Insights+ | Tuesday December 17, 2024

From Commitments to Action: A Business Guide to Address Forced Labor Across Value Chains

Preview

Case Studies | Wednesday December 11, 2024

Conducting a Double Materiality Assessment with a Financial Institution

Preview

Introduction

Beyond Bank Australia (“Beyond Bank”) approached BSR to conduct a materiality assessment to proactively identify, assess, and prioritize the bank’s material environment, social, and governance (ESG) risks, opportunities, and impacts. As a customer-owned bank, Beyond Bank’s senior management was keen to undertake this exercise despite not being under mandatory regulatory pressure to do so. By opting for a double materiality assessment over a traditional perception-based materiality assessment, Beyond Bank demonstrated its long-term commitment to its customers by evaluating the impacts of material ESG issues on its enterprise value as well as its broader commitment to communities by holistically assessing the impacts of its operations and supply chain on society and the environment.

Background

Beyond Bank is one of the largest customer-owned banks in Australia. As a purpose-driven mutual bank, Beyond Bank aims to change the lives of its customers and communities through financial well-being. It also strives to reduce its environmental footprint by using resources efficiently, reducing consumption, and helping its customers and people to do the same.

The Challenge

The quick evolution of disclosure requirements, such as the European Union’s Corporate Sustainability Reporting Disclosure (CSRD)'s double materiality requirement, has accelerated the shift of stakeholder expectations for companies to adopt and disclose impact-based material issues. Despite not being within the jurisdictions in scope of these legislative disclosure requirements, Beyond Bank understood the importance of ensuring it is well-placed and ready to meet potential changes in the regulatory landscape.

Senior management at Beyond Bank recognized early on the benefits of completing a materiality assessment using a double materiality approach, which considers how sustainability topics influence a company's enterprise value (“financial materiality") and how the company's activities affect the environment and society (“impact materiality"). Even without the disclosure and reporting obligations a listed financial institution would be subject to, Beyond Bank was able to secure buy-in from the Board, management, and internal stakeholders involved based on the rationale and benefits that a double materiality assessment would confer to Beyond Bank.

Beyond Bank also sought to develop its internal/in-house capability to be equipped with the tools and know-how to independently conduct a double materiality assessment to ensure it remains agile and well-positioned to refresh the exercise after any significant business changes in future.

BSR’s Response

The entire exercise was a collaborative effort between BSR and the Beyond Bank sustainability team—from level-setting the Beyond Bank team with an ESG 101 training to walking through and partnering to complete the double materiality assessment process. The Beyond Bank team completed the internal stakeholder interviews, while BSR conducted interviews with external stakeholders and representatives from Beyond Bank’s Executive Team and Board.

As part of the assessment process, 35 internal stakeholders and 12 external stakeholders shared their perspectives across a broad range of material issues. Internal stakeholders included leaders and management teams across the country and the organization, ensuring both regional and functional representation. External stakeholders included customers, community group partners, suppliers, industry groups, rightsholders, and NGOs. In addition, a customer survey and internal employee survey gathered input from both key stakeholder groups on their ESG priorities, with over 2,000 customer responses and nearly 200 employee responses.

These conversations and consolidated input helped to inform and refine the definitions of risks and opportunities for each ESG topic within the Australian context, and ultimately the prioritization of material issues based on Beyond Bank’s unique operational model/activities and footprint.

Impact

This collaborative process helped to strengthen internal capability within the Beyond Bank team in relation to knowledge of ESG topics and its potential impacts, risks, and opportunities, as well as a greater sense of buy-in to the process and confidence in the outcome. Insights from meaningful conversations with both internal and external stakeholders also provided Beyond Bank with valuable information on strategic priorities going forward. Building on the outcome of this double materiality assessment, Beyond Bank is referencing the identified priority issues to inform the organization’s sustainability strategy, and it is also considering reporting on specific GRI and SASB indicators for priority material topics.

"We enjoyed partnering with [the] team at BSR Singapore, and the insights we gained with respect to our material ESG topics [were] extremely beneficial to our strategic planning processes. We also feel very well positioned for any future changes that may come to the sustainability reporting landscape in Australia.”

- Brooke Avory, Sustainability Manager, Beyond Bank Australia

Conclusion

Despite not being in scope of the CSRD, it is evident that the European Union is setting the bar and precedent when it comes to ESG reporting and disclosure requirements, and it can be reasonably expected that a wave of regulations is forthcoming across the different jurisdictions. The double materiality assessment will position Beyond Bank well to meet such potential changes in the regulatory landscape.

