“Existing employees and prospective employees see this as core,” says Diana Breeze, Director of Group HR at Bunzl. “There’s been an awful lot written about the search for meaning and purpose in organisations and to existing employees, but also potentially prospective employees of yours as well. Environmental sustainability is absolutely at the heart of that.”

Companies competing for the best talent need to offer more than pay and perks – they need to offer purpose. They must prove and promote their sustainability credentials, or face losing the war for talent to their greener competitors.

Time to take action

People want their climate priorities to match those of their employer. It’s a message not lost on today’s leaders. In our research, more than four fifths (84%) of respondents say their organisation’s environmental and sustainability performance is a central factor in attracting and retaining talent. Nonetheless, one third say staff judge their current environmental actions to be below adequate, while another 33% remain neutral on the issue.

To combat this, a firm’s sustainability strategy needs to be inclusive and authentic. Potential talent wants to see genuine action being taken and have the opportunity to actively tackle the climate crisis within the workplace.

“There is a big focus at the moment on well-being and mental health, which has been prompted partly by the pandemic,” adds Breeze. “By engaging employees in activities like volunteering with local environmental projects – the ones we sponsor, engage with and donate to – they get a sense of connection with the organisation and a real sense of well-being, more than it ever has done.”

Engagement means employees knowing their contributions are recognised and considered. Our survey shows that 67% of business leaders think environment and sustainability should be used to create purpose among staff, with 33% strongly agreeing. This can be done through regular sessions via live channels, using tools such as Teams and Slack, or anonymous platforms like Suggestion Ox or Slido. An awards programme creates organisation-wide recognition and rewards for the best ideas and team members who drive the most positive change.

The leadership challenge

Employees cannot make the change alone, and the sustainability agenda needs to percolate from the top down, championed by the entire C-suite. The majority of those we surveyed, many in C-suite roles, indicate that embedding environmental sustainability into their organisation is a key part of their future strategy. To prove the point, leaders’ performance reviews and KPIs should, perhaps, be linked to sustainability targets.

“It is in every member of the C-suite’s remit to contribute in this area,” says James Davis, Partner at Positive Momentum. “After all, it will be the C-suite’s leadership, messaging, cadence and ‘can-do’ attitude that make all the difference to the future of their businesses and also the environment.” Ideally, there should also be an individual leading the charge – although more than half (57%) of our respondents say there is no dedicated sustainability role within their organisation.

Having an ESG lead makes it easier to engage staff in the organisation’s commitment to reaching net zero. With businesses around the globe attempting to navigate labour shortages, now is the time to step up. The good news is that linking sustainability and employee purpose isn’t difficult. Put even some of these actions in place and you will be well positioned in the intensifying battle for the best talent.

Across the globe, financial institutions are also responding to regulation on which organisations they can lend to, with environmental responsibility high on the list of criteria. Sources of cheap finance for overdrafts, loans for equipment purchases, and even short-term cash-flow injections are becoming dependent on a demonstrable sustainability strategy. In our research, 17% of respondents report being refused funding by banks owing to environmental concerns.

Smaller companies, too, are also starting to feel the impact, according to Francesca Hampton, CFO at Cynergy Bank, whose clients are predominantly SMEs. “While a lot of the new regulation is still being finalised, UK financial institutions need strong transition plans. At the moment, it’s all about our disclosures, our governance and our strategy,” she says. “We’re still at the beginning of the journey, but it’s moving fast and will impact the way all businesses carry out their services. We all have to say what we intend to do, and then we have to deliver it.”

With the introduction of the ISSB, announced at COP26, Hampton adds, banks will have to be more specific in their disclosures, while the UK’s Financial Conduct Authority (FCA) and the European Banking Authority (EBA) also intend to add more pressure. In the UK, it is the bank’s board that will be accountable for its transition to net zero, through the Senior Managers and Certification Regime.

“For SMEs, this is going to be a transitional period, and it comes at a time when we have political uncertainty, technological advancement, and societal change all happening at the same time,” says Hampton. “The regulation coming on climate change will demand resource and intellectual thought, and banks will need to help deliver what the country needs in terms of climate change.” At some point, adds Hampton, banks simply won’t be allowed to lend to businesses that cannot fulfil their promises on climate change or to ones that have inadequate efficiency ratios.

