It is hard to believe it’s been six months since COP26. The positive impact the Glasgow summit has had both on my own organisation and our clients, I would say, has been profound.
No one could deny that net zero is higher on the board agenda than it’s ever been. The Global Financial Alliance for Net Zero (GFANZ) has had a huge impact, and we have moved from Purpose Statements and net zero Pledges to Plans and increasingly Proof points of progress being made.
Global conflict has raised its head again and the new challenge is whether this will be a distraction to the climate agenda or accelerate disruptive change with higher energy prices and the alignment of energy national security interests. So, whilst significant steps have been taken towards greening the economy, significant challenges remain for business, finance professionals and government as we transition to the low carbon world.
In this blog, I want to focus on the role EY plays in helping companies make that shift.
Whilst significant steps have been taken towards greening the economy, significant challenges remain for business, finance professionals and government as we transition to the low carbon world.
Changing the rules of the game
Although progress has been made, businesses are still grappling with the need to rapidly adjust to a world where non-financial performance becomes ever more important – not only for the companies themselves but also their investors and indeed consumers.
As capital starts being allocated on this new basis, it is driving huge behavioural change. New metrics are needed, ones which enable the comparison of businesses and provide trust to all stakeholders.
The need for common standards
To avoid a situation where unscrupulous operators can ‘mark their own work’, common standards are essential. Yet, what Gillian Tett of the FT famously called an ‘alphabet soup of green standards’ has, if anything, become yet more complex as companies and investors have applied their own ESG standards and methodologies.
At EY, we are working hard to address that issue by, for example, openly setting and publicly sharing our own sustainability targets and, for the first time this year, reporting our results in a way that better reflects the value we deliver to all our stakeholders – people, clients and society.
In doing this we are applying many of the core common metrics and disclosures which we helped to develop with the Embankment Project for Inclusive Capitalism, and more recently with the World Economic Forum, working alongside our fiercest competitors in the Big Four to create the International Business Council sustainability metrics.
Clearly, that’s not enough, because unless these standards are widely adopted, ideally with an assurance framework in place to give everyone confidence in how they have been applied, proper comparison and transparency is not going to be possible.
The UK has the opportunity to lead the world in net-zero finance.
I am very excited by the progress the ISSB is already showing, however the “proof is in the pudding” of how quickly the proposed standard are adopted.
That’s why we continue to invest in increasing both the scope and the quality of the reporting, audit and assurance services that we provide to our clients. We have around 2,000 climate reporting professionals in our business now, having built the team over 20 years, but we are committed to recruit over 1,300 people and invest over £100m in Sustainability services over the next three years. We are also working closely with government to put the case for common green standards that can hold all parties to account.
Grasping the green opportunity
If it sounds like a mountain to climb – I am confident it will be worth the effort: the UK has long been a global standard setter and by maintaining that reputation I believe we will place our nation at the centre of the huge opportunities that lie ahead. The UK has the opportunity to lead the world in net-zero finance.
In short, far from being a cost or a ‘nice to have’, sustainability will become a key driver of long-term value and the best way to satisfy all stakeholders, from people and planet to investors and society.
The innovation, financial resources and hard work of UK businesses will bear much of the responsibility for making this shift, but they are more than up to the task.
So, as we all reshape for the future, it’s vital to think very carefully about developing, agreeing and building in those new metrics, so that purpose is backed by proof. We will be working hard to help our clients along on every step of that journey.
Hywel Ball, EY UK Chair
Catch up with Hywel’s participation in a panel discussing the work of and plans for the International Sustainability Standards Board at the Net Zero Delivery Summit