Morningstar’s Sustainable Investing Summit: Three Corporate Sustainability Trends

1. Scope 3 emissions are keeping corporate strategists up at night.

“Companies can bet that excluding scope 3 from their decarbonization program and disclosure will be reflected by financial analysts—and lead to higher cost of capital,” said Barbara Lambotte of Morningstar Sustainalytics.

Salesforce’s Steffen Müller summarized his company’s six-pillar strategy for carbon reduction, one of which focuses on emissions reduction in the supply chain. Stefan Eggers of BOAL Group added that 90% of his firm’s’ emissions come from scope 3, and that sustainability teams must understand the emissions of their entire value chain.

Lambotte pointed out that investors and banks have set carbon reduction targets that require publicly traded companies to establish KPIs toward their decarbonization plans. There was broad agreement that supply chain management is a critical element of achieving emissions reductions targets.

“Social impact is about designing, developing, and commercializing products that have a positive impact on people’s lives,” said UCB’s Veronique Toully.

Regardless of industry, aligning social impact efforts with business operations creates the largest impact. For example, Claudia Belli of BNP Paribas discussed how the bank has prioritized increased lending to underrepresented and at-risk groups, such as female-founded companies and student borrowers, to help increase their access to available capital to achieve outcomes. Jeroen Maas discussed how Philips has created a digital healthcare platform to provide services in African countries where access to these resources is challenging.

Toully discussed how UCB launched a program to provide access to medication in underserved areas. All panelists also agreed that measuring social impact efforts is essential in building tangible programs.

“A fully integrated sustainability strategy is integral in building brand value and trust with clients and investors,” said Morningstar’s Gabriel Presler.

On the final panel, corporate sustainability leaders discussed a few key challenges and opportunities. One overarching area of priority focused on communicating the improved quality but current realities of key sustainability datasets. Daniella Vega, from Ahold Delhaize, told the story of building tighter relationships with her CFO teams. Wijnand Bruinsma of AkzoNobel NV added that sustainability reporting still needs to improve the standardization of nonfinancial data to use it effectively.

Unibrew’s Henriette Hanne Øllgaard and Presler agreed, noting that their teams are now working cross-functionally to improve the comparability of sustainability data by reporting in line with established industry standards.

Sustainability is viewed as a “must do.” In a recent Morningstar survey, 67% of asset owners responded that ESG considerations have become much more important over the last five years. As the sustainability landscape continues to mature, corporate ESG goals cannot be achieved without integrating sustainability strategies throughout an organization. With growing pressure from investors, regulators, and society at large, firms are accountable for achieving their ESG targets and following through with their stated goals.

• Strong data management and disclosure in line with industry standards will bring improved comparability across datasets.

• Increasing focus on supply chain management and scope 3 emissions is critical to reaching net zero targets.

• Social impact initiatives can positively affect firm strategy and bottom line.

See more on the Sustainable Investing Summit.