The Securities and Exchange Commission’s proposed rule on disclosing climate change risk is just one way that regulators, investors, and society are pressing companies to boost sustainability reporting. At a Fortune conference on Wednesday, three leaders responsible for their organizations’ ESG efforts weighed in on how the landscape is changing—and on how much work lies ahead.
Despite the proliferation of frameworks for reporting and measuring ESG outcomes, there’s still no global standard, noted Brooke Fapohunda, chief sustainability officer with privately held investment giant Lord Abbett. “One of the things that we’ve done is to synthesize various frameworks, but we have not actually adopted them,” Fapohunda said at the Fortune Impact Initiative in Atlanta. “It’s more about thinking about what makes sense for us and giving ourselves the bandwidth to really think through and understand it and apply it the right way over the long-term.”
U.S. companies operating globally are already dealing with ESG reporting elsewhere, observed Faith Taylor, chief sustainability officer at IT infrastructure heavyweight Kyndryl, which has 90,000 staff worldwide. “I look at it in more of a global perspective, saying, ‘I have to figure out what are those main components in ESG that we have to report on regardless and figure out what that baseline is, across regulatory requirements and the frameworks that you’re using,’” Taylor said. “And then say, ‘OK, this is how we’re going to actually manage that.’”
For the most part, media and entertainment conglomerate Paramount reports “against all of the alphabet soup,” said Crystal Barnes, senior vice president of social responsibility and ESG at Paramount. “We’re a brand of brands. And so for us, some of the biggest challenges have been making sure that we are in a position to set up the proper infrastructure to be able to meet all of the requirements of the reporting structures that are coming down the pike.”
Paramount has been getting its house in order so it can meet the upcoming SEC regulations, Barnes said. “It’s making sure that everything we do is grounded in materiality,” she added, referring to information of importance to reasonable investors. “We’re in media, so there’s no roadmap for ESG, necessarily. But it is important for us to do the hard work and pull back the curtain on the areas that really are material to our business.”
To develop its ESG data, Taylor explained, Kyndryl worked with a third-party auditor on pre-assurance before doing assurance across the internal team. “Whoever your auditor is, if they’re part of that process, it will be seamless to go from reporting it externally to actually integrating it into your 10-K,” she said. “Then that gives you integrity and gives the board a comfort in terms of how you’re managing the risk. Because a key component is managing risk and the data and the questions you get about greenwashing in terms of the data.”
When it comes to ESG reporting, the way forward is through collaboration within and across industries, Barnes maintained. “I love the fact that the ESG space oftentimes doesn’t feel like a competitive space, but that we’re all trying to get to a certain spot together.”
Fapohunda, who questioned whether some companies would be ready for the SEC’s proposed implementation of its new climate risk reporting rule in 2024, also sounded hopeful. “The ability to achieve consistency and rigor and transparency in ESG metrics will help to defuse the skepticism and criticism around it,” she said. “I just think we have a long way to figure out what that system of metrics should look like.”
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