Companies will benefit from staying ahead of the curve and understanding where their ESG risks and opportunities lie. The outcome of the double materiality assessment provided Beyond Bank with data-driven insights on what ESG topics to prioritize, and it helped to inform its sustainability strategy in the longer term. Moreover, with the Beyond Bank team equipped with the know-how of conducting the double materiality assessment themselves, they are well-placed to refresh the exercise after any significant business changes in future.

Get in Touch

For more information on how BSR works with companies on sustainability management and strategy, please get in touch with BSR's Transformation Team.

Blog | Thursday December 5, 2024

Integrating Climate and Nature: A Dual Approach to Business Resilience

Preview

In today's rapidly evolving business landscape, forward-thinking companies understand that addressing climate change and protecting nature are intrinsically linked. While the private sector has historically been focused on reducing greenhouse gas emissions, systems that work together in the natural world require similarly collaborative solutions.

This dual approach not only yields better environmental outcomes, but also creates more resilient business models. That means taking a clear-eyed view of the world, appreciating the interconnectedness of our systems, and grasping that climate change, biodiversity preservation, economic opportunity, community well-being, and human rights are deeply interconnected opportunities to address.

To date, the climate and nature agendas have been separated—to say nothing of societal considerations. Our institutions, global convenings (e.g., COPs), frameworks, guidelines, initiatives, and targets are siloed. And for the most part, so are the teams working on these critical initiatives within businesses.

Through careful planning, integrated strategies, and a commitment to combining goals, businesses can create lasting positive impacts while building more sustainable and resilient operations for the future. The need for a de-siloed approach is particularly evident after this year’s Biodiversity COP16 in Cali and Climate COP29 in Baku. 

Understanding the Climate and Nature Nexus 

Fragmented approaches to interconnected environmental challenges are counterproductive. Solving the climate crisis requires a holistic understanding of nature's critical role, and integrated strategies are the most productive way forward. 

Healthy ecosystems act as natural carbon sinks, while climate change accelerates biodiversity loss. Climate impacts disproportionately affect vulnerable communities, and transitioning to more durable economic models can displace traditional workers and harm local communities without careful planning.

Over half the world’s total GDP is moderately or highly dependent on nature and its services, with an estimated US$58 trillion exposed to nature-related risk. To make these numbers tangible, consider that 75 percent of global food crops rely on pollinators, 70 percent of cancer drugs are inspired by or based on nature, as well as traditional knowledge of Indigenous Peoples, and 72 percent of companies are highly dependent on at least one ecosystem service.

More and more, science shows us that nature-based solutions are fundamental to addressing the climate crisis alongside local community health and wellbeing. These solutions include restoring forests, protecting wetlands, and regenerating grasslands, which not only sequester significant amounts of carbon dioxide—potentially offsetting up to 37 percent of global emissions cost-effectively—but are also critical in protecting communities from disaster risk, preserving vulnerable coastlines and maintaining clean water for consumption and disease prevention. 

Considering any of these issues in isolation can make the risks and vulnerabilities worse through maladaptation. By addressing climate and nature together, businesses can create many positive impacts, optimize synergies, and avoid unintended consequences and inefficiencies that stem from focusing on one aspect alone. 

Simply put, climate and nature resilience is business resilience. 

Societal Considerations of Integrating Climate & Nature

Against this backdrop, there are fundamentally important principles for incorporating societal considerations. This means human rights considerations, including decent work, respect for Indigenous traditions, and ensuring environmental solutions don’t exacerbate societal inequalities.

Human rights approaches provide an essential roadmap for business action. Meaningful engagement with affected communities is a crucial pathway to maximizing these positive impacts and understanding the risks of damaging actions of climate and nature solutions.

Doing this well includes recognition of and commitment to upholding human rights, including Indigenous peoples' rights, assessing impacts on and including the voices of workers and local communities in decision-making, effective grievance mechanisms, and ongoing engagement for continuous dialogue. 

To ensure economic opportunity is created, it’s crucial to invest in skills training for new economic opportunities, develop targeted training programs and inclusive supply chains, establish fair compensation mechanisms, and support local capacity-building initiatives. 

How is BSR Helping Businesses Integrate Climate & Nature? 

At BSR, we are guiding our member companies in creating integrated climate and nature strategies that consider impacts on human livelihoods through assessments, reporting and disclosure, strategy development, stakeholder engagements, and collaborations. 

2025 Climate & Nature Engagement Opportunities for BSR Members

Looking Ahead

The integration of climate and nature strategies represents more than corporate sustainability—it defines business resilience for the future.