The leadership challenge

In the sphere of ESG compliance, leaders need to recognise how fast the ground is shifting. For those who feel they are lagging behind what stakeholders expect, identifying quick wins can help. “A number of respondents are choosing to offset unavoidable emissions through external emissions reductions, such as tree planting,” says Simon Brown, Partner at Positive Momentum. “Studies carried out by the International Carbon Reduction and Offset Alliance (ICROA) indicate companies that offset typically invest more in energy efficiency and renewables, too.”

But don’t consider that ‘job done’. “It’s likely the rules around offsetting will be reviewed soon,” says Brown. “Carbon removal projects, either nature-based or using technology that permanently removes CO2 from the atmosphere, will be seen as more aligned to Paris Agreement targets. The cost of these will be much higher than the current cost of offsets, so businesses need to develop long-term strategies to integrate them into their net-zero plans.”

Whatever sustainability strategy the business chooses, finance leadership in particular is in a position to drive sustainability, not just in terms of investment and raising finance, but in setting targets, creating monitoring systems and equipping every department to rise to the climate challenge. Solutions by numbers are the way out of this crisis, and the CFO has as crucial a role in this as the Chief Sustainability Officer.

It’s an attitude that is mirrored by Rukmini Glanard, EVP Global Sales, Services and Marketing at Alcatel-Lucent Enterprise (ALE), which has environmental sustainability as one of its four corporate social responsibility (CSR) pillars: “The topic is definitely a customer and partner conversation, that appeared more regularly in 2021, as governments and media, in meetings such as COP26, continue to highlight greater action needed.”

As a private company, ALE faces little to no obligation to report its CSR activities, yet ALE does take action to report and publish activity; during 2020, it witnessed a 20% increase in new bid requests that include material questions on CSR. Indications from 2021 suggest this has increased to 40%.

“For environmental sustainability, our focus is to try to go beyond country regulation compliance and stay ahead of requirements – which is more and more difficult,” adds Glanard. “It is important that our R&D and development partners design with compliant components and materials and that ALE carries out environmental sample testing of these as part of the product certification cycle.”

Showing what you’re made of

There are myriad ways businesses can demonstrate to potential and existing customers that they have a strong sustainability focus.

In client satisfaction surveys, asking questions around how customers respond to environmental efforts will clearly advertise the steps being taken. Establishing a client sustainability advisory board invites customers to participate in ESG policy, and will garner diverse input.

Ensure that all employees are on board with the strategy. Sales teams, bid management teams, and service and support teams also need to be knowledgeable about ESG trends in their marketplaces, and the company’s sustainability measures, to prepare them for client dialogue around the subject. “Ensure you make this part of your company culture, and not a ‘nice to have’,” adds Glanard.

Sustainability accreditations can be a powerful way to promote ESG commitments. Our research shows that 57% of businesses have pursued an environmental accreditation that was not a regulatory requirement, while 36% have voluntarily joined an environmentally focused membership organisation, underlining the goodwill value of advertising sustainable business practices.

The leadership challenge

The power of environmental performance to attract customers can’t be overlooked. Progressive corporates looking to monitor and tackle their Scope 3 emissions – greenhouse gases emitted in your value chain as a result of activities from assets not owned or controlled directly by you – require suppliers to meet environmental and sustainability standards.

B2B leaders recognise the need to take action. Some 12% of the organisations we surveyed claim to be carbon neutral, and a further 51% plan to be so by 2030. “The majority of respondents are pursuing a climate and emissions reduction plan aligned with avoiding 2°C of global warming,” says Simon Brown, Partner at Positive Momentum. “Half of companies responding have a far more ambitious plan, linked to a 1.5°C warming relative to 1990 levels – the Paris Agreement aligned target.”

Businesses should be able to prove to customers that they can help them de-risk their supply chain, by demonstrating that they are a sustainable organisation. By taking action now, organisations can achieve first mover competitive advantage. If they wait, they will lose customers, both existing and potential, who require a greater ESG commitment from their suppliers.