Preparing for ESG reporting and uninsurable risks: takeaways from the WSJ Pro Sustainable Business Forum

Investors at the WSJ Pro Sustainable Business Forum on Thursday said their interest in sustainability information remains high and executives said they are working to expand their data and capabilities, even as mandatory reporting does not is not yet in force.

Jeannie Renne-Malone, vice president of global sustainability at Fashion Group VF Corp., is fairly confident that the company knows what it needs to do to meet the Scope 1 and 2 requirements. She added that while there is a bit of uncertainty about the Scope requirements Application 3, VF is working on something that could meet a limited assurance standard.

“We see the California bill (mandatory climate disclosure) as a good framework. I would say other states… are starting to look at it from a copycat perspective,” Renne-Malone said.

Pharmaceutical company Merck KGaA is changing the way it estimates scope 3 emissions from an expense-based method to a weight-based method, in part because of cost inflation. “We can pay 10, 15, 20 or 30% more for something, but that doesn’t mean emissions have increased… Weight-based estimation gives us more directly connected and accurate numbers on emissions from the scope 3,” said Jeffrey Whitfordvice president of sustainability and social innovation in the company’s Life Sciences division.

One of the things that keeps Ann Tracydirector of sustainability at a consumer products company Colgate-Palmolive, in the evening, is that the compilation of sustainability data is very cumbersome and manual. She said AI can help capture and analyze sustainability data such as reductions in gas emissions and utility usage.. “This is really important because eventually we’ll need to prepare for our data audit,” Tracy said.

Dan Crowley, a partner at law firm K&L Gates, said the anti-ESG movement is primarily political theater and recommends that executives pay attention to the investor-led movement rather than politicians or policymakers.

“Sustainability is no different from how we hold boards and management teams accountable for all good and sound governance,” said Kyung-Ah Park, Head of ESG Investment Management and Managing Director of sustainability at Singapore state investment company Temasek. She recommends that companies only talk about sustainability in their core business; be specific and transparent about successes and challenges; stay current with industry regulations; and rely on certification standards.

Here are some other takeaways from the event.

Climate risks are becoming uninsurable, but there could be a major breakthrough

“You will now find that insurance is withdrawing from certain areas simply because it is becoming uninsurable to the extent that extremes become the norm. … It’s not just related to the U.S., they’re also seeing it in other parts of the world,” said Torolf Hamm, senior director and head of physical catastrophe at the insurer. Willis Towers Watson.

There is some hope, however, according to Maryam Golnaraghi, director of climate change and environment at the Geneva Association, an insurance think tank. “The world is on the verge of a major breakthrough in the way risk modeling is done,” Golnaraghi said.

Consumers remain receptive to sustainability claims

Despite recent trends in greenhushing – when companies remain silent about their sustainability activities – Randi Kronthal-Sacco, a senior fellow at NYU Stern, said: “Consumers want to hear about sustainability efforts. They’re a little less interested in hearing brands talk about the most polarizing topics, but if it’s an important issue for the company, they should discuss it.

She studied consumer messaging from nine major brands across industries. Top performers first talked about the product’s reason for being (for example, that its laundry detergent will clean your clothes) and then added a sustainability claim.

“What consumers want to hear is how it affects them personally. So we said my health, my wealth, my personal world. So any time you talked about not having toxic ingredients that would be harmful to human health it resonated very well, any time you could put money in your pocket it resonated very well.

There is a bipartisan path for ESG

ESG has become part of America’s culture wars, but anti-ESG efforts are largely political theater, according to Crowley of K&L Gates, a longtime Republican. Extreme politicization pushes people to try to maximize their differences rather than recognize their commonalities, said academic Robert Eccles, a longtime Democrat. The two men worked together to chart a path forward through the controversy. They advise focusing on material risks.

Partnerships remain vital for sustainability

Partnerships are part of many companies’ sustainability efforts. It may sound cliché, but it’s a reality, said Cassandra Garber, Vice President, Sustainability and ESG at Dell Technologies. “Topics such as climate action, circular economy, digital inclusion… cannot be addressed successfully if you do not do it with third parties throughout your value chain. »

Dell approaches third-party sustainability relationships in the same way it does its traditional supply chain relationships, with the main difference being that the company is talking about different topics and the concepts are not as mature, Garber said.

Cultivating green talent can help overcome skills shortages

“Sustainability professionals are in high demand…more and more we are trying to develop our own talents,” said Tara Hemmersenior vice president and CSO of Waste Management, a recycling and waste company. Hemmer created a sustainability rotation program that moves a handful of people through four to five business functions and, after two years, brings them back to the team or places them in one of the company’s functions. business.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com