Armanino Blog

Looking to the Future of ESG for Businesses Following the United Nations COP26

March 02, 2022

Each year, the United Nations hosts an international climate change conference, a formal event to bring together the Conference of the Parties (COP) to address the United Nations Framework Convention on Climate Change. Governments represented at the event provide updates on the legally binding obligations each member country has to reduce greenhouse gas emissions.

Months after the 2021 United Nations’ Conference of the Parties (COP26) took place in Glasgow, Scotland, the global climate change event is still in the news. Governments are beginning to address the hard work they must tackle to deliver on the promises they made in reaching the Glasgow Climate Pact, which urges immediate, swift action to combat climate change over the next decade.

We spoke with our own ESG expert Kris Russell, who had the privilege of attending COP26, and learned more about his experience at what he calls the “climate change Olympics” and how private industry stood out in leading ESG progress.

Attendance at COP26 is limited to government representatives, the media and select nongovernmental organizations. How were you able to get in?

I was invited to COP26 to receive an award for the work I did as part of the Dallas Fort Worth International Airport (DFW). My team and I built a tremendously successful climate program to achieve Net Zero by 2030 and shared a recent initiative using renewable natural gas.

For those of us who worked at DFW, this was about sharing a scalable and transferable renewable energy solution that worked well in a state with a heavy fossil fuel industry presence, proving the business case for sustainability. We were a good example of assembling a cross-functional team and engaging with stakeholders and our business partners, then putting together a program that was a win-win-win — financially, environmentally and from a community health perspective. I’m optimistic other organizations will learn from our example.

In addition to receiving the UN Global Climate Action Award, I was in the audience listening to climate action ideas, ranging from carbon neutral hotels to sustainable cities of the future. The spirit of COP26 was collaboration and capacity building, maturing our collective global response.

What was it like to rub shoulders with world leaders at this high-stakes event?

Getting a front-row seat to watch 200-plus leaders from across the globe address climate change in real time was remarkable. It was like the climate action Olympics, and you could feel the energy and enthusiasm. Between the amount of innovation and influence present, as well as unmatched diversity of thought and expertise around climate issues, it was simply fascinating. It wasn’t lost on me that the outcome of COP26 will affect every person on this planet now and in the future.

I heard leaders from African countries talking about what they’re doing, and in the same exhibit hall heard from leaders from the Middle East who, despite their countries’ connections with oil and gas and fossil fuels, were focused on climate change issues. I got to meet and hear from leaders across Europe who are truly at the forefront of climate change mitigation and prevention, so it was cool being in the presence of climate change champions.

There was also massive global media presence at COP26, where outlets all set up their broadcast booths to bring COP26 to countries all over the world. That’s something you don’t typically see at a regular industry conference, and it made me feel that the eyes of the world were on this event.

It was also incredible to be in the same room as so many representatives from private industry and other organizations who are designing and implementing solutions to move us forward. We were all there to share progress and learn from each other about how the private sector can further climate change initiatives and make progress solving this complex issue.

One key outcome of COP26 was the announcement of a new International Sustainability Standards Board (ISSB) that will help streamline ESG requirements. How big a deal is this for businesses? How (and when) do you think this standardization will impact companies’ ESG efforts?

As we go further into 2022, we’ll see more about the commitments made at COP26, and the proof is going to be in the outcome. On the corporate side, the imperative to address climate change is here, it’s real and it’s immediate. Companies need a uniform guide to help them address climate change through their ESG strategies, and the time to do so is now. The cost of inaction far exceeds the investment to solve this challenge and the reward of transforming your business for a zero emissions future.

The ISSB will help consolidate ESG requirements, which will provide much-needed direction and clarity for businesses. Currently, ESG is a choose-your-own-adventure journey — organizations can select from the countless number of ESG frameworks and align their business operations and goals to the frameworks that make the most sense for their business and industry. They can also cherry-pick ESG frameworks that align with how they want to communicate with stakeholders like customers, investors and supply chain partners. Under ISSB, companies will have a single playbook and guidance when it comes to their ESG efforts, from benchmarking to reporting standards that provide transparency and trust.

The biggest effects I see across sectors and industries is that all organizations will benefit from communicating with stakeholders in a consistent manner. There will be far less confusion about ESG frameworks overall, making the process more approachable and accessible than before.

Activists such as Greta Thunberg have accused events such as COP26 of perpetuating greenwashing. Are participants concerned about this, and what real action are they taking to produce quantifiable results?

One interesting observation from COP26 was the presence of a distinct anti-greenwashing sentiment throughout the event, both with governments and industry representatives. Companies and governments are increasingly being criticized for lack of action on reducing emissions, just as the public has become more aware and critical of greenwashing than ever before. There’s real concern there, and even though COP26 was full of enthusiasm about the future, there was a sense of gravity that real change must happen now.

It’s now impossible to bifurcate the financial from environmental and social because of the way consumers think and act and how these concerns permeate every aspect of life and business. COP26 included several examples of this, such as a “guilt-free” hotel experience that helps guests understand the environmental impact of their stay. Consumer expectations will force companies to adopt, and ultimately, this affects the bottom line.

In many ways, COP26 was a renewed call to action and setting the stage for what’s to come from governments and businesses alike. As regulations emerge, we see significant opportunities for companies to implement ESG strategies to meet customer, employee and investor expectations and prepare for the future, with wide-ranging support of governments to do so.

How did COP26 affect the way you’re talking with clients about ESG and climate change? What opportunities do you see down the line?

I came away from the event with a renewed and heightened sense of optimism about climate change progress. If governments aren’t moving quickly enough on climate change, the private sector is. Companies in all sectors are working on this great challenge of our time, and they are moving quickly thanks to stakeholder pressure and a motivated workforce. That’s where real progress is being made today, and it’s thanks to companies like Armanino that measure success by positive impacts.

COP26 was interesting in that there were industry-focused discussions about climate change and ESG aside from the talks between governments and policymakers. The healthcare industry talked about climate-smart initiatives that reduce costs and improve patient outcomes. The financial sector came together to discuss using influence to help money flow toward climate solutions.

I’m talking with clients now about approaching ESG and climate change from angles they may not have identified on their own, and from real-life, proven examples and programs that were shared at COP26. Being able to take my experience and learnings back to clients is a privilege and something I’m really excited about. This transformation mobilizes innovation across industries and geographies.

What’s your biggest takeaway from COP26?

My experience in Glasgow reinforced my view that this transformation is mobilizing innovation across industries and geographies. It’s critical to seek out people outside your sphere who can share knowledge, perspective and ideas. Every industry has a role to play in our global commitment to make sure this planet is still a healthy place for future generations.

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