Purpose on Payday

By Andrew Adie

March 2021 was a month that has reminded us that corporate purpose is about people as well as the planet.

It started with Harry and Meghan’s explosive interview citing bullying and harassment, moved into debates around whether compelling care staff to have Covid vaccines is a breach of their human rights and ended with discussions on how organisations can better protect the mental health of their staff as we ease lockdown restrictions and news that Deliveroo’s much anticipated IPO is losing support due to concerns over its support for worker rights.

That isn’t to say that the E in ESG hasn’t also seen seismic developments. A landmark consultation has been launched by BEIS (Department for Business Energy & Industrial Strategy) looking at how climate-related financial disclosures for companies, to TCFD (Taskforce for Climate Related Financial Disclosure) standards should be mandatory for all listed businesses, large private companies and LLPs.

This builds on Rishi Sunak’s announcement in November that the UK would be the first global economy to make TCFD reporting mandatory across the economy by 2025. Large cap listed companies, large pension schemes and asset managers are already having to prepare for reporting to TCFD standards by 2022, and this BEIS consultation paves the way for the next phase of the wider plan.

Businesses wanting to respond just have until the 5th May 2021 to do so, so time is of the essence.

Another consultation, launched this week by the Department of Work & Pensions, is a 12-week ‘call for evidence’ on how Pension Scheme Trustees understand social factors and build these into ESG investment decisions.

Trustees may be forgiven for feeling they are under the microscope, but as stewards and asset owners for around £2 trillion in investments, the decisions taken by pension schemes have a significant impact. Pension scheme members are also increasingly vocal in their desire to see their funds used in socially and environmentally beneficial ways. Government action to drive up ESG standards in the sector is pushing on an open door when it comes to public opinion.

March has also seen significant turmoil within the corporate world around ESG and purpose.

Danone has fired its agenda-setting CEO Emmanuel Faber who turbo-charged the group’s sustainability efforts by formalising its role as an enterprise à mission (purpose driven company), but then failed to keep ahead of activists who pointed out that Danone’s financial performance lagged rivals such as Nestlé. It was a reminder that shareholders may support the move to purpose-driven corporate agendas, but only if it also preserves value and drives financial performance.

There has also been increasing scrutiny of greenwashing, with stark figures from Climate Action 100+ showing that less than 1 per cent of companies analysed by the group had set targets to cut carbon emissions by 2025, yet more than half had pledged to be net zero by 2050.

The gap between what is being pledged and the action to deliver it is also a concern among consumers. A study undertaken by SEC Newgate Research for the Department for Business, Energy and Industrial Strategy (BEIS) and the Department for Environment, Food and Rural Affairs (Defra) has shown that many consumers are yet to embrace the changes needed in homes, travel and our lifestyles to hit net zero by 2050 targets.

Next month sees Earth Day and President Biden’s climate summit which will further focus minds on the challenges of the race to zero by 2050, ahead of November’s COP26 conference.

At COP26 the UK Government is seeking to persuade the international community to commit to 68% cuts by 2030 as it aims to get the world back on track to limit global warming to 1.5 degrees compared to 1990 levels.

Most consumers and businesses are nowhere close to meeting that and this month has underlined again that the race to zero will be a marathon, not a sprint.