The past year has seen extraordinary growth and positive developments in environmental, social, and governance (ESG) compliance. One of the most surprising of these is that traditional rivals are now collaborating to meet the challenges posed by ESG risks. These partnerships – among and between industry leaders, countries, and global standard-setting organizations – are the right path forward to achieve the hoped-for consolidation of the current “alphabet-soup” of ESG standards. This blogpost will highlight some of these partnerships – including between Accenture, Microsoft, and Duke Energy to develop a technology-based solution to address methane emissions – and how they bode well for the future of ESG regulatory compliance.
The broad and complex nature of ESG makes it uniquely suited to collaboration. Environmental change, social responsibility, and corporate governance impact every industry, jurisdiction, and organization in a multitude of ways. Working together helps these entities pool resources, address various stakeholders’ demands, and meet internal and external ESG targets more quickly, efficiently, and cost-effectively. In particular, these alliances may support technological innovation around ESG, influence conversations with regulators vis-à-vis optimal and achievable ESG standards and metrics, and promote information-sharing on ESG best practices. Additional benefits may also include improved corporate reputations and increased access to capital.
Examples of Collaborations
Accenture and other global organizations across numerous industries have partnered to monitor greenhouse gas emissions (GHG), develop ESG standards and investment opportunities, accelerate climate action through new technologies, and facilitate diversity, equity, and inclusion (DEI) in the workforce.
- February 2021: German chemical company BASF has partnered with Siemens Energy to accelerate commercial implementation of new technologies designed to lower GHG.
- August 2021: Accenture is working with Duke Energy and Microsoft to develop a solution utilizing artificial intelligence (AI), cloud computing, and satellite data, to monitor the methane emissions of natural gas distribution systems.1
- September 2021: Accenture and Salesforce have teamed with Mastercard to track and analyze carbon emissions along the value chain in order to help Mastercard achieve its target to reduce GHG by 20%.2
- January 2022: Nineteen U.S. and Canadian banks, along with the Risk Management Association (RMA), have formed the RMA Climate Risk Consortium to develop standards for banks to incorporate climate risk management within their operations.
In addition, several inter- and intra-governmental collaborations, including with industry, have recently emerged, particularly from COP26, the 26th United Nations Climate Change Conference of the Parties held in Scotland from October to November 2021.
- July 2019: The U.S. Congressional Black Caucus (CBC) launched an initiative to bring together the technology, education, nonprofit, and public sectors to increase African American inclusion in the technology industry. During a conference on the impact of AI – co-hosted by the Information Technology Industry Council and including Accenture Federal Service’s Chief Technology Officer and Google’s Directory of Strategy, Cloud, & AI – topics included the societal and ethical implications of AI and the importance of using it responsibly.3
- November 2021: At COP26, several collaborations were announced including (a) China and the U.S. working together to cut GHG over the next decade, (b) 100+ countries, including the U.S. and the EU, agreeing to cut emissions of methane by 30% by 2030, (c) 100+ countries, including Brazil, Canada, China, Indonesia, Russia, the U.K., and the U.S. agreeing to end and reverse deforestation by 2030, and (d) more than 40 developed and developing countries pledging to phase out coal by 2040.4
- November 2021: The U.K.’s Financial Conduct Authority (FCA) and the City of London Corporation launched a second phase of their Digital Sandbox and invited 12 organizations to test and develop new products and services to aid the transition to a net zero economy.
- January 2022: The U.S. Department of Labor and Equal Employment Opportunity Commission created a Hiring Initiative to Reimagine Equity (HIRE) with the goal to expand access to good jobs for underrepresented communities.
Finally, international standard-setting organizations are cooperating to develop a single set of globally accepted sustainability disclosure standards, among other ESG undertakings.5
- June 2021: The Value Reporting Foundation (VRF) – a global nonprofit created to help businesses and investors understand enterprise value – wrote a letter to the U.S. Securities and Exchange Commission outlining VRF’s support for efforts to build alignment in the ESG reporting landscape.
- September 2021: The Climate Disclosure Standards Board (CDSB) – an international consortium of business and environmental NGOs – released its Biodiversity Application Guidance to support organizations in preparing high-quality biodiversity-related financial disclosures.
- October 2021: The Task Force on Climate-related Financial Disclosures (TCFD) – created by the Financial Stability Board and consisting of 32 members from the G20 (a platform connecting the world’s major developed and emerging economies) – released its 2021 Status Report, which revealed that (a) more than 1,000 new organizations support the TCFD recommendations, bringing the total to over 2,600 organizations in 89 countries and jurisdictions, and (b) for the first time, over 50% of companies reviewed disclosed their climate-related risks and opportunities.
- November 2021: During COP26, the International Financial Reporting Standard (IFRS) Foundation – a global nonprofit responsible for developing a single set of high-quality global accounting and sustainability disclosure standards – announced the formation of the International Sustainability Standards Board and the publication of two prototype ESG disclosure requirements.
The diversity and wide range of the above-listed alliances around ESG demonstrates the importance, indeed the necessity, of collaborating to meet, if not exceed, ESG goals. Our key takeaways from the partnerships featured in this blogpost include:
1. Cooperation encourages organizations to re-imagine processes and standards
a. By connecting with regulators to inform policy decisions, the RMA Climate Risk Consortium aims to develop consistent climate risk management taxonomies, frameworks, and standards for the financial industry.
b. By aligning with key players in the technology industry, the CBC highlights fundamental inclusivity issues within the industry while also creating a joint plan to use AI responsibly.
c. By encouraging the private sector to rethink its hiring practices, the DOL and EEOC work to ensure equality in employment opportunities.
2. Achieving sustainability goals is an integral part of operations, not just a one-off practice
a. The partnership between Accenture, Duke Energy, and Microsoft demonstrates how technology and innovation – elements central to the daily operations of each organization – can address sustainability challenges on an on-going basis.
b. Similarly, the collaboration between Accenture, Salesforce, and Mastercard shows the benefits of integrating ESG-driven infrastructure and processes into day-to-day business operations.
3. Teaming helps organizations play to their strengths and benefit from others
a. Siemens noted that joining forces with BASF aided the company in implementing new technologies and shaping energy transition in its industry. BASF also acknowledged that it “stand[s] to benefit from the expertise of a first-class partner.”
b. By creating a sustainability Digital Sandbox, the FCA aims to promote innovation in sustainable finance, while participating organizations benefit from increased access to regulatory resources when developing sustainable products.
To meet current and future ESG regulatory requirements, unlikely partnerships may become the norm among industry participants, governments, and international standard-setting nonprofits. Indeed, 2021 has revealed that traditional competitors and opposing stakeholders are coming together to collaborate on proposed ESG rules and standards, technological advancements for data collection and analysis, and business operational adjustments. Organizations that do not participate in these mutually beneficial alliances may miss out on significant ESG opportunities.