The government and private market sustainability players fulfill crucial roles in their transition to a sustainable future. Their capacity to identify environmental, social and governance (ESG) material issues, along with their means for innovation, enables them to tackle environmental challenges globally and locally. The key challenge is balancing the protection of the planet, people, and profits as market players conduct their business operations.
This is the second article in a two-part series that will discuss insights from COP28. In this part, we underscored the urgent need for a real and meaningful transition. Increased investor demand and regulatory pressure echo this sentiment, amplified by governments’ collective commitment at COP28 for science-based actions. This second part explores how to move profoundly from a lofty ambition — that is, halving emissions by 2030 and achieving net zero down the line — to progressive action.
Ernst & Young’s (EY) keynote session at COP28, “Building Confidence in a Sustainable Future,” featured three panel discussions that delved into three concrete strategies for entities to employ in their efforts to arrest climate change and achieve a sustainable future.
Strategy #1: Building investor confidence through regulation and sustainable finance
Regulations act as a catalyst for broader sustainability transformation, helping economies allocate capital more efficiently. The creation of the International Sustainability Standards Board (ISSB) disclosure standards, for instance, empowers investors to make better economic and investment decisions by incorporating comprehensive sustainability information.
Organizations are encouraged to identify, disclose, and later address material information or the most significant sustainability-related risks and opportunities that could influence such decisions. Businesses in carbon intensive sectors are pressed to disclose their decarbonization plans and progress. These companies are among the top contributors of greenhouse gas emissions, the primary cause of climate change. They, including their assets and supply chains, are also the most susceptible to climate impact. In light of the COP28 agreement to put an end to oil, gas, and coal use in energy systems, this group will continue to face mounting pressure from regulators and investors, including financial institutions, to ramp up their adoption of decarbonization strategies.
A few other industries identified with the most exposure to transition risk are real estate, mining, agriculture, and telecommunications.
Meanwhile, financial institutions (FIs) also play an integral role in advancing ESG outcomes through sustainable financing. However, it must go beyond supporting customers and communities in achieving their goals. Banks and institutional investors are urged to lead by example, engaging with their suppliers and corporate clients at scale to facilitate effective transition plans. Additionally, banks are perceived as pivotal partners for small- and medium-sized businesses, offering not just financial resources but also essential guidance in the latter’s transition towards more sustainable practices.
In the Philippines, there is a pressing need for local businesses to further enhance their reporting practices despite noticeable improvements on two metrics: (1) the number of disclosures made per the recommendations by the Task Force on Climate-Related Financial Disclosures or TCFD (coverage); and (2) the extent and detail of each disclosure (quality).
Publicly-listed companies (PLCs) in particular should brace themselves for an upgrade. After deferring implementation late last year, the Securities and Exchange Commission (SEC) notified PLCs that the Revised Sustainability Reporting Guidelines and the SEC Sustainability Reporting Form (SuRe Form) are slated for release in 2024.
In keeping with developments on international reporting standards, the SEC is looking at mandating compliance for data covering the year 2024, with reporting due the following year (2025). Regarding sustainability reports for 2023 or those due in 2024, PLCs are advised to continue adhering to the provisions set out in SEC Memorandum Circular No. 4, series of 2019, also known as the “Sustainability Reporting Guidelines for Publicly-Listed Companies.”
Since the government is aligning to global sustainability standards and frameworks, companies may gradually start transitioning themselves to the expectations and requirements of investors. They can partner with FIs who support sustainable finance and invest in companies who are advancing sustainability in the market.
Strategy #2: Building business confidence through data and talent
You can only improve what you can measure. Harnessing in-depth, reliable sustainability data is fundamental for businesses to make informed decisions. This process involves consistently gathering data into a cohesive system and rigorously evaluating sources, quality, and completeness. Accurate and ample data enable companies to analyze and generate insights, and be clear about their sustainability objectives. At the same time, it allows them to acknowledge areas of unfulfilled goals openly. Ultimately, clarity and transparency in managing sustainability data are critical to boosting their credibility.
On a related note, the increase in sustainability reporting, highlighted by the fifth EY Climate Risk Barometer, further emphasizes the need for skilled professionals. These experts are instrumental in weaving standardized reporting frameworks into the fabric of business processes, ensuring that sustainability is not just a compliance metric but a core component of corporate strategy. Accountants, for example, provide expertise in managing and interpreting data that directly influences strategic decisions, aligning financial practices with sustainability objectives.
Moreover, just as financial statements are audited, enlisting independent assurance over sustainability reporting shouldn’t be an afterthought. Obtaining assurance empowers businesses to achieve external accreditation or support management’s confidence that the necessary processes and controls are in place. This, in turn, improves stakeholder trust and confidence in an organization’s financial and non-financial reporting.
Strategy #3: Collaborative action from the public and private sectors
Businesses are key drivers in climate action and are central to the success of the COP28 agreement. Their role comes with the recognition that real impact requires integrating climate data and its ramifications into the core business strategy at the Board level. This transcends mere compliance; it’s about taking responsibility by embedding climate awareness across operations, human resources, supply chains, and technology.
However, holding governments and country leaders accountable is just as important. Business and industry leaders must challenge the government, demand concrete regulation, and steer the policy compass. Collaboration between the public and private sectors is key to supporting a faster and safer transition to more sustainable operations. It can also drive nationwide discussions or negotiations, ensuring inclusive actions from stakeholders involved.
Time is running out. Proactive strategies, razor-sharp policies, and targeted investments aimed at slashing emissions by 2030 are non-negotiable. This journey demands relentless scrutiny, unwavering collaboration, and enduring actions that deliver a triple win for society, policy, and business.
CHARTING A SUSTAINABLE COURSE FOR ALL BUSINESSES
Now is a critical moment for public and private market players to lead the charge toward sustainability. This era calls for a shift from mere regulatory compliance to completely reimagining business strategies and operations.
Specifically, Philippine PLCs are tasked with adapting to evolving reporting standards, which involves harnessing precise sustainability data and engaging adept professionals to provide additional confidence. The actions they take today will shape the corporate landscape of tomorrow.
Embracing sustainability positions these companies as leaders and innovators in a global economy increasingly focused on responsible business practices. This is a strategic imperative for enduring success, blending economic growth with a commitment to the planet and its people.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Benjamin N. Villacorte is a Climate Change and Sustainability Services partner of SGV & Co. and the current chair of the Philippine Sustainability Reporting Committee (PSRC).