15: ESG is a business issue

Anna-Marie Slot:

 Hello, and welcome to the latest episode of 30 for Net Zero 30. Where we're speaking with 30 change makers around the globe on steps to take now in order to reach 2030 goals, I'm Anna-Marie Slot, Global Sustainability, ESG partner at Ashurst. Today we are joined by Sallie Pilot, Director and Chief Insight and Engagement Officer at Black Sun PLC. Sallie has close to three decades of experience putting insights into practice for organizations. Thank you so much for joining us today, Sallie. Maybe you could start off with telling us a little bit about your background and how you ended up working with Black Sun.

Sallie Pilot :

 Super. Well Anna-Marie, thanks so much for having me today. It's really great pleasure to be on the show with you. So thank you. Just to give you a little bit of background on me, as you mentioned at the beginning I work for Black Sun PLC. It's a global stakeholder communications and engagement company. I've spent the majority actually of my career there for the past 25 years. So pretty much my entire career there. And during that time we've evolved and changed the business over time to really meet the needs of our clients. So I'm really privileged to work for a variety of companies across sectors.

Sallie Pilot :

 Most of those companies are listed so that they need to meet the scrutiny of investors, regulators, and wider stakeholders in the way they communicate and disclose around their stories. And most of them have quite complex global operations. So we work with the likes of Tesco, Burberry, Schroeders, NetWest, Aston Martin, Croda just to name a few. And what's really common about all of them is they really see communications and transparency and disclosure as a real opportunity and driver of change and long-term performance. So it's a great privilege to help them with their communications and how they communicate authentically with all of their various stakeholders.

Sallie Pilot :

 Just in terms of my role there I've got the best job in the world, I think, because I get the opportunity to look at insight and very much the trends that are impacting our clients. We do a lot of research into changing behavior, transparency, and how companies are improving engagement between business and key stakeholders. And then the other part of my role, I get to engage with outside stakeholders. So I really try to understand the landscape, what investors are demanding, what regulators are demanding, how that world is changing and how that might impact the corporates that we work with moving forward. So really exciting times.

Anna-Marie Slot:

 So sounds like a great remit there, Sallie. And clearly you've probably been seeing the evolution of ESG. Could you just let us know over the last few years in particular, have you seen a change around how people are approaching that.

Sallie Pilot :

 A massive change, Anna-Marie. Actually really significant. So I guess from our perspective there are five big trends that I think are really driving this that have become quite enhanced or accelerated in the last two years since COVID hit. And I say often to clients and anyone who will listen to me that the silver lining of COVID is that we've got these issues onto the agenda as real business issues not just sustainability issues. So I think there's a couple of things really happening. There's obviously the rise of stakeholder capitalism and the wider and understanding, I think, by business that profits are really the result of the strength of their relationship with their various stakeholder groups. And this is more and more important moving forward.

Sallie Pilot :

 The idea that sustainability and sustainable business is on the top of investors agendas. So there's a lot of change being driven that way which is driving the corporates agenda. And I think that the fast pace of regulation and legislation around this area. And the thing I wanted to highlight here is not just corporates, but it's also investors that are under scrutiny and changing regulation legislation in terms of their investments and green deals and just transition. So that's really important because of the impact that that has on the information that they want from corporates.

Sallie Pilot :

 And then of course we've had an accelerated digital transformation over the last few years. And then I think finally but almost most importantly is the realization of the commercial impact, particularly when it comes to different generations. And I'm speaking mostly of millennials here. And I think that this idea that millennials really want to work for companies that have a purpose and are making a difference and are really trying to tackle these issues. So we find with our clients that really the driver is a change or all those things that I talked about, but often it's their own employees that they're having to be accountable to, to be part of the solution rather than part of the problem that's driving a lot of the change internally. Which I think is super exciting.

Anna-Marie Slot:

 Yeah, really interesting. I mean you highlight the circularity of the influence on companies really from stakeholder perspective, from investor perspective, from employee perspective, from regulatory perspective. It's that whole almost circle around the company that seems to have evolved in the last couple of years. You guys have done a lot of work obviously with listed companies here at the front end of a lot of that regulatory work. What is it that you find to be the most useful there? Where are you seeing best-in-class in that work from a company perspective? What are the actions that those guys are taking?

