create the reporting framework of 21 ESG standards. The big four – Deloitte, PwC, EY, and KPMG – provide financial auditing and other professional services.
Accounting giant Ernst & Young announced Monday plans to become carbon negative in 2021, “net zero” in 2025 and cut its total emissions by 40% with seven key commitments.
The London-headquartered firm achieved its goal of becoming carbon neutral in 2020, but after reviewing the science and talking to the company’s climate change experts, it became clear that being carbon neutral wasn’t enough.
Steve Varley, EY’s chief sustainability officer who was appointed in July 2020, told Insider the company emitted 1.1 million tonnes of carbon dioxide in 2019. The travel restrictions brought on by the coronavirus crisis has meant these emissions have fallen to 769,ooo tonnes, but Varley said EY’s commitment is “regardless” of the impact of the pandemic.
“Our commitment is to remove more carbon dioxide from the atmosphere than we emit every year, forever,” he said.
Varley said he was inspired by Microsoft becoming carbon negative in January 2020. “That’s been on our minds and part of the inspiration for EY also declaring that we become carbon negative.”
“Wouldn’t it be fantastic if society recognized that business is a positive driver rather than a negative contributor” to the environment, he said.
Here are the seven ways in which EY plan to become carbon negative this year.
Cut down on business travel emissions
EY’s first commitment is to reduce travel emissions produced by the business by 35% by 2025. That includes employees or clients travelling by plane, train or bus.
Of the 1.1 million tonnes of carbon emitted by EY in the financial year of 2019, three quarters (76%) of those emissions came from air travel. Since the pandemic struck in March, this amount has reduced as less people are travelling.
While the pandemic won’t last forever, Varley said EY expects employees to continue to use technology such as Zoom to communicate which will ultimately reduce the need to travel. The company is also investing in collaboration technologies to help achieve this goal, he said. Many EY clients have made similar commitments to reduce their carbon emissions, Varley said, who believes there will be teamwork between both parties to make sure they cut down together.
Reduce overall office electricity usage
Another commitment EY has made is lowering the electricity usage in its offices and procuring 100% renewable energy for the remaining needs of the company. This will help EY become a member of the RE100, a group of organizations worldwide committed to renewable electricity, by 2025, the company said.
Given that coronavirus has forced many employees to work from home, this may seem quite easy to reduce. But Varley said the commitment includes calculating how much carbon EY employees, like himself, are emitting from home working.
“The future we see is a mixed economy of working,” said Varley, who said staff and clients have been working in a range of places including home, offices, and client’s sites.
Structure electricity supply contracts
EY also want to sign more contracts with electricity suppliers so any electricity they don’t use can go straight back into the national grid.
Varley said it has a multi year deal with Lightsource BP, a subsidiary of BP, which will provide the accounting firm with renewable electrivity. The deal involves EY buying more electricity than it needs from Lightsource BP, and the electricity it doesn’t use is put back into the national grid for others to use as renewable electricity, Varley said.
Provide employees with tools that calculate how much carbon they’re emitting
In order for employees to take matters into their own hands, EY are providing them with a modelling tool which will work out how much carbon they’re emitting whilst working.
The tool will work similar to another tool that EY uses to calculate the financial budget on a project, according to Varley. It will show you how you can achieve the same result but with a lower footprint, he said.
Plant trees and use technologies to remove carbon from the atmosphere
One of the projects EY has invested in as part of its strategy to cut down on carbon is helping to protect five million trees in the Amazonia rainforest through an organization called South Pole.
EY plans to use more nature-based solutions and carbon-reducing technologies to offset more carbon than it emits every year.
Invest in services to help EY clients decarbonize their company
Varley said EY is accelerating its investment in the company’s Climate Change and Sustainability Service (CCASS) practice, which helps clients and companies identify and understand how to be more sustainable.
The accounting firm is also planning to invest in its tax practice, Varley said, as it’s increasingly likely that many countries will introduce or strengthen carbon taxes.
EY is also part of the “Terra Carta” – a charter unveiled by His Royal Highness The Prince of Wales on January 10, which gives businesses a roadmap to a more sustainable future.
