Some top take aways from recent conferences

Because we help our clients find the right reputation, advocacy, corporate affairs and sustainability professionals, we like to keep our fingers on the pulse. Team Temple has recently attended three major conferences related to ESG including, the Product Stewardship Forum, the Australian Investor Relations Association Conference and the AFR ESG Summit. While each conference had different areas of focus, it is obvious to us that corporate affairs professionals will continue to play a critical role in ESG. However, as professionals we will also have to grow our knowledge, skillsets and capabilities to meet the challenges and the opportunities in the new environment – especially around the new disclosure regimes. Here are a few of our take aways:

1. ESG isn’t going anywhere

Despite some of the rhetoric mainly coming out of the US where people are trying not to use the term ESG because it is politically weaponized, the reality is in Australia ESG is not going anywhere. Indeed, the coming mandatory discloser regime has focussed everyone’s attention, especially on carbon disclosure and reporting. It is all getting very real now. While investors are focussed on performance and value creation, they are looking at ESG metrics to manage risk and make long term investment decisions. As one conference panellist from a financial research background said, ‘ESG is not woke – it is about pricing risk’.

Currently, because of the incoming reporting, the focus is very much on the ‘E’, but as Anthony Macdonald said in the AFR, “What is really torching shareholder value, damaging brands, and getting CEOs sacked or retired early has much more to do with the ‘S’ and the ‘G’.” (Read the story here).

2. The destination is known – but we aren’t sure how to get there

As one panellist said ESG (in relation to climate) “…is the biggest economic transition since the industrial revolution.” While we know the destination, we are not sure how we are going to get there. This is leading to challenges in how and what to report under the new mandatory reporting regime and what companies can and cannot say, and how they outline in a clear way what assumptions they are using in their forecasts and forward-looking statements. Gone are the days where one can say they plan to meet the 2050 targets but not provide a pathway to get there. Investors are looking for credible pathways.

Measuring, monitoring, and disclosing performance on the new metrics with transparency and consistency is expected to help businesses performance over the long term but will involve short-term costs. Investors want this data to help make decisions about their investments. The challenge for IR, ESG, and Corporate Affairs professionals is to stay on top of an organisations’ strategic and business narrative to ensure that its storytelling is not undermined by inadequate or unclear metrics and disclosures.

3. So, tell me about your Scope 3?

Yikes! Everyone is concerned about how to measure Scope 3 emissions, especially down the value and supplier chain, into small and medium sized businesses. How will organisations capture and verify the data? Who will do this well? Where can we learn? And what happens if we get it wrong and then have to go back to market with different or inconsistent numbers? What will the regulator do? Could there be innovation with calculators for SMEs from banks or accountings software providers?

There is going to be a lot of learning ‘to build the plane while flying it’ across the industry. The operational challenges are real and far from resolved. But clever collaboration and industry sharing, standard definitions and case studies are expected to help fill the gap. Innovation and ingenuity will be required.

4. Upskilling required by all

Everyone is needing to upskill in these new eras. Not only are management and boards needing to upskill and enhance their knowledge and capability on ESG – especially the new reporting regimes, so are people across and deep in most large businesses. As one speaker said, you need to get your head around your carbon reporting and get the resourcing sorted quick smart because there is going to be a constraint on the knowhow available in the market.

From an IR, ESG and Corporate Affairs perspective the learning never stops and professionals must be ready to master these areas because of their importance in the overall reputation and performance of the organisation. The need to explain and educate, articulate and advocate has never been more critical.

5. Local community expectations count

Nothing is happening in a vacuum. An era of high interest rates, uncertainty and conflicts overseas has certainly meant people have adjusted to be more focussed on immediate issues like the cost of living. While the environment is lower down the order in their concerns, it hasn’t gone away. This is especially true in relation to what is happening locally in their communities. The transition will mean significant changes in local and regional communities.

Communities must be brought along the journey with regards to land use, power station closures or new renewable projects, transmission lines and battery infrastructure as well as around planning for housing, road, rail and airport infrastructure. The role of corporate affairs professionals in helping to guide organisations through some of the more challenging and localised aspects of delivering transition projects with stakeholders is certainly still required.

Trends to watch

Looking a bit further out, two things jumped out.

Nature disclosures is next on the agenda. While organisations are just getting started on carbon disclosure, the expectation is that nature disclosures will follow.

AI is – and will be an ESG issue. Firstly, in terms of carbon emissions because AI requires lots more energy to run, but also from a social impact, ethical, privacy, intellectual property, employment and community impact perspective. Watch this space.

This is just the briefest snapshot of some of the conversations we are seeing and having across our industry. There is a mountain of new information to get across but in our view corporate affairs professionals love complexity and learning new things – and then shaping, sharing, translating, advocating, and persuading with simplicity and nuance to different stakeholders. It is after all – what we do.

If you want to chat more about what we are seeing in the market don’t hesitate to reach out.