Time and time again, I see sustainability leaders let their instincts get the better of them. To all the sustainability leaders or professionals out there, here are a few traps I’d try to avoid:

• Mission over money: Most of us are ideologically driven and tend to assume that our stakeholders share the same perspective. In reality, most organisations are orientated around financial motivations and KPIs. → Learn how to speak the language that will resonate most with your organisation. Translate sustainability goals into potential revenue. I would opt for an 80/20 principle – 80% focus on major alignments with 20% on smaller initiatives that should naturally evolve.
• Alignment over action: We often over-index on trying to get consensus. While alignment is important, fixating on it can lead to prolonged periods of stagnation. This tends to look like months of work trying to organise workshops and syndication meetings. → Make sure you have an undercurrent of action. Quick wins and smaller interventions serve as proof of progress, giving your alignment efforts tangible weight.
• Results over relationships: Underestimating the importance of relationships with stakeholders can really hinder progress in getting the bigger initiatives over the line. As these initiatives almost always require buy-in across different functions, creating a cross-functional win team behind you is one of the most effective tools in your toolbox. → Nurture 2-3 pivotal relationships. Identify shared interests and potential wins and double down on them.

On the flip side, the most effective CSOs leverage a few game-changing superpowers:

1. People management. CSOs are often geared towards creating consensus and bringing people together. However, in actual fact, you should be managing for differing motivations. Tap into the details and the big-picture thinking for each stakeholder. You need to understand their motivations to determine when and how to escalate action.
2. Operational and commercial experience. Generate relevant experience that makes you a value-adding professional in your business context. A few options:
   ‍- Own a budget. If you are able to demonstrate the ROI of your budget it gives you reason to bid for budget expansion. Don’t underestimate the experiential value of managing a budget.
   ‍- Generate revenue. Transform a cost centre into a revenue centre. Reading the fine print of Amazon’s latest supplier engagement commitments, it looks like Amazon is generative revenue out of what would otherwise be a compliance challenge (read how here).
   ‍- Generate press. Focus on narratives, not numbers. Provide a compelling story for senior stakeholders to tell rather than fixed numbers (which instantly become irrelevant as soon as you improve your data coverage).
   ‍- Lead your industry. Promote cross-sector collaboration. Use the convening power of your organisation to galvanise your ecosystem. Identify shared challenges and shared progress e.g., supplier conferences.

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Listen to the full episode, The Toolkit for a CSO here.

By Saif Hameed, CEO of Altruistiq

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Industry Insight: The danger of data assumptions...

Assumptions are the bread and butter of sustainability analysis. But be warned - here be dragons!

Most activity-level data will include many different assumptions from many different people. By not codifying these assumptions you run multiple risks:

1. Dependency.

These assumptions are retained wisdom in the minds of the data handlers. You become reliant upon that individual to continually free up their schedule, every time you go back to ask for data again (and trust me, you will go back). You are in even more trouble if this individual leaves the company, taking that knowledge with them.

2. Inconsistency.

If the assumption changes YoY, it is challenging to track the context to demonstrate why. This makes comparability near impossible, and will also create significant headaches when it comes to audit, assurance, and answering questions from internal or external stakeholders.

3. Usability.

Assumptions are context-rich and can provide opportunities later on e.g., operational improvements, and cost optimisations. By not storing these assumptions, you reduce the usability of the data for other purposes later on. Ultimately, usability and driving change is what 70% of your work should be focused on going forward.

In an ideal world, each data point should have dozens of different tags associated with it to enhance the usability of that data going forward. Be kind to your future self!
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Policy Pulse | The Latest Sustainability Developments: The EU’s reporting standards for CSRD are finalised, impacting >50,000 companies

A breakdown of the key policy updates that you and your company need to know about from the last fortnight.

What you need to know

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is the EU’s landmark law for making ESG reporting more consistent. This requires >50,000 companies of a certain size (e.g. >250 employees or €40m in revenue) to make annual sustainability reports in line with the European Sustainability Reporting Standards (ESRS).

