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Blog | Wednesday March 6, 2024

Demystifying Social KPIs under CSRD: Six Recommendations for Business

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With the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the expected Corporate Sustainability Due Diligence Directive (CSDDD), companies in the European Union and beyond are required to report on their social and environmental impacts within a broad range of sustainability topics, creating a growing focus on what can be quantified and verified. The directives will make it mandatory for companies to mitigate and report on impacts throughout their entire global value chain, which many find challenging as there is less visibility and control over sustainability issues upstream and downstream.

In the case of environmental issues, this is fairly straightforward both in terms of what the regulators are asking companies to disclose, and already well-established metrics and tools to measure GHG emissions reductions. When it comes to the social part of a company’s ESG agenda, however, setting targets and measuring impact is not as simple. 

Challenges of working with the social impact agenda have been expressed by several BSR members, who are less certain about the right way of setting social targets and KPIs, precisely: what to measure and how to measure it. Through several projects with members, we have been able to develop a roadmap on how to identify meaningful social KPIs and targets covering the entire value chain.

Key recommendations include: 

• Benchmark against regulation and best practice: Start with researching existing and upcoming regulations, industry frameworks, and guidelines on social sustainability; this will give an overview of what is already in the market and help prioritize. Benchmark yourself against best-in-class peers, to identify priority topics and leadership practices from companies that have already gone down this road.

• Prioritize: While the CSRD requirements help set the right direction, it is a daunting task to try to cover everything in one go. Start focusing on the areas where you are mature, and pilot identified social KPIs here.

• Build on what already works: A crucial step is a mapping exercise to capture what metrics are already in use within the organization, to avoid coming up with ‘on-top-of measuring.’ This gap analysis will not only help to build on what you already have, but also make it easier to see how new social KPIs can be embedded into existing set-ups. 

• Engage internal stakeholders from the start: Make sure to involve the right internal stakeholders; soliciting expert input serves to reality-check the value of the proposition, but also to make sure there is buy-in, letting people contribute to the agenda. As one of our members put it—“to make the project successful, people need to be able to relate to it internally.” 

• Dig where you stand and align with materiality: Social initiatives tend to be more successful when aligned with existing corporate strategies, as they can take advantage of operating capabilities and capitalize on existing knowledge. At an early stage, test and make sure that your social KPIs and targets support and reflect the strategic and operational focus of your organization, and are anchored in your materiality assessment.

• Involve the digital team: They play a crucial role in collecting relevant data and making sure it is valid; involve them in the pilot phase and work closely together to ensure the data collection is rigorous and realistic. To operationalize your social KPIs, you need to ensure accuracy and security in how the data is gathered.

Identification and measurement of social impacts provides a great opportunity for businesses to explore what truly matters to their affected stakeholders and the organization. We recommend embracing this process as a discovery, with CSRD as a reference for what to comply with, best practice examples from peers, and a thorough consultation process within the organization. The outcome ought to be tailored to your overall impact and role in society, bringing people together, and creating a shared understanding of the journey to come once the social KPIs are set.

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

Blog | Tuesday March 5, 2024

A Foundational Guide for Business on Social Justice for 2024 and Beyond

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Amid ongoing political polarization and uncertainty in the United States, BSR’s Center for Business & Social Justice offers The Social Justice Guide for Business: Moving Beyond Crisis to Action for meaningful engagement on social justice issues.

In the current landscape, businesses are under increased scrutiny when they engage on social issues. Simultaneously, stakeholders expect business leadership on various social justice issues—this paradigm shift is the new normal. Companies are expected to continue to act on social justice in practice, if not in name, including issues such as climate justice, democracy, economic inclusion, racial justice, gender equity, LGBTQ inclusion, caregiving, unionization, and community impact.

Given dynamic expectations from workers, consumers, investors, and communities, coupled with concerns about potential backlash, a social justice lens on business strategy provides a new way forward.

Data from 2023 confirms the direction in which stakeholders are pointing, despite the headwinds:

Workers in the U.S. want their company to take meaningful action. 

• More than 8 in 10 employees report being satisfied with their job at companies where their leaders speak up about critical events and issues. 

• By a 4:1 margin, workers want to be a part of a business that promotes social justice internally through workplace policies and practices. 

• By a 5:1 margin, adults say it would make them more likely to want to work for a company that advances social justice through investments, donations, and advocacy.

Most consumers are already voting with their wallets.

• More than 7 in 10 consumers today expect companies to take public positions on issues including human rights, climate change, racism, and gun violence.

• A brand’s commitment to diversity and inclusion can make 42 percent of consumers more likely to buy their product—up 17 percent from 2022 and 49 percent say brands should do more regarding social advocacy.

• Consumer expectations are moving rapidly beyond what performative action can deliver—76 percent of consumers believe a company’s leaders should reflect the diversity of the communities where they do business. 