Sallie Pilot :

 Okay. That's a really good question. I think what I'd like to share overall is I think the conversation has completely changed in the last few years with corporates. So a few years ago I used to ask my clients every time I met with them, "Have you had any questions from investors around ESG or sustainability? You had any engagement?" And the answer would always be a flat, no. Or maybe it came up in conversation. Now without a doubt every conversation our clients are having with investors, sustainability is upfront on the agenda and very focused.

Sallie Pilot :

 The other conversation that's changing very much is internally in corporates often these were isolated conversations we were having with one department maybe a sustainability team, or one person and a finance team or whatever. Now everybody is part of this conversation. So I think that's hugely exciting. That the challenge though is that everybody understands the why this is important, but the what do we do and how do we do it is where we're finding corporates are really struggling. So I think that's really exciting. And what we're seeing is that in a lot of cases this is a journey. I know that's a cliche and people use that a lot. But I think that what we're seeing in terms of the companies that are making the most progress around these issues are really understanding that sustainability issues are just business issues.

Sallie Pilot :

 My long held belief is that companies shouldn't have a sustainability strategy and a corporate strategy, they should just have one strategy which is a sustainable business strategy. And I think more and more companies are moving to that acknowledgement the challenge is okay, great but how do we get there? That's easy to save but very difficult to do. So one of the things that I've seen work really well from a corporate perspective is there needs to be a champion. There needs to be either a C-suite or a board level or somebody very influential within the organization that understands this, owns this, and champions it throughout the organization to really drive it strategically.

Sallie Pilot :

 And then I think for companies there's a number of steps really that take place from my vantage point in terms of what we see and the transformation that we see happening internally. So often it's understanding the business model, so unpicking that business model. And over the last two years, I mean, companies have had to really look hard at their business models. And I think that there's a lot of reviews going on right now. So companies can understand how they build a sustainable business model for the future. So one that delivers of course financial returns for the short and long-term, but in a way that generates value for society and also is very conscious of the environmental constraints that we're all living under. So there's a lot of thinking around business models and what should the business model of the future be.

Sallie Pilot :

 The next thing is really integrating that into one strategy. So I said, we should have a corporate strategy not a separate sustainability strategy. But if these things are embedded into the corporate strategy, it means it's embedded into the core activities of the organization and then it can be plunged through all of the operations. So really embedded in the thinking. Part of that is about risk management and understanding that this is a risk that needs to be managed. But the flip side of that it's also an opportunity, but really getting the risk teams involved. So through all of this, what we're seeing is it's moving from an isolated department of sustainability team to actually bringing in, you've got to bring in your strategy team, you've got to bring in your risk team, you've got to bring in your HR team, all the people that are dealing with the different issues and really have a collective view on what you're doing as a business.

Sallie Pilot :

 And then of course importantly you need to measure it. And there's that old adage, what gets measured gets managed. And I think that's very fair. And we see that very significantly in the work that we do for clients. And then also, I think the real power of reporting is what gets reported gets measured. So often we use reporting as a tool with our clients to help them engage in the debate internally because reporting often throws up key requirements that companies have to report against. And then often these can stimulate a conversation internally about, so what is our approach? What are we doing? How are we progressing against it? What commitments can we make? Those sorts of conversations, so I think that's really exciting.

Sallie Pilot :

 The other aspect I think that is really important is how it's integrated into governance structure. So I talked about the clear tone from the top, but we also need that oversight from the board and we need structures and processes around it to ensure that it's integrated across the business. And I think more and more important is that link to remuneration. And not just executive remuneration which I know is always top of mind, but how does that link through to everybody's remuneration into in the business? Right through to all the employees so everybody feels like they're aligned against consistent goals. So those are some of the steps that we see taking place internally.

Sallie Pilot :

 For a company that is just starting out, we really work with them to really understand so what are the trends in their marketplace? So what's impacting whether it's their sector, their business, whether that's environmental or social issues. What does the landscape look like out there? Then we go through a process of really the understanding what are the key issues on their stakeholder agendas and why are they important. And then also doing an inflection of that company. So what are their impacts? What do they control? What do they not control? What are they good at? What are they not good at? And really trying to spend a lot of time consolidating all of that information internally to identify the key issues that they can focus on as an organization. And then usually that's a good starting point.