Ensure EY suppliers set science-based targets
EY will require 75% of its suppliers to set science-based targets, which help businesses reduce emissions in line with the Paris Agreement goals, by no later than 2025. Having a science-based target means that companies will reduce their emissions at a quicker pace to make sure they’re not warming the planet up, according to Varley.
“I wouldn’t be surprised that in subsequent years we don’t increase that 75% to 100%,” Varley said. “We realise that we have a role to play systemically because we’re a big global organisation of making sure our supplier also live our values and don’t contribute to the warming of the planet.”
Not enough [companies] have gone carbon negative in their announcement, according to Varley. “There’s an opportunity to get a science-based target, to become net zero and to remove more carbon from the atmosphere than they emit.”
His Royal Highness The Prince of Wales has unveiled a new sustainability charter, named “Terra Carta,” backed by leading international businesses, including Bank of America, BlackRock, Unilever, AstraZeneca and BP.
The charter, designed by Apple’s former Chief Design Officer Sir Jony Ive, is a 10-point roadmap to 2030 for businesses, supporting the likes of the Paris Climate Agreement. With nearly 100 actions for businesses, the plan should act as a “basis of a recovery plan that puts Nature, People and Planet at the heart of global value creation,” according to a press release. Each actor was given a framework for their individual plans, it said.
This publication is the latest endeavour by Prince Charles to support sustainable practices in the private sector, following his speech at Davos in January 2020 and the creation the Sustainable Markets Initiative.
“The ‘Terra Carta’ offers the basis of a recovery plan that puts Nature, People and Planet at the heart of global value creation – one that will harness the precious, irreplaceable power of Nature combined with the transformative innovation and resources of the private sector,” HRH The Prince of Wales will say at a One Planet Summit event.
One of the initiative’s aims is to drive investment into Nature-based and engineered solutions that address the climate and biodiversity crises. To that end, Prince Charles’ SMI created the Natural Capital Investment Alliance, which seeks to increase natural capital allocation by $10 billion by 2022.
Natural capital is the term used to describe the stock of combined resources that make human life on Earth possible. For example, plants, animals, minerals, soil, air and water.
The alliance, founded alongside HSBC Pollination, Lombard Odier and Mirova, will also pursue natural capital investment through corporate offsetting and carbon pricing prospects.
Terra Nova’s supporters already include some of the biggest businesses in the world, with Brian Moynihan, Bank of America’s CEO and Chairman, calling it “a comprehensive roadmap for the private sector to help drive toward a sustainable future.”
“By aligning development objectives within our operating models the private sector can marshal the resources that will be needed to reach the development goals. HRH Prince of Wales’s leadership and commitment has created a spirit of possibility that business leaders are proud to join,” he added.
Commit to rapidly accelerating the world’s transition towards a sustainable future.
Recognize that ensuring the integrity of all ecosystems, on land and under water, requires that climate, oceans, desertification and biodiversity be treated as one common system and addressed simultaneously.
Acknowledge that we need to make health our goal; individual health, community health, economic health and the health of our Natural resources (e.g. soil, air and water).
Recognize the importance of ‘local’ – local traditions and culture, local products, local jobs and local sustainability – and how these ‘locals’ connect and support each other in the wider tapestry of regional and global systems.
Acknowledge that Nature underpins the inherent prosperity, wellbeing and future of all people and the one planet we share. Further, that the restoration of the natural world is of common benefit to all humankind irrespective of borders.
Acknowledge that the required global trajectory is a sustainable one, where the private sector has a critical role to play. To accelerate along this trajectory, a ‘future of industry’ and ‘future of economy’ approach must be taken.
Take into account the need to ensure a skilled workforce and cadre of leaders that are prepared to participate in a fair, equitable and just transition towards a sustainable future.
Recognize that to scale sustainable solutions and investment, cross-border and longer-term ‘mega’ projects need to be explored underscoring the importance of public, private and philanthropic collaboration.
Acknowledge the need for net zero commitments to be achieved by 2050 or sooner. Setting more ambitious timelines, such as 2035, emphasizes and catalyzes immediate action, continuous innovation and improvement.
Undertake to collaborate, share knowledge and ideas to propel the world towards sustainability at a faster pace through public, private and philanthropic collaboration.