Investors believe environmental and social factors can materially impact long-term financial value.

• Investors are increasingly seeking greater transparency and accountability from business in their workplace policies and practices, climate risk and impact. 

• Nine in 10 investors said companies have a responsibility to help address societal problems that are important to customers, employees, and investors. 

Business leaders need to wrestle with how to prioritize positive and equitable social outcomes as a primary strategic objective. Companies will face trade-offs and need to make choices along the way. 

The Guide will help business leaders who, despite having publicly embraced and committed to addressing social injustice over the past four years, are now pumping the breaks in reaction to political blowback. It can help business break out of the cycle of scrambling to respond to flashpoints that often leave companies prone to missteps and vulnerabilities.

While a social justice approach isn’t meant to be easy, it’s also not ‘all or nothing.’ The guide aims to provide consolidated guidance on approaching social justice based on sound business principles, helping companies tackle social justice issues in a methodical and meaningful way, acknowledging the multiple corporate functions this work touches.

To unpack the term social justice and shift from theory to action, the Guide offers strategy and implementation advice in three sections: 

• How Companies Engage: offers a high-level overview of how companies currently engage on social issues, outlines six forms of corporate social engagement, and includes links to existing tools and resources that are currently leveraged by corporate leaders in their social impact initiatives. 

• A Social Justice Approach: defines the key terms related to corporate social justice and provides a framework for engagement to help businesses address social justice issues. 

• Advancing Social Justice: provides high-impact, actionable recommendations for overcoming those barriers and supporting a more equitable society while minimizing risks to business. 

The Guide is designed by and for large companies across industries with complex value-chains, diverse stakeholders and is focused on the U.S. region.

Social justice often isn’t anyone’s job at a company yet implicates many functions and roles including DEI, Sustainability, ESG, Public Affairs, Investor Relations, Stakeholder Engagement and many more. The Guide can be applied by executives empowered to make organizational decisions and is also designed to support practitioners looking for approaches grounded in methodology. 

The interaction between business and social justice is evolving, and this guidance serves as the basis to spark dialogue and collaboration with urgency and purpose. Use of the Guide will generate improvements and interest in future versions that go deep by industry, function and issue area.

The Center for Business & Social Justice welcomes input, ideas, and feedback on the Guide. 

People

Maggie Paruta

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Maggie supports BSR’s Financial Services team primarily on impact investing and corporate sustainability for companies in the financial sector. She also supports BSR’s work in sustainability management and strategy.

Prior to joining BSR, Maggie worked at NYU Stern’s Center for Sustainable Business where she consulted companies on how to build the business case for sustainability using the Return on Sustainable Investment (ROSI) methodology. She has experience working across industries, notably with food and agriculture companies, to produce thought leadership on how to embed sustainability in supply chains for risk reduction, operational efficiency, and competitive advantage. She also volunteers with NYU Stern to mentor students on pursuing sustainable business careers.

- B.Sc. in Sustainable Business & Economics from NYU Stern

- M.P.A. in Nonprofit Management & Policy from NYU Wagner

Blog | Tuesday February 27, 2024

Collaborating to Advance the SDGs: Three Considerations for Business Leaders

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The latest UN progress report on the Sustainable Development Goals (SDGs) highlights that the world has fallen behind on the 2030 Agenda. Only around 15% of the SDGs are currently on track for 2030. The SDGs, and in particular SDG 17 – Partnerships for the Goals, highlight that urgent and decisive action and collaboration between actors such as business, government, and civil society are needed to advance a future in which no one is left behind. 

Against this backdrop, BSR’s recently published report “Advancing the SDGs through Collaboration” explores the role that business-led multi-stakeholder collaborations can play in promoting the 2030 agenda. The report draws upon BSR’s extensive expertise in incubating, designing, and facilitating collaborative initiatives and leverages concrete examples of collaborative initiatives incubated through the CoLab SDGs program, a partnership with the Swedish International Development Cooperation Agency (Sida).

The report identifies three critical lessons learned that are particularly important to business leaders and collaboration practitioners, individuals who design, participate in, or manage collaborations: 

1. Striking the right balance between participation and decision-making: Good governance in collaborations not only enables successful partnerships, fair decision-making, and transparency but also creates legitimacy. BSR’s governance framework that is based on two factor—decision-making and participation—identifies four governance models that are particularly useful when designing business-led collaborations that may allocate governance seats to stakeholders other than businesses including NGOs, governments, unions, workers representatives, or industry associations. For example, the Sustainable Coconut Partnership makes decisions via a steering committee made up of industry members that founded the initiative, but also allows participation of diverse stakeholders. Given its recent growth, this approach facilitates governance by delegating to a group of members on decision-making. There is no one-size-fits-all approach to governance, and governance models need to be carefully designed based on the vision, mission, intended outcomes, and participants of the collaboration. 

