February 6, 2020
February 6, 2020
The third Davos Cyber Future Dialogue was a gathering of global cross-disciplinary cyber experts focused on building a safer and more peaceful cyber future. The meeting, where I was a delegate for the second time, reflected a larger gestalt evident in Davos this year: nonfinancial issues—including environmental, social, and governance (ESG) issues and cybersecurity—have become a more integral, “must-have” (not just “nice-to-have”) part of today’s global business priorities.
The World Economic Forum (WEF) agenda catalyzed this reality. A simple scan of the news from Davos this year irrefutably underscores the mainstreaming of ESG. The keynote from 17-year-old Swedish climate activist phenom Greta Thunberg, the creation of a new group of young “Global Shapers,” and a variety of major corporate announcements all rode the ESG wave that has been gathering momentum in recent years. The table below of major developments in only the past year reflects this global trend.
|CEO and Client Letters||2019 and 2020|
|European Commission||ESG Disclosure Directive||2019|
|FT||Moral Money Weekly Newsletter||2019|
|Bloomberg||Bloomberg Green Newsletter||2019|
|The Business Roundtable||Statement of Corporate Purpose||2019|
|US Securities & Exchange Commission||ESG Letters to Investment Funds Demanding More Information||2019|
|Goldman Sachs||Announces $750 Billion Sustainability Investment Goal by 2030||2020|
|Goldman Sachs||IPO Board Diversity||2020|
|Edelman||2020 Trust Barometer||2020|
|Allianz||2020 Risk Barometer||2020|
|Bank of America Corp.||ESG Metrics Initiative||2020|
|Microsoft Corp.||Zero Carbon by 2050 Davos Announcement||2020|
|TCI Fund Management||“The World’s Most Profitable Hedge Fund Is Now a Climate Radical”||2020|
|United Nations||Reigniting the Final Decade Push for the Sustainable Development Goals||2020|
Source: Andrea Bonime-Blanc, GEC Risk Advisory 2020
But wait: There’s more. Coinciding with its 50th anniversary, the WEF published its new 2020 Davos Manifesto, called “The Universal Purpose of a Company in the Fourth Industrial Revolution,” which begins:
“The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.”
While ESG is definitely not new (just ask those of us who have been working in this space for decades), the sudden and overwhelming acceptance of ESG by mainstream business is what seems new. There are a few good reasons for this—our turbulent times and the rise of existential natural and man-made risk increasingly require all hands on deck in our fragile global village.
There are a number of larger-scale factors that have accelerated the global ESG momentum so evident in Davos. I call these the “Ten Megatrends of Our Turbulent Times” in my new book, Gloom to Boom: How Leaders Transform Risk into Resilience and Value:
Additional, more granular strategic trends are evidenced in the World Economic Forum’s Global Risks Report 2020 (to me, the bible of global strategic risks that no executive or board member should miss). Using five categories of strategic risk (economic, technological, societal, environmental, and geopolitical), the WEF publishes this report annually and singles out the top 10 greatest likelihood and greatest impact global risks. For 2020, they are:
Notice a pattern for 2020? For the first time ever, the top five most likely global risks are all environmental. This also means that some of the greatest opportunities in 2020 are for companies that address those risks by improving existing processes, products, or services, or by inventing new ones. Some forecasters see a range of $3 trillion to $30 trillion in ESG-related new investments coming up. It’s time for everyone to get cracking.
So, what is a board to do with all this ESG information? Two simple things: First, make sure management addresses relevant ESG and technology issues (what I call “ESGT”) directly in business strategy. Second, ensure that the board itself is equipped to conduct proactive ESGT oversight. More concretely, this means that management and boards must:
Finally, boards should specifically consider the following:
The above questions and suggestions are intended to ignite an ESGT strategic conversation in the boardroom and beyond.
It’s no longer a question of “if” but of “when” ESGT issues, risks, and opportunities will present themselves to your company. Isn’t it far better to be prepared—to have a systematic, proactive, value-protecting and -creating stance on ESGT—than to have a reactive, potentially value-destroying attitude that opens your company up to competitors or, worse, to a crisis that can be financially and reputationally destructive?
This year, Davos catalyzed the momentum of ESG. It is now up to boards and C-suites to grab the ESGT baton and run with it on behalf of shareholders and key stakeholders, not only to protect them but to innovate and create new value in a turbulent time.
Andrea Bonime-Blanc is CEO and founder at GEC Risk Advisory, board member, global ESGT strategist, start-up mentor, NYU cyber professor and author, most recently, of Gloom to Boom: How Leaders Transform Risk into Resilience and Value (2020). She tweets @GlobalEthicist.