Anna-Marie Slot:

 All very good points. I think especially the network going from a single person trying to champion this somewhere in the organization to really having touch points across all of the essential working groups. And have that result in transparency and commitment and disclosure that creates that virtuous circle back to doing more and better. I have to ask because we always ask, how about yourself? Are you making any changes? Are you committing to anything in the near, the middle term around your own commitments around net zero?

Sallie Pilot :

 Yeah, it's a good question. I mean, I think we all have a part to play. I think it's hard as an individual to understand how the little things we can do can make a difference. I mean there's two things, I guess, from a personal perspective. As I said I've got a great job, so I've got the opportunity to be involved in this from across a lot of clients. The other thing that I get involved in in a personal capacity on behalf of the business but very much pursuing my interest is helping other organizations.

Sallie Pilot :

 So currently we're working with Accounting for Sustainable and Deloitte on launching a finance leader sustainability barometer to gauge where finance CFOs and chief investment officers are around this issue of sustainability. And attitudes and perceptions and where the state of play is. So we're hoping that one day will be an Edelman Trust type Barometer of what's going on, and the reason for that is to really drive change in action. So that's something that we're doing. But on a personal basis I have a daughter, we're all influenced by our children these days. And my eldest daughter is actually vegan, so although I've tried to be vegan over the last few years I've only managed to be vegetarian but we're very conscious about that impact that we can have.

Sallie Pilot :

 We've been an early adopter of electric vehicle, which I think me I'm laughing right now with the fuel crisis that everybody's going through right now. So we're in a very good position there. And on a day to day basis, we look at our energy providers and those sorts of things and where possible. I mean we do simple things like walk to school and walk to work or take public transportation just to reduce the impact as much as possible. So, I mean, those are some of the small things that I guess I'm doing on a personal basis.

Anna-Marie Slot:

 No. It sounds like add those all up together and you get a lot of shift, a lot of movement. Looking at all the different things that you're doing, looking at all your work with companies and understanding how they're moving, is there anything that you think if this one thing happened the pace of change would accelerate. I mean obviously it's accelerating year on year, but to really game shift into being able to deliver in a meaningful way on the 2030 commitments that people are making. Any ideas around that?

Sallie Pilot :

 Look. Yeah, I think so. I think what I've learned over the years of doing what I do and in the conversations that I have on a daily basis is that the importance of dialogue and engagement and understanding how everybody fits together. We're all intrinsically linked. All business are intrinsically linked whether they're a supplier or a customer or a investor. I mean there's a massive value chain going on here. And I think the more and more that we can open up the dialogue between different aspects of our own value chains in the organizations that we work for so that we can align our thinking and support one another towards the 2030 goals or 2050 goals or whatever they are, I think the faster progress that we will make.

Sallie Pilot :

 So move from seeing as this an isolated silo activity with our own organization, but moving towards more of a collaboration across value chains I think is really important. So I'm a big advocate of open and honest dialogue and engagement, also authentic conversations. I think that's whether it's a company communicating about what they're doing, some of the challenges, but the opportunities I think that authenticity of communication is really important as well. And I think, look, we're very some really clever people out there, so I think it's about connecting those dots and opening up those conversations. So I think that would really probably help us move a lot faster in tackling a lot of these challenges that we're facing today.

Anna-Marie Slot:

 No. Thanks Sallie. Great insights and a lot to go off of there with all of the advice and suggestions. So I really appreciate you joining today. Thanks so much for your time.

Sallie Pilot :

 No problem. It was a great pleasure. Thank you very much.

Anna-Marie Slot:

Thank you for listening to this podcast. We hope you found it worthwhile. To learn more about the issues we've just covered, please visit ashurst.com/podcasts. This 30 for Net Zero 30 episode is just one small part of our continuing podcast series, ESG Matters @ Ashurst. Make sure you don't miss any of our future episodes by subscribing via Apple Podcasts, Spotify, or wherever you listen to your podcasts. While you're there, you can also listen to our other episodes and leave a rating or review. In the meantime, thanks again for listening and goodbye for now.