Climate change, depletion of biodiversity, and waste management. All these have and continue to put a threat to human lives. These issues, more commonly referred to as environmental problems, bring global economies to come together and find the most appropriate course of action to combat or at least reverse the damage brought by these risks. To add, these risks and their adverse effects to the quality of human life today and in the future have given rise to the concept of intergenerational ethics, a sense of moral obligation to preserve the environment for future generations.
There is a lot to be covered in terms of protecting the environment. In the Philippines, a news report cited that aside from the damage brought by Typhoon Odette, threats such as the effects of pollution and illegal fishing plagued the country last year. Amidst the COVID-19 pandemic, Filipinos are also grappling with the impact of global warming which has led to extreme weather events like supertyphoons. This, in fact, prompted the Department of Finance to tie up with other ASEAN leaders to collaborate and share best practices to address such threats. The Secretary of Finance also emphasized during the 2021 United Nations Climate Change Conference of the Parties (COP26) that the country is taking big steps towards cutting greenhouse gas emissions by using clean energy and highlighted the planned rollout of a sustainable financial roadmap that could provide more environment-friendly policies.
These are just one of the action plans that the government has initiated. But the burden is not just carried by government entities alone. More organizations are stepping up to share the load. On top of this, such groups continue to call on the government to include climate issues on its agenda.
Today, we tend to heavily associate environmental protection with sustainability. While the term evades an exact definition, sustainability can be defined as any and all forms of development that meets the needs of the present population without compromising the right to a balanced and healthful ecology, as embodied under the Philippine Constitution, and needs of future generations.
There is a common misconception that sustainability is all about entities and governments finding ways to lessen environmental risks. However, the scope of sustainability initiatives is not merely confined to looking for the perfect solution, if any exists. It covers social economy, corporate governance, and even extends to financial concepts bundled together and forming what we now know as sustainable finance.
The principle behind sustainable finance is not new. It is the offspring of social considerations and governance initiatives and is considered as “a system in which resources are used to their maximum extent before being disposed of”. It was also defined by the European Commission as a process which covers considerations for environmental, social, and governance (ESG), like mitigating the effects of climate change, before governments and private corporations jump the gun in making investments in the financial sector. The result – viable and sustainable long-term programs.
Benefits of sustainable finance
In today’s modern times, shifting the focus on social and environmental issues, including incorporating sustainable finance in a business model is a must to thrive. And it does not hurt that sustainable finance also provides a lot of benefits. For one, a corporate strategy anchored on sustainability and corporate social responsibility (CSR) measures add value to a company’s brand and increases stakeholder confidence. Results of a McKinsey report showed that companies keen on prioritizing such initiatives are much more likely to engage with their clients better when it comes to sustainability.
In the long run, as companies embed these initiatives within their organizational blueprints, they create positive value for society. In return, they gain consumer trust and become more resilient to such challenges which can threaten their very existence.
So how do we do it? How do businesses go about in railroading and integrating these green policies into their framework?
All things change, even consumer mindset. Decades earlier, the public may not be as invested in environmental issues. Today, a business’ customers are more socially aware of the impact and gravity of their actions and decisions when it comes to protecting the environment. Hence, to cater and see eye to eye with the more socially and environmentally conscious consumer, more green financial products are being developed, opening an exciting array of opportunities for companies in the financial services sector.
Investing in the development of these products is the way to go, and the benefits are many – increase in profit, strengthening brand loyalty, and even promoting employee satisfaction. These products include those for retail banking, corporate and investment banking, asset management services, and insurance.
Start with a clear objective. What do you plan to achieve upon integrating sustainability measures in your organization? Cutting down carbon footprint, investing more on CSR programs, and presenting more eco-friendly initiatives – these are all viable goals. Once the goal is clear, the next step is to find the right sustainability leaders, like Chief Sustainability Managers or Directors, to lead the pack.
Including business partners also does the trick. Find meaningful ways to engage suppliers and other partners to help you achieve your goal.
Never forget the workforce as they form the backbone of any organization. It is equally important for companies to start from within and engage their employees as much as they do when it comes to investors and clients. Research has shown that corporate staff are much more skeptical when it comes to embodying their companies’ policies. To counter this, leading by example could help.
Inculcating a shift in employee mindset is an integral step when a business introduces new initiatives on CSR and ESG. Starting from the inside and then rolling out these green initiatives to investors and consumers to create value is a great way to go in terms of embracing sustainability as part of corporate practice.
Setting clear goals, integrating new sustainability initiatives, and imbibing a shift in employee mindset are just some of the many ways that companies can further step up in terms of sustainability. In the end, caring for the environment and becoming sustainability stewards in the process may entail additional effort and sweat, but is still rewarding and is the right way to go.
As published in The Manila Times, dated 26 January 2022