Companies that recognize and act on the interconnected nature of these challenges will be better positioned to thrive in an increasingly complex operating environment. By working with nature rather than against it, these approaches provide a holistic, multi-benefit approach to combating climate change while supporting ecological resilience and human well-being.

Success requires shifting from siloed thinking to integrated action. By embracing solutions that simultaneously address climate change, protect nature, and support communities, businesses can build truly resilient models that create lasting positive impacts.

The key to success lies not in viewing climate and nature as separate challenges but as interconnected aspects of a single journey.

People

Lara Birkes

Preview

Lara is responsible for leading BSR's Climate and Nature team globally and driving the organization’s work with Member companies' impact consulting, grants, and collaborative initiatives.  

Lara is a sustainability and policy professional with over fifteen years of experience managing partnerships, sustainability initiatives and policy engagement with companies, international organizations, governments, and NGOs.  

Prior to BSR, Lara was Global Head of Sustainability at Sonder, joining in 2020 to establish the corporate responsibility function, implementing policies to engrain responsible business practices across the company pre to post IPO. 

She also serves on the Advisory Board of EQX Biome, a start-up working to mobilize financial markets to protect the world’s remaining biodiversity hotspots. In 2024 Lara started hosting a web series & podcast called Nature IS to raise awareness of the critical need for protection, conservation, and regeneration of biodiversity.  

Lara holds a B.S. degree in International Business & Management from the University of Montana, a M.A. degree in International Trade Policy from the Middlebury Institute of International Studies in Monterey, California and is a World Economic Forum Global Leadership Fellow.  

Insights+ | Thursday November 21, 2024

Sustainable Business in Context: US Politics and Global Impacts

Preview

Case Studies | Thursday November 14, 2024

Building a Social Performance Framework Aligned with the EU Corporate Sustainability Reporting Directive (CSRD)

Preview

Introduction

BSR worked with Inter IKEA, a global home furnishing brand, to design a social performance framework aligned with the EU Corporate Sustainability Reporting Directive (CSRD), international frameworks, and existing company best practices. The performance framework needed to enable measuring the progress of Inter IKEA’s social sustainability strategy, called Fair & Equal, including key performance indicators (KPIs) and strategic goals.

This project allowed Inter IKEA to bring its key internal stakeholders together in developing a shared understanding of the company’s social sustainability strategy and agreeing on the focus areas and a roadmap for next steps, to confirm its strategic social sustainability priorities, and to prepare for the new regulatory reporting requirements like the CSRD.

Background

The Inter IKEA Group, a BSR member company, is the group of companies that connects IKEA franchisees with range developers and suppliers and aligns the overall IKEA strategic direction. The group employs 219,000 people, operates in more than 60 countries, and works with 1,500 suppliers and partners.

IKEA’s sustainability strategy, People & Planet Positive, covers the entire IKEA value chain and franchise system, including sourcing and extracting raw materials, manufacturing, transporting products, retail activities in stores, customer travel to stores, product use in customers’ homes, and product end-of-life. The Fair & Equal agenda, one of the three focus areas of Inter IKEA’s sustainability strategy, reflects the Group’s commitment to ensuring human rights are always respected and understanding the impact its business has on people and communities where it operates. 

The Challenge

Stakeholder expectations, company values, and new regulations like CSRD and CSDDD prompted Inter IKEA to disclose information on its social performance and the progress of Fair & Equal, its social sustainability strategy. To do this, Inter IKEA sought to develop a social performance framework with strategic goals and key performance indicators.

The complexity of the scope of Inter IKEA's business, which includes various entities operating under the IKEA brand, posed challenges in developing clear measurements and an implementation framework to guide functions in achieving their commitments. Additionally, Inter IKEA faced the challenge of linking the strategy’s overall goals with tangible and measurable daily tasks, leading to a lack of internal alignment on understanding the impact of the social strategy.

This situation presented an opportunity to strengthen stakeholder trust and preparedness for upcoming regulations by developing internal guidance and alignment on reporting metrics for Inter IKEA’s external sustainability reporting. Moreover, the project offered the chance to enhance Inter IKEA’s capacity to deliver on its vision, support a greater and deeper impact of Inter IKEA’s sustainability efforts within Fair & Equal, and make it easy for its value chain actors to undertake similar efforts.

After working with BSR on several other projects, Inter IKEA reached out to BSR for this challenge.

“IKEA’s work affects millions of people around the world. With this reach comes the responsibility to respect human rights and understand the impact our business has on both the people and communities where we operate. That’s why it is important to collaborate with like-minded partners with good skills and experience to support us on our journey to define performance and goal-setting. BSR has supported us and contributed both theoretical and pragmatic perspectives.”

