The E in ESG
This is a ONE THING article, which is featured in FDI’s monthly newsletter.
Author - FDI Founder, Paul Smith
ONE THING is for the busy (speak of the devil) Future Director, in which FDI Founder Paul Smith picks just one thing Future Directors oughta know or do or stew on for the next month. We hope you get something (at least one thing) out of it.
This month’s ONE THING is one strange stat: Tesla rates lower in their ESG rating, than ExxonMobil. You read right.
A few months ago, a big sustainability index dropped Tesla from their list but kept the greenhouse gas emitting fossil fuel giant.
It’s a reminder that ESG ratings that are rated within industries, not across them, and don’t consider Scope 3 Emissions (those emissions emitted by the end product of a company, ie. the ones that matter) are BS.
Another reminder they’re BS?
The 2021 State of the Environment Report released in July this year.
The Report paints a bleak pic of Australia’s deteriorating environment. Land clearing is up. Endangered species are up. Climate change is impacting every ecosystem in the country. Extreme weather is disrupting many livelihoods and our food supply. Lettuce prices are making national headlines.
ESG ratings, while better than nothing, are so easily gamed they’re ineffectual. Corporate jazz hands aren’t making a dent.
A Future Director knows in their gut this is grim.
That, yes, money makes the world go round.
But also, that money can’t go round without the world.
That’s why I’m psyched by people like Future Director Award finalist, Clare Thorpe. A librarian by trade, Clare serves as a board director for Southern Cross University and non-exec director for the Australian Library and Information Association.
And how does she use her voice? Hear it from her: “As a board director,” Clare says, “I have to have front of mind, with every decision I’m asked to make, or every issue I’m asked to consider, whether that’s an investment strategy, whether it’s strategic planning, whether it’s financial planning – every decision has to be made in the context of how does this address the problem of climate change?”
Yes. Yes. Yes.
I’m also heartened by the change in tune of the Federal Government, who passed a 43% emissions reduction target after a decade of Liberal delay – something corporate Australia, and undoubtedly some Future Directors in our midst, have backed loudly.
And I’m warmed by news that on Sat 20 Aug 2022, solar briefly overtook coal as the #1 source of national power.
Future Directors know the tide is turning. That climate action now makes for a more stable business environment in the future and forges immediate public goodwill. And that it isn’t just up to the big end of town – it’s also up to the small and mid fish to tighten their supply chain credentials too, including Scope 3 Emissions.
Perhaps this moment is the moment to question whether the ESG Rating of the company you board is as rigorous as it could be. Or, if you’re just doing jazz hands.