2. Centering the rightsholder perspective: Business-led collaborations that focus on the SDGs frequently run the risk of designing solutions for rightsholders without including their voices in the process. It is paramount for collaboration practitioners to map their stakeholders and rightsholders carefully; design engagement approaches that are appropriate, culturally sensitive, and accessible; and consult or engage them systematically throughout the entire collaboration lifecycle—from ideation to launch as well as daily operations. By including the perspectives of women workers through continuous engagement in their native language and via local partner organizations or representatives, RISE, a leading collaboration advancing gender equality in the global garment, footwear, and home textiles industries, manages to center the voices of key rightsholders in a meaningful way. RISE also guarantees that women workers are represented at every level, from governance to project implementation, ensuring that the work responds to their real needs and priorities. Collaboration practitioners must integrate the voices of multiple and diverse stakeholders and rightsholders—either directly or via representatives such as labor unions or grassroots organizations—to ensure that collaborations contribute effectively to sustainable development for all. 

3. Measuring collaboration impacts in a systematic manner: Finally, collaboration practitioners must keep in mind that not all ideas for partnerships result in formal business-led multi-stakeholder collaborations—and that’s okay! For example, some ideas may not be pursued due to duplication with other existing initiatives, a lack of buy-in from business or other stakeholders, or a lack of resources. However, the decision as to whether to form a collaboration is often informed by extensive landscape research, exploratory projects, and stakeholder discussions, all of which significantly help advance knowledge on critical sustainability issues. For example, Keeping Workers in the Loop, a project that explored the impact of circularity on jobs in the fashion industry, uncovered the need for further research on the ecological, social, and economic impact of global used-textile product flows. While the project has not resulted in the launch of a formal business-led collaboration, a clear need for further research and dialogue was identified. This demonstrates that measuring collaboration success must be done systematically, considering not only the direct outcomes (i.e., whether an initiative has been established or not) but also understanding that positive benefits and impacts can play out in several different ways. 

Business-led multi-stakeholder collaborations will be key in addressing many of the world’s systemic sustainability and development challenges. They will require strong collaboration practitioners as change agents who are aware of the potential pitfalls of developing and launching collaborations—from governance to rightsholder engagement and measuring collaboration impacts.

Blog | Tuesday February 27, 2024

Three Approaches for Integrating Human Rights into Company Risk Registers

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As emerging regulations seek to mandate that companies implement risk-based human rights due diligence, it is increasingly critical that companies identify human rights risks in their operations. One such opportunity is through including human rights risks in risk management approaches.

One mechanism for this is through leveraging a risk register, which companies use to record potential risks that could affect a project. While leveraging risk registers presents an opportunity to ensure that human rights issues are identified and assessed—and can lead to further corporate respect for human rights—they also present some inherent challenges due to their nature and historical function.

The Challenge

A fundamental challenge to integrating human rights into both risk management approaches broadly, and risk registers specifically, is that both primarily focus on risks to the business rather than harms to people, which is a critical lens for assessing human rights under the UN Guiding Principles on Business and Human Rights (UNGPs). It follows that traditional risk registers are not set up to evaluate human rights risks from a “risks to people” point of view.

Given this focus on risks to business, leveraging traditional risk register criteria (e.g., legal risks, economic risks, etc.) is not the most effective way to measure risks to people. Rather, further action must be taken to ensure that human rights risks are being captured from a “risks to people perspective” and not only when and if those risks also pose a risk to the business. 

Three Approaches 

To begin ensuring that risk registers effectively measure risks to people and that human rights risks can emerge with adequate gravitas, BSR outlines three potential approaches: 

1) Maintain a traditional risk register but strengthen language on impacts to people in the risk and consequence descriptions. 

This approach is largely consistent with a traditional risk register but allows for the integration of human rights risk and impact through lighter touch edits. It will entail ensuring that each relevant risk description provides context on how it impacts people, and that consequences are framed to clearly capture these impacts, not just risk to business, when considering the severity of a topic or risk.

2) Update a traditional risk register to include a new category dedicated specifically to risks and impacts to people. 

This approach requires more significant edits to the traditional risk register. In addition to the edits in approach one, this will also entail creating a new category of risks to people. While traditional risk registers often include a column for stakeholders that records how risks to stakeholders emerge as business risks, this new column would focus specifically on how each risk will impact people outside of business impacts. If a risk comes up “low” across business consequence categories, like financial or legal risk, it still has an opportunity to come up “high” when considering how it impacts people.

This approach will also involve creating new consequence descriptions focused on impacts to people/human rights. In alignment with the UNGPs, this should consider how many people may be impacted (scope), how severe the impact may be (scale), and if the impact is remediable.

3) Create a second risk register to capture risks and impacts to people and develop a process to ensure that both the traditional risk register, and the human rights risk register are considered together and weighted equally.