-Lars-Erik Fridolfsson, Head of Fair & Equal, IKEA

BSR’s Response

In co-designing a social performance framework with Inter IKEA’s team, BSR:

• Conducted a benchmark assessment of approaches to social performance measurement
• Conducted interviews to understand current social performance at Inter IKEA and the INGKA Group (Inter IKEA’s biggest franchisee)
• Facilitated two alignment and co-creation workshops with internal stakeholders to achieve a shared understanding of the strategic areas and the envisioned structure
• Developed 200+ KPIs, in alignment with CSRD, international guidance, and best peer practice, for the six levels of Inter IKEA’s value chain under Fair & Equal’s nine strategic areas. These included staff, suppliers, franchisees, customers, communities, and society.
• Developed a high-level roadmap to guide the implementation of the framework, including recommendations on prioritization of strategic areas, based on current maturity and CSRD priorities

Impact

BSR helped Inter IKEA Group internal stakeholders arrive at a shared understanding of its social sustainability strategy for its value chain and agree on the focus areas, performance measurement framework, and a roadmap for the next steps.

"BSR gave an extensive and well-conducted overview of key external frameworks and standards that exist in the field of social impact. They also covered upcoming legislation and regulations that [we will need] to adapt to. [In] this work, they showed that they have a great knowledge… [of] sustainability topics related to human rights and social impact. We felt very secure [in using] this material for our organization's benchmark work and as a part of the foundation for the framework.

The design and outcome of the performance framework has fully met our expectations and will now be aligned [across] our different IKEA organizations and implemented throughout.

As always in large projects, focus changes and new possibilities occur. We found BSR very adaptive and responsive to the changing needs during the project.

BSR was also very performance focused and delivered according to the agreed timeframe for the different phases of the project."

-Lars-Erik Fridolfsson, Head of Fair & Equal, Inter IKEA Group

Conclusion

After agreeing on the baseline framework, IKEA continued the project by adapting the framework further within the organization and mapping where in the value chain it had indicators and metrics that could be used as a first-generation performance framework. It found five KPI areas to start working with, decided on performance indicators, and conducted an impact pathway analysis. This initial framework will now be implemented across the organization in a step-by-step approach.

Reporting does not need to be disconnected from operations and impacts. In fact, good reporting should aim for the opposite: focusing on activities that make a difference, testing the assumptions it builds on, adjusting over time based on successes and mistakes, and helping with effective decision-making. By identifying Social KPIs for policy, process, target, and impact, companies can better align their vision of impact with the impacts of their value chains, products, and services as experienced by the affected parties.

Get in Touch

For more information on setting social KPIs under the CSRD, contact BSR’s Sustainability Management team.

This case study was written by Renata Greenberg. 

Blog | Tuesday November 12, 2024

The Silent G: Six Questions Every Leadership Team Should Ask About Sustainability Governance

Preview

The term ESG (Environment, Social, and Governance) is easy to say but hard to deliver. In fact, recent election results may make it even harder—by exacerbating the fundamental drivers of environmental degradation and societal discord.

Pursuing the vision of just and sustainable business has never been for the faint of heart. Yet business adoption of E, S, and G has progressed, albeit at different paces. Corporate investment in E has the longest history and has proven over decades to improve the state of land, water, air, and climate. Corporate prioritization of S has yielded strides in diversity and inclusion within the enterprise, and improved human rights and workers’ rights along the value chain. And while work in all of these areas is far from complete, new issues are popping up on the ESG agenda, from nature and biodiversity to living wage, a just transition, and responsible AI.

What about G? Governance flashed into the spotlight in 2020-21 with CEO-level commitments spurred by a few select yet seismic events, including Covid-19, the Me Too movement, and the cost-of-living crisis. But this chorus of commitments has quieted—due to the politicization of ESG topics, the challenge of executing against ambitious goals, and the consideration required to align governance with new, turbulent market and societal dynamics.

Don’t Be Fooled by the Silent G.

In BSR’s recent report The CSO at a Crossroads: Three Paths Forward for Sustainability Leaders, 83 percent of the CSOs interviewed felt that increased involvement by other C-suite executives helped advance ambitious sustainability objectives that protect and promote the business. This indicates that despite concerns about market dynamics, corporate leaders see the silent G as a positive force. That support is manifesting in increased professionalization of the CSO role, and the integration of sustainability across corporate functions and from the back office to the boardroom.

In fact, in closed-door convenings and private conversations around the globe, we’re seeing companies refocusing on G. They are assessing material ESG impacts; building data streams to measure and monitor progress; and hiring ESG controllers to collect, consolidate, and report.