ESRS Reporting requirements - The ESRS requires companies to disclose how they measure and manage their sustainability impacts, risks and opportunities for each of the twelve standard areas across all ESG themes.

The ESRS was developed in consultation with the ISSB and GRI to help with ****interoperability. The crucial difference is that ESRS reporting is subject to double materiality.

Double materiality: looks at both impact and financial materiality when deciding what meets the thresholds for disclosure - the ESRS is unique in requiring both lenses. Most reporting only uses financial materiality (asking whether risk or opportunity will impact the company’s financial position).

What does this all mean?

The ESRS gives companies more reporting requirements, but at a level that gives deeper consideration to people and planet. They overlap with ISSB standards, but are broader in every sense:

• More issues to report - double materiality means that companies have to report on high-impact risks and opportunities that could be financially immaterial and require sustainability impacts and dependencies as issues to report on.
• Broader themes for disclosure - the twelve ESRS standards cover all aspects of ESG, with new environmental themes going beyond ISSB including biodiversity and the circular economy.
• Wider set of stakeholders - covers more than investors, including customers, employees, suppliers, regulators, and anyone impacted by or interested in their value chain. This wider set is to be consulted as part of the materiality assessment for finding issues to report on.

What we think

ESRS and the introduction of double materiality marks a promising shift for sustainability reporting:

• Increasingly in line with societal needs - matches the priorities of the public, especially in taking a longer-term view for strategies and investment vs a short-term financial focus.
• Better for constructing sustainability strategies - framing climate action plans with ‘how does my value chain impact the environment?’ vs ‘how do I mitigate climate transition risks?’ lends itself to more effective strategies.
• … but it is harder work - determining impact materiality is subjective, so is subject to skill capacity or manipulation. The wider scope also means that there is risk of double reporting when looking at the ISSB and GRI.

The positive impact of the ESRS depends on how much the greater reporting efforts are outweighed by companies being driven to take more positive action.

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• European Commission press release
• The complete ESRS framework
• Greenomy - how the final ESRS differs to the drafts

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Sustainability Trailblazers: Urban Outfitters ‘pre-loved’ scale-up

Urban Outfitters (UO) has been very intentional in how they have deployed a sustainability budget, focusing efforts on a key topic: circularity. The holy grail for sustainability teams is making a project or intervention revenue-generating. UO has done just that by creating a long-standing catalogue of ‘pre-loved’ items into a thriving, circular, product line: Urban Renewal.

What is Urban Renewal?

Urban Renewal is a business line developed to focus on repurposed, remade, and one-of-a-kind vintage apparel.

This year alone they have:

• Saved over 260,000 pieces of clothing from landfill at their UK clothing recycling plant
• Recirculated over 50,000+ pairs of second-hand denim
• Upcycled deadstock fabric into 80,000+ remnant styles

UO is also pragmatic about internal resources, championing circularity with a blend of in-house efforts and a few strategic partnerships:

• Manufacturing waste: URBN x FabScrap: finding end-of-life solutions for the waste generated during manufacturing, diverting over 20,000+ lbs of textiles.
• Design waste: URBN x CLO3: a software-driven design tool to help minimise sample waste. This year, Urban has been able to cut sample garments by >8000 samples per year.
• Extending life: URBN x Nuuly, a subscription clothing rental company, extends the life of Urban clothing through renting and re-wearing.

Managing your internal and external budget is key to ensuring pilot projects, such as these, scale up into revenue-generating lines. More on Maximising your sustainability budget here.

Related resources:

• The Toolkit for a CSO (podcast)
• Understanding the true cost of internal spend (article)
• Maximising your Sustainability Budget (podcast)

Other news

• Ecuadorians reject Amazon oil drilling in historic referendum
• EU’s new Green Deal chief to reach out to industry and voters
• Grant Shapps out as UK Net Zero secretary

Events on the Agenda

• 2nd European Sustainable Beauty Forum, 12 - 13th September 2023
• Register interest to join our State of Sustainability community events!

Do you have a spare 2 minutes? We’d really appreciate it if you gave feedback on this newsletter.

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