This approach involves creating a second risk register to effectively capture human rights risks and impacts to people and developing a process to integrate the two registers. Consistent with approach two, the new register should include criteria on scope, scale, remediability, and likelihood of occurrence. Leveraging these criteria, the register can prioritize the greatest risks to people and their enjoyment of human rights.

Integrating the two registers would entail developing a process to ensure that both the traditional risk register, with its focus on risk to business, and the human rights risk register, with its focus on risks to people, are considered together. This may include integration within the tools themselves, a separate dashboard that captures the high risks and actionable items from both registers, or a matrix that captures both risks to business and risks to people.

BSR’s Analysis and Recommendations 

As the lightest touch, approach one is likely to be the easiest option to action and implement. However, several issues remain. Primarily, traditional risk registers likely already cover some impacts to people, so updating the language may not be enough to ensure that human rights risks rise to the top. In addition, business and human rights experts advise against full integration of these impacts in risk registers, instead suggesting that risks to business and risk to people be kept separate to maintain focus on people.

Building on approach one, approach two goes a step further to help site-level staff better understand impacts on people and gives them a place to consider the severity of these risks outside of the business context. Adding a category dedicated to impacts to people could also help to ensure that risks that have high consequences for people may be elevated even if it does not have immediate impacts on the business. 

Ultimately, however, while this does go a step further in integrating human rights principles into the risk register, impacts to people are still largely evaluated through criteria that was designed to measure risks to the business. Important aspects of how to assess risks to people, including how many people may be impacted, the severity of the impact, and the possibility of remediating impacts, as outlined by international human rights standards, may not be fully captured in this approach.

Though approach three can rightly be considered the most intensive and resource-heavy option, it is also the best option to ensure that human rights issues are captured and that they rise to the top.

A second risk register will allow site-level staff to evaluate impacts to people in alignment with international human rights standards and principles and follow leading practices as outlined by business and human rights experts. Following these principles, the register will be able to more accurately capture high risk areas for human rights impacts. This approach is also aligned with the latest requirements for Double Materiality, including assessing internal impacts (risks to the business) as well as external impacts (risks to people), and plotting both these risks on one matrix or dashboard. 

As long as practitioners are diligent to ensure that the human rights risk register is treated with the same weight as the existing business risk register and that the human rights risk register has a clear process for non-human rights staff to successfully leverage the tool, this will be the best and most robust option to making a risk register an essential and useful tool in any company’s arsenal for respecting human rights.

Regardless of the approach selected, it is essential to evaluate risks to people, not only risks to business, in company risk management procedures, including risk registers. At BSR, we recognize that these changes may need to be made gradually and call on companies to start somewhere. Even if it is not currently possible to go as far as creating a second human rights risk register, centering human rights in risk management is an important first step to capturing risks to people.

Blog | Thursday February 22, 2024

Investing in Women Workers: How Training has Helped Build Financial Resilience in Shea Supply Chains

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From moisturizer to chocolate, shea butter and oil—an ingredient extracted from the nut of the shea tree fruit—is used by food and cosmetic companies to create a variety of everyday items. The supply chain behind these products involves over 16 million women, who collect shea fruit, and process the nuts found in the fruit. Given women workers’ role in the value chain, their financial inclusion is crucial to ensuring the sustainability of shea—a commodity that has been under pressure given climate variability and increased clearing of shea trees for farmland.

Workers that focus on nut collection face a restricted timeframe during the summer months when ripe shea fruits allow for earning a sustainable wage. However, workers involved in processing shea nuts into shea butter may have a more stable income due to year-round work yet only garner profits from collecting during the shea season. Given that most women are uniquely shea nut collectors, and processing at scale requires several resources not readily available to everyone, the dependence upon the shea yield often leads to unstable income streams and difficulty predicting women’s disposable income. 

To increase the financial independence of shea workers from Ghana, BSR, the Estée Lauder Companies Charitable Foundation, and other partners, developed a financial resilience training program for over 1,000 women working in shea in Northern Ghana.

The pilot’s scoping took a community-informed approach, gathering feedback from women shea nut collectors and processors in the identified villages. For over ten months, we delivered training in two co-operatives in the Tamale region: one in Mole Crema with mainly women shea nut collectors, and one in Janshegu with women that both collect and process. Peer educators and community volunteers were first trained on a range of financial literacy topics—including financial planning, saving, budgeting, products and services, and family financial decision-making—and then supported in delivering the training to other women in their shea cooperatives.

The results have tangible impacts on women’s livelihoods and surfaced some interesting takeaways for companies looking to improve outcomes for workers in agricultural supply chains. 

How Can Business Take Action? 

Financial resilience boosts women’s independence and their overall well-being and confidence. 

Despite representing 43% of the global agricultural labor force, women face major barriers to realizing their full economic potential, such as disproportionate burdens of care, unequal access to resources, limited ownership and control of land, and lower remuneration.