At the same time, they are evaluating and upgrading organizational capacity to manage material ESG issues, both within the company and across the value chain. This first piece of homework—baseline analysis—is apt preparation for previously voluntary disclosure regimes such as the Task Force on Climate-related Financial Disclosures (TCFD), which is being embedded in regulations around the world, and for new newly minted requirements such as the Corporate Sustainability Reporting Directive (CSRD) and the International Financial Reporting Standards (IFRS). It also provides a solid foundation for corporate leaders navigating an extremely dynamic, high-risk operating environment, as described in BSR’s report, Between Two Worlds: Sustainable Business in the Turbulent Transition. The number and complexity of the issues at stake and the number and divergence of critical stakeholders underscores the essential role of strategy, oversight, and control to build business resilience.

Principles of Good Sustainability Governance: Key Questions

The confluence of all these developments is a real and abiding tension between pragmatism and ambition, which was on full display at Climate Week New York in September and continues to dominate the atmosphere in which sustainability plans are being developed. As corporate leaders contemplate how to assess and improve sustainability governance in this environment, we suggest asking six sets of questions, three each at the Business and Board levels:

Business

1. Organizational structure, roles and responsibilities: What organizational models will ensure that material issues pertinent to specific business functions get the support, attention, resources, and controls they merit? How should you assign accountability for sustainability across functions? How should you align competency, resources, accountability in practice, and ensure that upskilling happens at all needed levels?
2. Stakeholder engagement: How do you identify, target, and constructively engage stakeholders? What tools and levers can you use to anticipate and prepare for disruptive events?
3. Resilience: How do you harness internal expertise and external perspectives to drive resilience throughout the business and along the value chain? How can company resources be leveraged to anticipate and prepare for cross cutting issues, like climate and health, nature and human rights, and the just transition?

Board

1. Competencies: Does the Board have the depth of expertise required to evaluate key ESG topics, both within the business and in the larger policy environment? How is this expertise integrated into Board structures, roles, and responsibilities?
2. Strategy and risk: What mechanisms does the Board have in place to understand the full range of material sustainability risks and opportunities for the business? How does it maintain a current, coherent view of evolving market dynamics and potential impacts on both business resilience and external stakeholders?
3. Oversight, controls, and accountability: As Boards work to formalize ESG oversight in light of new mandatory disclosure regulations, how are material sustainability issues integrated into enterprise risk management? What mechanisms are in place to support timely oversight and informed decision-making on business strategy, market entry, M&A, and other areas under Board purview? How are decision-making structures and director incentives aligned with ESG goals?  

In BSR’s experience, companies whose leaders ask these questions regularly—and sense-check them with materiality assessments, stakeholder discussions, and learning and foresight sessions—are more resilient to external forces, from extreme weather to economic headwinds.

If you are interested in learning more, stay tuned: we will address each set of questions in upcoming blogs. In the meantime, if you are seeking advisory support to build, enhance, or stress-test your corporate or Board sustainability governance structure, get in touch! Learn more about BSR’s corporate governance activities or contact the Sustainability Management team.

Blog | Thursday October 31, 2024

Racing Past the Crossroads: How Sustainability Leaders Can Reassert Ambition

Preview

BSR’s recent report, The CSO at a Crossroads: Three Paths Forward for Sustainability Leaders, drew on interviews with more than 30 chief sustainability officers (CSOs) to argue that we are at a crucial moment to reassert an ambitious vision for the CSO role.

After a period where CSOs focused (understandably) on reactivity and regulation, it is time to recognize the urgency and scale of global challenges and their implications for business. We emphasized the unique capabilities of the CSO in helping the company navigate external global developments and stakeholder interests with an eye on strategy, risks, and opportunities.

So how can CSOs steer down the more ambitious paths for sustainability leadership? 

Here are seven ways sustainability leaders can reassert ambition in transforming companies, economies, and societies: 

