How Can Companies Lead Sustainably in Uncertain Times?

The global landscape is experiencing uncertain times, a world in transformation with growing geopolitical crises, inflationary pressures, climate disasters, and a lack of consensus on how to address present and future challenges, given the antagonistic visions among the leaders of the great powers. 

Today more than ever, leadership on ethical, climate, social, and sustainability issues require different skills, attitudes, pronouncements, and decisions. We see different reactions where: i) for some this is a very difficult test, they lose their control and cannot clearly communicate their position or their intention, they are ambiguous, and generate confusion; ii) others have a clear and long-term vision, they are willing to change strategies and adapt, but without losing focus on a broader horizon, iii) others are decisive and forceful without moving an inch, they are not flexible and do not want to adapt to a situation that they consider short-term.

Now, financial leaders are also wondering if it is relevant to continue promoting a robust sustainability agenda, with the use of new tools and methodologies, with concrete actions and medium- and long-term goals. They wonder if it is possible to postpone progress and achievements in the climate and social agenda, if trends and the slowdown of important global initiatives and commitments should continue. 

Under this scenario, it is possible to observe that the perspectives of institutional investors and various executives of the financial system and the real economy seem to be clear, with a common and defining approach where the priority continues to be value creation in the long-term, not only for shareholders but also for stakeholders. Then the key will be to continue promoting innovative sustainability strategies that are a fundamental part of the corporate and business strategy. 

Their response can take various forms, but priority actions can be focused on: 

• The digital transition – Addressing the challenges imposed by new technologies, cybersecurity, data protection, online business transactions, artificial intelligence, or nano technologies, which is a current challenge for financial and business leaders, in both the present context and in the future.

• Social development – Taking decisive action that reduces growing inequalities is necessary today more than ever. The confluence of political changes and environmental crises poses great challenges to leadership and destabilizes our lives and those of our stakeholders. 

• Transparency and accountability – Understanding new reporting requirements and being prepared for the growing demand for sustainability-related financial disclosure from investors, local and foreign regulators. ESG data is not just metrics or indicators, key users need to know the transition plans and resilience of the business. Informed decision-making, with or without regulation, becomes crucial.

•  Risk management for climate change impacts – In this case, no matter where the assets or businesses are located, it will be necessary to protect the company's operation from the financial implications caused by present and future climate impacts.

  • Physical and transition risks – Some economic sectors and certain industries will be hit harder than others. Companies that recognize the specific risks they may face, such as stranded assets, new regulation, and changes in consumer behavior, develop corporate strategies focused on improving materiality analysis with a forward-looking view, using new models and tools to better manage climate risks and opportunities under different scenarios.

• Sustainable investment and financing committed to long-term value creation – Capital allocation is conditional on knowing more about ESG performance, with investors ensuring the viability of the business model if its organizational culture is in force, if it is innovative, or if it will be able to maintain its competitiveness and face changes in demand, and whether the company will make decisions to maximize existing opportunities.

• Sustainable development and business growth – Staying optimistic and knowing how to adapt in the race for sustainability requires planning, long-term vision, technology, and achievable goals. Companies that are ahead of their peers and lead the environmental, social, and governance performance of their industry will always be winners, more competitive, and have increasing organizational value, even in uncertain times.

In uncertain times, business as usual is not an option. Working hard on the sustainable track is key if we see beyond our eyes