Surveys captured before and after BSR pilot training in two co-ops have shown a positive change in gender dynamics in several households, with men taking a more active role in household chores and women more involved in daily decisions. The percentage of women believing that they should have as much access to credit and financial services (savings account, insurance, loans...) as men, increased from 54% to 98% following the pilot.

The financial resilience training dramatically increased women’s overall understanding of financial planning and boosted savings rates. Nearly all women started saving monthly after the training, versus 36% in Janshegu and 60% in Mole Crema before the training. As a result, many women took on entrepreneurial initiatives that helped them diversify their income streams—for instance, by purchasing sewing machines to mend garments or freezers to sell cold drinks.

We simultaneously observed an overall growth in confidence, an increased sense of joint decision-making power between partners, and reduced perceived limitations around savings, leading women to save more of their earnings. This training model proved to not only support women in achieving higher financial confidence but also amplified their sense of agency in their communities and their shea cooperatives.

Given women worker’s pivotal role, applying a gender lens can not only strengthen agricultural supply chains but can also enable entire communities to improve their social and economic well-being. 

Collaboration between business, civil society, and local stakeholders is key to empowering workers and strengthening bonds that enable sustainable supply chains. 

The pilot program in Ghanaian shea is a testament to the value of taking a collaborative approach, whereby business can amplify social inclusion and community impact by empowering female workers in their supply chain. Women who participate actively in financial decision-making, as well as engaging with resources like savings groups or financial institutions, are enabled more autonomy regarding how they manage and improve their shea business. This engagement with financial resources, and active decision-making can increase their resilience in the face of volatility in the shea market.

Tapping into the local networks of cooperatives enabled an extended reach, as beneficiaries engaged their wider communities, thereby increasing women’s economic empowerment across more of the supply chain. Engaging with local partners and suppliers at the raw material level built stronger business networks while also increasing women’s interest in continuing to work within shea. 

With diversified businesses and more tools at their disposal, shea businesses can continue despite times of downturn, which has the potential to secure a more stable supply. Financial learnings can also enable investment in increased shea butter production and output with one training beneficiary saying:

“When I heard the word budgeting, I always related it to government. I never knew I could personally budget. This training has explained budgeting [and] I can [now] budget for to buy more of the shea nuts for shea butter processing."

Shea Woman Collector

The pilot program in Ghanaian shea demonstrates the value of taking a collaborative approach, whereby business can amplify social inclusion and community impact by empowering female workers in their supply chain. Working through local cooperative networks extended the reach of the impact as the women who received training shared learnings with their communities. Engaging with local partners and suppliers at the raw material level built stronger business networks while also increasing women’s interest in continuing to work within shea. 

By participating actively in financial decision-making and leveraging resources like savings groups or financial institutions, women are enabled more autonomy in managing and investing in their shea business and can increase their resilience in to market volatility. 

Investing in collaborative financial resilience trainings for female supply chain workers—at both the business level and industry level—can reduce supply chain volatility, mitigate disruption risks and ultimately create lasting impact on women’s economic empowerment. 

Next Steps 

To build on the pilot’s successes and expand impact for female financial resilience in supply chains, BSR and the Estée Lauder Companies Charitable Foundation are currently scaling this training intervention throughout 2024. In seeking to scale, we are strengthening the capacity of several local suppliers and their field officers—who interact regularly with the women workers—to make the training more accessible to actors across the shea industry. 

Further to this, we are creating a radio program with the Farmers’ Voice Radio Network (FVRN) to educate its farmer and shea nut collector and processor listeners across rural areas in Ghana on financial topics. The approach of using different models aims to increase women’s financial wellbeing in the sector. 

In testing the effectiveness of different models, BSR will share learnings, successes, and best practices from the project scale-up to inform efforts for investing in women working in agricultural supply chains and advancing worker and supply chain resilience.

Learn more about this initiative here, and if you would like to get involved in the scale-up, please contact us.

Blog | Wednesday February 21, 2024

2024’s Elections: A Defining Test for Business Leadership

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As more than half of the world’s voting-age population heads to the polls in 2024—more than in any previous year in human history—there is a wave of anxiety cutting across business, civil society, governments, and in many places, the very citizens whose voices are to be heard at the ballot box. 

It is, indeed, an epochal moment. Most of us take democracy, and the rule of law, as a stable constant in our public life. But it’s not something we can take for granted. The rise of anti-democratic parties around the world has set off alarms. It is far from clear, however, that business has faced up to the urgency of the moment. Although, according to a recent report in Fortune, business leaders increasingly recognize that political disruptions do pose a significant risk. 

Business cannot thrive in an environment where trust in democratic institutions is undermined, where objective facts are under attack, where social consensus is unattainable, and where populism stokes resentment and interferes with global collaboration.  

All of those things are in play in 2024’s elections, from India to Mexico to the United States, to the European Union, and dozens more jurisdictions.