1. Use futures, foresight, and scenarios to reframe the time horizon for ambition. Corporate approaches that emphasize reactivity and compliance are doomed to deliver incremental improvements and miss the long-term changes that affect business and society. Companies can recognize the benefits of more resilient and ambitious strategies by weighing, “What developments might shape our business and operating environment over the next 10 years, and what actions should we take to prepare for them?” BSR’s 2018 report, Doing Business in 2030, encouraged leaders to contemplate scenarios based on the hyper-politicization of business and sustainability, dramatic geopolitical fragmentation, breakthroughs in AI, and a global public health crisis. The 2024 report, Between Two Worlds: Sustainable Business in the Turbulent Transition, updates futures thinking to enable Boards and senior executives to focus on longer-term considerations. 
2. Focus on the top few areas with the most strategic importance and impact. To date, sustainability strategy has too often been an exercise in breadth and bundling—covering a range of topics and aggregating them into themes. This may have made sense in an era when companies were in the early stages of understanding their impacts. With foundational double materiality assessments in place, CSOs can pursue more ambitious impact agendas by identifying and investing in a select few strategic priorities. These priorities will need to be tailored for each company and may be linked to the specific business model (US private sector on EU regulations). As Robert G. Eccles and BSR alumna Alison Taylor noted, “The CSO role is finally becoming strategic, if you define strategy as the art of choosing what not to do. Today, CSOs help identify and direct attention to the ESG issues that have a substantial impact on an organization’s financial performance and risk profile. This approach aligns with broader corporate strategy-making, as it helps organizations focus on what matters most to long-term value creation.” 
3. Shift from disclosure to strategy; from assessment to action. Recent regulations have launched a scramble to strengthen corporate governance, risk assessments, and disclosures on sustainability. Those are worthwhile developments, but ultimately meaningless unless they serve as the basis for strategy, action, and impact. Companies that are investing so much now in due diligence and compliance should begin to focus more on the resulting actions that will yield meaningful improvements in real world risk, opportunities, and impacts. You can’t simply “CSRD away” your climate risk. A focus on collective action and collaboration within and across sectors can also avoid duplication and better align efforts towards more efficient and impactful change. 
4. Rethink business models to address the fundamental tensions among corporate interests, society, and the environment. Business and economic models based on indefinite growth and unmanaged externalities are already running up against environmental, social, and political limits. Those limits will threaten many companies, such as those that depend on cheap natural resources, endless disposable plastics, unfettered trade, fragile logistics networks, low wage labor, and use of personal data. These limitations may manifest in response to commitments and regulations. For example, incremental action against a context of ongoing growth will not suffice to help most companies achieve their public, investor-facing commitments to Net Zero and Science-Based Targets. Additionally, the European Sustainability Reporting Standards specifically call for disclosures to account for the impacts of a company’s business model. Moreover, companies have an opportunity to build more ambitious, resilient strategies by examining and innovating in how they create, deliver, and capture value amid changing environmental and social dynamics. Areas for exploration might include designing products/services for sustainability and human rights, development of circular or service-based business models, expanded employee ownership, and more inclusive governance models. Focusing on business models puts sustainability at the center of major business decisions—where to build a factory, which technologies to adopt, mergers and acquisitions. Boards and executives will have to make such business decisions within the wider societal context. 
5. Activate boards and executives. Corporate leaders have moved rapidly up the maturity curve on sustainability, particularly in their oversight of disclosures and compliance. It will be vital to shift boards and executives to more active roles in grappling with the strategic impacts, risks, and opportunities of sustainability.
6. Elevate expertise and stakeholder voices. Senior executives and board directors rarely bring specific expertise in areas of vital sustainability importance such as climate change, human rights, and responsible AI. They also rarely come from vulnerable stakeholder groups. Important efforts are underway to upskill and diversify corporate leaders, though we can’t expect solutions to be quick or comprehensive. To access expertise, navigate complexity, and incorporate more diverse stakeholder viewpoints, boards and executives will benefit from ongoing platforms to tap external views. That might come through building partnerships, establishing external advisory councils, or leveraging industry wide stakeholder engagement. It might also include more significant governance changes such as mechanisms for employees to serve on boards, or granting a board seat to nature.
7. Engage in public policy; strengthen geopolitical capabilities. The call for companies to engage more thoughtfully in public policy is not new, but it is more important than ever given political backlash and reluctance to take on the major challenges that social and environmental risks pose to economic and societal well-being, and the fracturing of global cooperation on issues like climate change, trade, and peace. Companies will benefit from aligning sustainability and public affairs to promote shared priorities and boost credibility. More importantly, they can enhance sustainable business leadership by using that base of credibility to encourage rational policies that manage systemic risks and promote positive, sustainable transformation in the business operating environment. While business associations have often focused on preventing regulation and tax policy, those associations could be valuable forums to amplify the collective voice of specific industries to advocate for a strengthened enabling environment for sustainable business.

BSR plans to use these preliminary ideas as a starting point to engage members in the coming months, and we welcome your solutions, critiques, and quandaries.

