Applus+ joined PwC, Naturgy and Endesa for a roundtable discussion, together with El Confidencial newspaper, to discuss how companies contribute to the improvement of the environmental, social and governance indicators (ESG). The conclusions were definitive: “It is essential to integrate ESG standards into company strategies right now”.
It was agreed by all the speakers at the event that ESG has become increasingly important in Spanish society. Present at the discussion were Teresa Sanefliu, President of Internal Quality, H&S and Innovation at Applus+; Marga de Rosselló, Director of Sustainability and Climate Change at PwC Spain; Nuria Rodríguez Peinado, Director of Environment and CSR at Naturgy and Angel Fraile Coracho, Head of Sustainability Planning and Stakeholder Engagement at Endesa Iberia.
All the speakers noted that the European Union is the world leader in advancing sustainability. They all agreed that the European regulatory framework will accelerate the process of the adoption of ESG corporate criteria in the near future but “in Spain, progress is being made at double the speed, with large companies being better prepared than the rest”. Nevertheless, the speakers also agreed that authorities were asking for a degree of maturity that the sector does not yet have. The pace required by the regulations is too fast and SMEs are struggling to adapt. This is especially the case in the economies of countries like Spain where 90% of businesses are small or medium in size.
Another distinctive feature of the Spanish economy is a lack of domestic clients. The event speakers indicated that, compared to Northern Europe, we do not have nearly as many users who are willing to pay a premium to ESG-committed companies. They were, however, self-critical on this subject; they believe that companies should be able to demonstrate the importance of what they are doing and why.
Even so, the participants agreed that significant progress had been made and, in the current sustainability landscape, Spain is setting an example as a driving force for change. According to PwC, the consultancy firm which has helped companies implement this new strategy, “in Spain [sustainability] has always been important and it has already received significant attention from companies such as Applus+ etc. However, it’s the investors that have instigated the greatest change and set things in motion”.
The speakers pointed out that ESG integration does not only consist of risk management but also the identification of new opportunities. Improving sustainability brings “competitive advantages in both the medium and long term”. ESG strategies must be embedded across whole companies and integrated into truly sustainable business plans, with the necessary means provided to deploy them. And of course, performances must be monitored, in order to keep improving.
Within companies, ESG commitments and actions should come from above, at the CEO and board level, descending down through all lines of business. Governance from the top is essential to drive progress and ensure consistency in execution. “It is so important that words are aligned with real actions”, said the event speakers. This strategy allows all stakeholders to be considered, including those not involved in purely financial strategies. Based on stakeholder concerns, businesses should establish a materiality framework to prioritise the most important issues, which may not always be entirely financial.
It was unanimously agreed that the greatest pending issue was the homogenisation of all the information and the indicators to measure the progress of actions carried out, in order to demonstrate, with evidence, that ESG commitments have been adopted. The lack of a homogeneous system makes comparisons difficult, even between companies in the same sector. Europe is working to establish unique criteria and to bring sustainability closer to financial systems in terms of rigour and comparability.
Partnerships are key to ESG success. The event participants recognised that “the obstacles are enormous, with such depth and dimension, that they must be faced together, or they will be difficult to overcome. Companies in the sector have to work together more in order to face the challenges of the future”. As such, private-private collaboration is as important as public-private collaboration. The participants agreed that if they act in unison, with a common goal, set regulations and an awareness of the real dangers, they will inspire an appetite for collaboration between companies, even competitors, to achieve a shared objective.
Nevertheless, everyone emphasised the necessity of implementing actions to minimise the short-term negative impacts of the drastic measures required in pursuit of sustainability on vulnerable sectors. Furthermore, all were all aware of their share of social responsibility: “A fair transition requires sacrifices and solidarity. There is no turning back from the transition, but we must be aware of the impacts that the process is going to have, so as not to leave anyone behind”.