This would, at other points in history, be considered a political question that is not front and center for business. For multiple reasons, that mode of thinking is a luxury that businesses cannot afford. 

To start, while elections ensure that the people have their say in governance, there are many reasons why this year’s spate of elections may not have that effect. First and foremost is mis/disinformation, including AI-powered deepfakes, which generate false information that distorts outcomes and destroys trust.  

Already this year, in the US and Pakistan, false information and deep-faked communications ostensibly from candidates and officeholders have distracted and confused voters. There is considerable evidence that both domestic and foreign actors are using the digital playing field to influence outcomes and erode trust in democratic processes.

There are also many barriers to free and fair elections having nothing to do with digital tools. Political parties and candidates in many countries have actively cast doubts on the legitimacy of elections, established legal and practice barriers to voting. And in the United States, the flood of money from opaque sources undermines both the reality and the perception of free and fair elections. 

In addition to questions about the legitimacy of election processes, some outcomes present risks for companies committed to just and sustainable business. Across the world, populist movements are causing a turn away from climate action, progress on equity and diversity, respect for disfavored populations, and global cooperation.

Concerted progress on climate and nature, for example, will be virtually impossible if the COP processes—as imperfect as they are—buckle under the weight of geopolitical conflict and nationalism. Scapegoating and xenophobia interfere with business commitments to diversify businesses from the boardroom to the factory floor and contribute to a vicious cycle in which human rights and rule of law are sacrificed in the name of national glory. And the momentum towards the harmonization of regulatory standards relevant to “ESG” is also under threat. 

The stakes, in my view, are clear. The question then is what can businesses—and business leaders—do? 

For many businesses, this presents uncomfortable questions, and a sense that while there is risk in inaction, there may be equal or greater risk in taking action.

We believe that the best approach is to establish a “playbook” that offers companies a range of options that they can fit to their circumstances and assets. All companies, for example, can encourage voting and help their employees strengthen their media literacy to avoid false or misleading information. All business leaders can speak with their peers in various forms and engage in quiet diplomacy with government officials to promote legitimate elections. Indeed, this was seen in the run-up and aftermath of the 2020 elections in the United States. 

Other steps may be appealing to some companies and not others:

• Coalitions of companies committed to preserving and advancing workforce diversity and climate action—with a clear statement of business and economic benefits—can send a powerful message.

• By reinforcing the economic value of cooperation to address global challenges, business can help to legitimize the economic case for a truly sustainable economy.

• Demonstrating the human progress that individual companies—and macro financial and economic systems—can deliver through an enduring and purposeful commitment to sustainability further reinforces positive outcomes.

Not all companies will want to make these efforts, but this is essential in a world where a sense of economic precarity is fueling fear-based politics.

BSR is supporting its member companies in understanding the stakes, identifying leverage points, and supporting collaboration, including with like-minded stakeholders. Seldom has there been a time when the achievement of free and fair elections and sustainability goals have been so closely tied. 2024 is not only a stress test for rule of law and democracy; it is a test for business leadership as well. The opportunity for positive impact is great, and the price of inaction is too high to risk. 

People

Kaia Ling

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Kaia works with BSR member companies across industries on sustainability management, with a focus on climate change, supply chain sustainability, and consumer sectors.

Prior to joining BSR, Kaia supported the development of the innovation and sustainability department in an alternative protein start-up, where she focused on developing a holistic sustainability roadmap and strategy and performing a baseline assessment to identify opportunities of improvement in sustainability performance. She started her career in a boutique sustainability consultancy firm focusing on plastic waste advisory and has experience working with private companies and governmental agencies, such as the Supreme Committee for Delivery and Legacy in Qatar, to promote the management of plastic waste in their operations and supply chain.

Kaia holds a B.Sc. (Hons) in Environmental Earth Systems Science, specializing in ecology, from Nanyang Technological University, Singapore. She is fluent in English and Mandarin.

Blog | Wednesday February 14, 2024

China’s Climate Commitment and its Impact on Scope 3 Targets

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China’s national climate commitment aims to achieve carbon neutrality by 2060 and an emissions peak by 2030. The country has indicated a firm resolve to achieve these targets, while also emphasizing a trajectory that is “independent of external influences”. This blog explores the business implications of these climate policies, offering insights that are particularly relevant for global companies with substantial manufacturing operations in China and recommendations for how to leverage opportunities to address Scope 3 emissions in this dynamic landscape. 

China's engagement in COP28 provided valuable insights into its evolving energy strategy, accompanied by potential 2025 targets. In addition, the Sunnylands Statement, jointly released by China and the U.S. signifies an elevated commitment to collaborative efforts in addressing the climate crisis. While abstaining from the Global Renewables and Energy Efficiency Pledge due to reservations, China’s stance reflects concerns over side agreements and meeting the outlined targets.

