ESG as a window to the future

Malta Annual Review 2021

In recent years, sustainability issues such as climate change, modern slavery, and inequality have entered public consciousness like never before. As a result, society has increasing expectations of the role businesses should play in tackling some of the planet’s biggest challenges.

Organisations are expected to not only minimise their negative impacts, but to also contribute positively to both society and the environment. Corporate sustainability is therefore all about creating long-term value by implementing strategies that incorporate environmental, social and governance (ESG) dimensions, in addition to economic ones.

Sustainability is not a new concept and, for many, brings to mind environmental issues like climate change and resource scarcity. While these are an important element of ESG, the term in fact encompasses much more and covers social issues, like a company’s labour practices, talent management, product safety or data security, and governance matters, like board diversity, executive pay and business ethics. ESG reporting, is therefore all about how companies are weighing risks and shaping business strategy within the context of these issues.

Today however, the gap between corporate organisations and investors on sustainability related disclosures is as wide as ever. On the one hand, investors are increasingly seeking to understand a company’s long-term value creation plan and are demanding credible, standardised information for them to assess the long-term risks being faced. On the other hand, many companies, even when they have a good story to tell and robust processes to manage sustainability risks, are not being effective in providing investors with the right information in the right format.

What is clear however is that investors are increasingly aligning their messaging and engagement practices to show that they want ESG-related data to answer critical questions related to risk and strategy. This is because ESG issues are increasingly being seen as a window into the future, with a clear hierarchy emerging.

Leading companies view ESG issues as a business imperative: they manage risks while capitalising on opportunities, including sharing their story and vision for the future, setting themselves up for long-term success and value creation in the process. Laggards, on the other hand, ignore the topic as a whole or still think of ESG as a check-the-box exercise grounded in philanthropic activities.

Our ambition therefore is to assist companies in understanding the implications of ESG on their business and to build trust in the climate transition with a view to accelerate the transformation the world needs.

What we've done

Purpose sits at the heart of our strategy and integrating the fundamentals of ESG into our work is key to helping organisations improve their impact on the environment and society, and to become more resilient, agile and sustainable. In this respect, we’ve launched an ESG platform and committed to upskill our people to build ESG into our client services.

In line with our purpose, we also made a net zero commitment that outlines our journey to reach net zero greenhouse gas emissions by 2030. Our target is to reduce greenhouse gas emissions by 50% in absolute terms from 2019 levels by 2030, in line with a 1.5 degree scenario. In this respect, we are pleased to have announced that in July 2021 our emissions reduction targets were independently validated by the Science Based Targets initiative (SBTi).

Throughout this past year we have been engaging with different local stakeholders including Government, business and social partners to raise awareness on ESG and help our partners with their net zero transformation. Beyond reporting, our role is to help clients manage sustainability risks and opportunities both within the organisation and across the value chain. Here, we get involved in the formulation of their sustainability strategy and the measurement of impacts, including carbon footprint assessments.

Among the various events organised on sustainability, we have been actively engaging in the Malta Sustainability Forum and with other organisations including the Malta Chamber and the Malta Business Bureau.

In order to create the necessary discussion around ESG, we have also been publishing various insights and thought leadership on the topic, ranging from the role of the board in leading the way on ESG, the importance of addressing ESG matters in IPOs, and the regulatory updates in the space, notably the Corporate Sustainability Reporting Directive (CSRD) and Sustainable Finance Disclosure Regulation (SFDR).

The ESG episode of our podcast, PwC's Trend Talks, coming out at the end of November 2021, sheds light on all that is happening in this space and offers a glimpse into the way sustainability will shape the business environment in years to come.