It is especially crucial that these conversations reflect the challenging context of the present and the global imperatives of the future. If CSOs are indeed at a crossroads, it is time to race along a path of integration, ambition, and transformation. We look forward to bringing together CSOs, CEOs, and Board Directors to further discuss the evolving role of sustainability leadership. 

Blog | Wednesday October 30, 2024

Adequate Wages vs. Living Wages: Implementation Guidance for Companies

Preview

The term “Adequate Wage” has emerged across several EU legislations and the International Labour Organization’s (ILO) first ever guidance on Living Wage. As employers navigate complex regulatory environments, we have seen widespread confusion on how Adequate Wage compares to Living Wage and Minimum Wage.

Latest Developments

The recent advancements to drive improved wages both in the EU and globally include:

• ILO Position on Living Wage: The ILO came out with an official definition for Living Wage and published principles that data providers can follow. It is the first ILO framework to guide data providers and employers on Living Wages.
• EU Directive on Adequate Minimum Wages: A 2022 directive that requires EU countries to increase their Minimum Wages to align with “Adequate Minimum Wages.” This is defined as a 'double decency threshold' in which no Minimum Wage should be set below 60 percent of a country’s median wage and 50 percent of the gross average wage. Minimum Wages of EU member states that are below this threshold are expected to increase.
• EU Pay Transparency Directive’s (EU-PTD) Focus on Gender: To align with the EU-PTD by April 2026, companies must conduct gender pay assessments using specific standards, remediate those impacted by identified gender pay gaps, and publish the results of the gap analysis for the public.
• Corporate Sustainability Reporting Directive’s (CSRD) use of Adequate Wage: In order to comply with CSRD’s requirements, companies should work toward collecting, analyzing, and reporting data that address any Adequate Wage gap.
• The Corporate Sustainability Due Diligence Directive (CSDDD): CSDDD requires companies to evaluate and adapt their business plans, strategies, and operations, including purchasing practices, to ensure that they contribute to “Living Wages and incomes for suppliers and employed workers.”

How does Adequate Wage relate to Living Wage, Minimum Wage, Average Wage, and Collective Bargaining?

Minimum Wages are the lowest wage allowed by law. Collective bargaining agreements, driven by unions, also can shape wage rates for a particular industry or job position in a country. Many people question why evaluating Living Wages is necessary when the concept of a Minimum Wage was originally intended to reflect the wage rate required for a worker and their family to live a decent life.

In practice, Minimum Wages are shaped by governments, meaning that the level and frequency at which they are increased to align with costs of living varies, and is often insufficient. Similarly, collective bargaining agreements only exist with strong working unions. Beyond legally compliant wage obligations, compensation teams pay close attention to average wages that reflect labor market conditions. A Living Wage, on the other hand, is based on cost-of-living, and is not shaped by politics, negotiation, or economics conditions.

The concept of Adequate Wage aims to take into account the different roles each of these wage rates play. According to ILO, an Adequate (Living) Wage is “a wage that meets the needs of a worker and their family, taking into account the national economic and social conditions of a country.” While the implementation of Adequate Wages at the country level is still underway, this guidance will aim to inform companies on how to measure Adequate Wages to prepare for CSRD requirements.

How can companies prepare to meet Adequate Wages in the coming years?

The CSRD explains that companies must “disclose whether or not its employees are paid an Adequate Wage.” Companies should start by evaluating if Minimum Wages are paid. This is an important first step, but due to the fact that in some countries a Minimum Wage may not be enough to cover the needs of a worker and their family, a secondary level of analysis is required to determine if the Minimum Wage is an Adequate Wage by looking at Living Wage benchmarks and the double decency threshold.

Understanding the Adequate Wage for a country or region is dependent on each location’s context, in order for companies to close any pay gaps to meet regulations like the CSRD, companies will need to conduct a gap analysis for Minimum Wage, Adequate Wages and Living Wages.

In many cases, Minimum Wages may be sufficient for reporting. Nevertheless, it is important to compare it to Living Wages and the double decency threshold to anticipate where Minimum Wages will likely be increasing. According to WageIndicator’s Adequate Wage Guide, the Adequate Wage is determined by whichever figure is highest. Follow these steps to start your gap analysis:

• Step 1: Check the Statutory Minimum Wage as applicable in the country, sector, industry, region, age-level etc. The Minimum Wage is the law and the minimum threshold.
• Step 2: In countries where there is no Statutory Minimum Wage, where applicable and possible, check the lowest negotiated wages as stipulated in Collective Agreements for your sector, industry, or company.
• Step 3: Check the ‘double decency threshold’ for a country (50 percent of the average wage and 60 percent of the medium wage) as well as the Living Wage estimates for a country and region. In cases where the Living Wage estimates are highest, use those.
• Step 4: If the ‘double decency threshold’ exceeds the Living Wage estimate, consider the Adequate Wage, but first verify regional Living Wage variations.
• Step 5: The CSRD requires companies to report on an “Adequate Wage.” Depending on the country, this could be the Statutory Minimum Wage, a collective bargained wage, an Adequate Wage, or a Living Wage estimate.