Introduced before COP28, the EU's Carbon Border Adjustment Mechanism (CBAM) faced some criticism, particularly from China, reflecting an acknowledgment of CBAM’s potential impact on trade dynamics and the imperative for enhanced climate emission reductions.

Propelled by climate policies, Chinese provinces, including Beijing, Shanghai, and Guangdong, are actively implementing comprehensive strategies for green, low-carbon development, emphasizing technological innovation, carbon neutrality, and the integration of sustainable practices across various industries. 

Renewable energy is experiencing rapid growth in China. This upswing has a ripple effect on market performance, fostering growth in sectors such as electric vehicles (EVs), energy storage, and other emerging industries and technologies. However, despite the increasing share of renewables in the total electricity mix, coal usage is projected to rise, driven by China's post-COVID emphasis on economic development--a trajectory likely to continue until the nation reaches its emissions peak.

At the corporate level, businesses spanning manufacturing, construction, and logistics are embracing transformation by integrating solar panels, incorporating EVs, and adopting diverse clean energy practices. Notably, local enterprises, whether state-owned or private, are demonstrating proactive efforts to embrace emission reduction goals, potentially shaped by implicit government compliance expectations. This complex interplay of factors reflects China's evolving energy landscape, which is driven by priorities both at the national and local government level, followed by market changes including investment in the energy sector and carbon tax schemes. 

Global companies operating in China, especially those with significant manufacturing, can take the following actions to meet their Scope 3 reduction targets in the context of evolving climate policies: 

1. Craft a Comprehensive Climate Strategy that Aligns with Broader Business and Sourcing Strategies:

   Global companies are increasingly setting clear climate strategies, particularly net-zero targets. However, a challenge lies in these strategies predominantly addressing Scope 1 and 2 emissions, leaving out Scope 3. To truly embrace a holistic approach encompassing Scope 3, it is crucial to intertwine climate strategies with broader business strategies. This integration ensures that actions to decarbonize supply chains align with business priorities and commitments, fostering collaboration with suppliers on climate performance improvements. Importantly, climate strategies should not burden suppliers but instead, serve as a collaborative framework for shared sustainability goals. 

2. Empower Supplier Engagement for Scope 3 Reductions:

   In alignment with China's climate policies, many suppliers within the country express a willingness to embrace clean energy practices and invest in sustainable, long-term emission reduction solutions. However, some encounter challenges, ranging from where to start their sustainability journey, to calculating the return on investments. Many suppliers are eager to form partnerships with buyers, seeking collaborative opportunities for improvement and knowledge-sharing. Global companies and buyers can actively support these suppliers in their continuous efforts to collectively achieve Scope 3 emission reduction targets. Explore additional BSR resources on Buyer-Supplier Engagement, Supplier Engagement Guide, and a case study from Denmark for effective strategies.

3. Strengthen Partnerships with Leading Suppliers and Industry Initiatives for Collective Scope 3 Solutions:

   Within the global supply chain, many Chinese suppliers excel in innovation, production, energy efficiency, and emissions reduction. Many have already established climate reduction targets and actively engage in industry-wide collaborations, such as the UNFCCC China group's initiative in the apparel industry. Global companies and buyers can leverage active suppliers in China, capitalizing on their commitment to ongoing improvement, robust investments, and dedication to low-carbon practices. 

4. Integrate Just Transition Considerations:

   While examining how to achieve specific Scope 3 targets is crucial, it is equally important to incorporate a holistic perspective on an accelerated and sustainable transition to a net-zero economy, considering the well-being of individuals, workers, and local communities. By integrating social considerations into climate goals, companies can contribute to a just and sustainable transition, ensuring a positive impact on both the environment and the communities in which they operate. 

In navigating China's dynamic and evolving climate policy landscape, global companies often cite the challenges posed by uncertainty and frequent policy changes. However, amid these complexities, it is increasingly vital for companies to establish their own climate strategy and clear goals in alignment with the 1.5°C global ambition. This strategic clarity will enable them to adeptly navigate through China's climate policy shifts, whether gradual or abrupt. Recognizing China's significant role in raw material supply and production, and as a major consumer market, companies should leverage these vast opportunities for resources and partnerships. 

For more guidance on navigating the evolving climate policy landscape, contact BSR’s climate and supply chain experts based in China.

Blog | Tuesday February 13, 2024

The Sustainability Leader Checklist for 2024

Preview

2024 is set to be yet another year of polycrises: violent conflicts, turbulent geopolitics, fractured societies, extreme weather, and unharnessed AI, to name just a few. The difficult news waves will cross the CEO’s desk and land on the laps of the Sustainability team, in conjunction with other teams. How you as a sustainability professional interpret these conflicts will be critical—both to your mental health, and the health of the company.

The sustainability leader’s job, broadly stated, is to chart a transformation that will deliver results, and build resilience, in a turbulent economy. It requires both mastery of the company’s core value proposition, and vigilance on external events. But it also requires facing the myriad tensions inherent in the sustainability remit. These start with the existential angst of internalizing what the current (climate, nature, fill-in-the-blank) crises portend for the viability of our economy and society—while at the same time responding to near-term issues like new mandatory disclosure requirements with C-suite accountability. 

A second conundrum is how to establish ambition on issues like climate, nature and human rights. Anchoring goals in past practices can make them achievable but insufficient; scaling them to the scope of the problem can be logistically overwhelming—or so detractors will argue.

This introduces organizational capacity. A company fortunate enough to have a robust, competent team might be tempted to deploy it in the name of efficiency. The danger is leaving the rest of the company behind; in effect, missing an opportunity to build capacity. A related question: When should a sustainability leader take a stand internally and externally, and when should they lean back or ask permission?

While all executives face challenges, few have implications for the future of humanity. And few are as new to the executive table. The combination of diverse, serious issues and a lack of organizational muscle memory can prevent companies from acting expeditiously. Instead, they crescendo into crisis, putting companies at a disadvantage and sustainability leaders at risk of burnout.

If this sounds familiar, consider these 3 steps: 

1: Start with yourself 

A wise rabbi once advised me, “If you want to change the world, think in concentric circles—starting with yourself. How will you model the change you want to see? Then, how might you cascade it to your network, your community, and beyond?”

Here’s a way to start:

• Self-assess. Are you getting enough sleep, nutrition, exercise, “downtime”? If not, fix it. Sanity and health are essential to the kind of change you seek to lead. 

• Name it. The stresses are real. Existential angst? Disruptive co-worker? Precise diagnoses lead to better solutions.

• Prioritize your goals. Find quiet time to think through what you need to accomplish. What does “good” look like? What’s essential, and what’s nice to have? What roadblocks need to be overcome?

• Take account of your assets. Outdated assumptions, rigid practices, and a lack of actionable information often stall corporate action. Consider how you might leverage personal attributes, structural opportunities (the corporate cadence of budgeting, risk assessment, investor meetings, etc.), and external events and actors as resources.

• Reframe the narrative. Many of the key pivot points in sustainability stem from reframing the narrative. Revisit yours. Is it fit for purpose, given your newly refined goals? 

2: Consolidate your Braintrust

Sustainability leaders have a lonely job. Few colleagues have had prior experience, and help can come with strings. You need a braintrust: like-minded professionals who can offer perspective, advice and the occasional pushback.

The braintrust I built in Hong Kong was called "The Breakfast Club”. Over tea and muffins, we shared market insights, confronted challenges and built career paths. Projects were born and catastrophes were avoided. Most importantly, we became each other’s go-to for the professional support we all craved. 

You don’t need a formal convening. Build a roster of confidants, including:

• Trusted advisors with whom you can debrief and detox—and then refocus and ideate.

• Sustainability practitioners to share, strategize, and iteratively support you as you navigate the process ahead.

• An opt-in network, ideally managed externally, providing expertise and a safe space to explore new ideas. BSR is uniquely suited for this purpose; provides an external perspective, invaluable to sense-check market observations and ground-truth operational strategies, intersectional expertise, with depth in both core issues and the critical interfaces (e.g. climate and justice, nature and supply chain); a focus on critical intersectional issues, such as its host of Collaborative Initiatives and exploration of Beyond Growth strategies.

3: Prepare your Pitch

A dog trainer once told me that canines need to hear something 75 times to learn it. The estimate for people varies from far less to far more.

Prepare your pitch and be able to tailor it. You’ll know it’s working when you start hearing your words emanate from others. Here are some tips:

• Frame it. A succinct framing of the ambition, in a manner that resonates with your audience, provides an essential common point of reference.

• Bound it. There’s a difference between riding a wave and boiling the ocean. Demonstrating that distinction can earn you trust – and enough interest from your stakeholders to continue the conversation.

• Identify big goals. How you define your goals will have a bearing on which competencies, and colleagues, will be needed to achieve it. Consider your resources, and those you can influence. Then think about what it would take to institutionalize change. How might you optimize your resources and network to achieve the ambition you framed?

• Propose a process. This was a big takeaway from my tenure leading sustainability in Asia for German chemical manufacturer BASF. Starting with the ‘right’ answer pressures colleagues to respond right away—and can end in disagreement or de-prioritization. But initiating a process allows them to opt in, or—implicitly—stay out of the way. A well-designed process yields a shared understanding of the challenges, priorities, and options, and coalesces toward a plan. Does this take more time? Yes. Use that time to loop back, with your team and your braintrust, to test assumptions and course-correct. The result: a better chance of organizational alignment (and forward movement).

2024 is set to be a rough news year. Taking a renewed approach can help you surf the oncoming waves—and redirect that energy into impact for your company, value chain, and industry.