How BSR can help

BSR has worked with dozens of companies for twenty years to conduct Living Wage gap analyses and advance their Living Wage programs. For more information on BSR’s services on Living Wage, please contact us.

Blog | Thursday October 24, 2024

Collaboration Crossroads: Recognizing When to Part Ways for Greater Impact

Preview

Business-led, pre-competitive collaborative initiatives are a cornerstone of systems change and advancing solutions to systematic problems. They allow companies to enter a safe space for best practice sharing, pool resources for problems that any single company could not solve alone, and use a collective voice or action to drive system change across entire industries. However, collaborations are not meant to be everlasting, and companies must recognize when it’s time to pull the plug.

When collaborations begin to flounder, resources become constrained, participants become weary, and impact is minimal. Many of the “red flags” participants might see in collaborations can be conquerable hurdles, or they can be warning signs of a pending end. It is important to be able to read the tea leaves, know the difference, and evolve accordingly or plan for an ending.

There are a few clear signs that it may be time for a collaboration to consider sunsetting.

1) Collective goals achieved

The first and most obvious sign that a collaboration should close down is when the intended impact or goal is achieved. Collaborations form around collective visions for learning or creating change. A common mistake is passing that point and trying to refresh a strategy for new goals. While a natural next milestone may arise out of the existing work, trying to carve out a new strategy with the existing members and governance structures may create more challenges and conflict than necessary. Rather than continue, consider which aspects could be spun into a separate, tangential project. BSR’s Future of Fuels is a success story of companies that achieved their mission and goals and sunset the collaboration.

2) Insurmountable barriers

Collaboratives typically form when companies come together to solve some of the world’s most difficult challenges. If they were easy problems to solve, it wouldn’t need a group of companies to find the solution. It is quite common for collaborations to refresh a strategy, change direction, and realign. However, acknowledging when hurdles become blockades is an important trait among participants. Occasionally, we may enter a space before the technology is scalable, before policy allows progress, or there’s a learning curve that sheds light on needs for impossible resourcing. Any number of barriers may pop up, but knowing when they prevent progress and impact will be a telltale sign that a collaboration may not succeed.

3) Dwindling participation or absence of enthusiasm

Nearly every collaboration seeking high-impact or systems change thrives on members’ participation and passion. Individuals may become less interested in topics, turnover in a company might introduce a disinterested or uninformed replacement, company priorities might shift, or the external ecosystem evolves. Any of these factors may influence the participation of members and therefore the progress of the group. This is another “red flag” that may be a temporary challenge, or it may be a sign of greater trouble ahead. Any collaboration that begins to lose its value proposition to members cannot survive. When participants pull back, it is an important reminder to see the bigger picture, reevaluate the problem, rethink aspects like relationships or governance, and determine if there is a possible impact to be made by the group before deciding to sunset.

4) Misalignment among members

It is often a single challenge that brings members together, but it is the individual goals of each participant that keep them in the room. When companies begin diverging from the original goal, it may be due to their own shifting priorities and nothing to do with the collaboration, but it will almost certainly drive a wedge in the collaboration. These situations are fairly common, but when a fracture cannot be repaired and the dissonance is too great, it is important to recognize that it is no longer a collaborative effort for a singular goal. It is natural for priorities and objectives to shift throughout a collaborative lifecycle; however, when members can no longer align on collective objectives, and it is likely more resource-intensive to redirect the group, it may be time to acknowledge the successes and end the collaboration.

Collaboration can be a powerful tool that brings companies together in hopes of solving the world’s most challenging problems. It can also be one of the most difficult, emotionally tolling, and disappointing tools when it falters or fails. Preventing collaboration fatigue and distrust in collaborative efforts often falls on those in the room to know when it is time to sunset. It is rarely black and white, but recognizing the signs and creating a candid space for honest conversations can help tease out the potential impacts and reinvigorate the group. It can also help bring closure when the time comes to shut the doors.

As collaboration experts focused on making an impact, BSR recognizes the difficulties, but also the power, of collective action. The end is inevitable to make room for new beginnings, ideas, and people. The sunset of a collaboration is never truly the end, but rather an opening to start over or for new solutions that can change the world.