The Future in Focus

Hello, everyone. To all of our listeners worldwide, welcome to LRQA's Future in Focus podcast. My name is Holly Wild. I am the Global External Communications Manager for LRQA. And it is my pleasure to host this podcast episode for you today, entitled ‘The ‘E’ in ESG’. But the real star of the show today is one of my colleagues here at LRQA, Marcela Romero Marino.

Marcela, it's so good to have you here today. How are you doing?

Hi Holly, I'm doing very well, and thank you for having me in this podcast.

No problem at all. No problem. So, I believe it's your first time on this particular podcast, so could I ask you to briefly introduce yourself to our listeners, like what's your role and where in the world are you speaking to us from today?

Yes, of course. I am part of the advisory team. I have the privilege to lead the LATAM consulting team. I'm based in Bogota, Colombia, beautiful city, located in the mountains, the Andes. We have a team of 20 people working with clients in all industries and, every type of ESG consulting, project.

Wonderful. And I have a fantastic mental image of where you're located in the world now. It sounds wonderful. So thank you, Marcela, again for joining us. Now let's get down to business. I want to provide first a little bit of context for our audience today. Our listeners may already be aware that we have recently launched our very own internal sustainability strategy called Our Planet, Our Plan.

As a quick recap, for those of you who haven't heard of it before, Our Planet, Our Plan sets out LRQA's environmental, social and governance ambitions, otherwise known as EQ. SG, all in the aim of delivering a positive impact for our clients, colleagues, suppliers, communities, and our planet. The plan stretches over seven years and is organized into seven commitments.

That's safety, community, equity, inclusivity, education, governance, and environment. Through our Future in Focus podcast channel. We'll be interviewing a technical expert for each of those commitments with, yes, you've guessed it, environment being the topic for today. Now, we're really lucky because Marcela is highly experienced in this particular field.

So as I ask a few questions today, we're going to receive some personal insight and professional guidance for global businesses. But let's get started. Before recording today, I asked Marcela to think of a bit of an introductory story or anecdote. I asked for something that's either stuck with you or caught your attention recently, or just a comment on the industry or marketplace in general under the environmental theme.

So Marcela, over to you, what would you like to share with our listeners today?

Well, I think that the ESG industry, has been growing like significantly. And, one signal of that is that, for example, I came, to LRQA to acquisitions to companies elevate the recently acquired company. And before that Elevate at quiet, small consulting firm that, I was part of in the five past years,

I went through two acquisitions and I am seeing that in the field, big movements, big acquisitions, have been happening because ESG, it's very important topic now for, private sector. And then, the demand of consulting services, advisory services, analytics assessments, that we offer, at LRQA is also increasing.

So that's very important because it demonstrates that companies are increasingly interested in addressing ESG risks and sustainability impacts.

Thanks, Marcela. That's great. Not only to find out your route to LRQA, but you're right that ESG assurance is a real growth area. So, so thank you for that opening story. Now we're going to be talking about environmental sustainability. So the E in ESG quite specifically. And people may first think about individual countries and what they are doing to reduce national emissions led by governments. But actually, businesses in the private sector have a huge role to play. Can you summarise what that role is for our listeners and why that's the case?

Yes, public policy and government, of course, are key to achieve a low carbon economy. But it is true that business. Emissions reduction efforts are the fundamental component of this transition to a low carbon economy. It is at the private sector level that decarbonization will happen and, of course, motivated by public policy and other government incentives, but without any regulatory or policy incentives.

It also should happen. I mean, there is no possibility of a low carbon economy if private sector doesn't commit with, drastic emission reductions. So, only, by having a committed private sector is that we as humanity will be able to achieve, the Paris Agreement objectives. Like, I don't know, maybe I don't know if, our audience knows that only 100 companies around the world are responsible for 71 percent of the global GHG emissions, you know, 100 companies have 71 percent of the global emissions that are that are causing, global warming. So, and this is based on a report of the carbon disclosure project. That is a very recognized and trusted, organization. So, this demonstrate the role of private sector in achieving the transition and the need of private sector to commit to ambitious objectives regarding emissions.

Wow, what an extraordinary statistic and thank you for sharing it because it's really, painted a very vivid picture there and I love your phrase about there needing to be a committed private sector. I think that's a really good use of language there. So moving on. At the time of recording this episode, COP28 is fast approaching, and there's so much media scrutiny and debate over progress made on environmental goals, or lack thereof. But let me start by asking what positive momentum you have seen in corporate environmentalism?

Yes, maybe in the past four or five years, I've seen more awareness about the impacts of climate change on business in the short and the medium term. We usually say that businesses are only interested in short term results, right?

Short term financial metrics. But I have seen more and more businesses also interested in understanding What about the impacts of climate change, but also climate management and carbon management in there? Medium and long term performance, and this is might be driven by some regulatory signals, like a lot of new regulations around the world, pushing companies to commit to environmental and social goals, but also investors requiring more and more information about, environmental commitments and goals and, Performance to their portfolio companies.

It is clear that there is an increasing number of companies. Paying more attention to emissions reductions, but also to understand how they need to adapt their businesses and their value chains, their supply chains to the impacts of climate change. It is a fact that climate change is already happening and it is having significant impacts.

All over the world, and of course, it's having impacts in the way businesses do their business. So I think that there is a positive feedback between this better understanding of how climate will impact business and the commitment. Of the private sector to reduce emissions, so we avoid the worst climate scenario if we don't reduce our emissions.

So, I think that a lot of companies are finally realizing that investing on emissions mitigations. programs, it is a very good investment and also they are aware of the fact that it is not something that they do because they want to be like a good, corporate citizen and help others, but because also, through these type of programmes, they are also helping their own business long term sustainability.

Thanks, Marcela. Really good insight there, actually. And I feel like you work with global clients all day, every day. So you really are close to those trends. So thank you for sharing them with us. That shift to long-term thinking and understanding that there's opportunity in managing climate risk for the business themselves. That's really interesting to hear. Okay so it's really important then to also provide a balanced view for our, for our listeners today. So where do you think corporations are falling short?

Yes, I think that there are very important global companies and regional companies committing with the emissions reduction, but most companies really fall short at setting these ambitious targets. I mean, a lot of companies. Are setting like what they believe is possible, but they are not really addressing what is necessary to really achieve, the Paris Agreement objectives.

And the reality is that we are not achieving the parties agreement objectives. We are far from those, objectives. We need companies to really commit to ambitious targets, to ambitious goals regarding emissions reduction. We also need industry wide agreements, no environmental challenge or social challenge is solved by doing individual efforts, individual at our personal level, but also at company level, we need really industry wide agreements addressing, for example, supply chain, emissions companies, global companies share supply chains all over the world and if they. Partner to help these supply chains, the suppliers in their supply chains, for example, it is likely possible that we will have a better, output than doing isolated efforts company by company.

So, I really think that we need to be more ambitious. Companies need to be more ambitious at setting, scope one, two, and three reduction targets. And here, maybe, in the scope three emissions is where companies are maybe struggling the more because, of course, they don't, they have a limited, sometimes limited leverage on their scope three. So there we are very short on the goals.

Okay, so we've covered, you know, some of the areas that corporations are falling short and why that might be. So, what's the most common type of support that companies need? What are you seeing in your experience?

Yes, because of our, portfolio of services, I see that companies need a lot of support regarding the scope tree management, like, especially, when it comes to their supply chains, companies have global companies, regional companies have very complex.

Supply chains and they lack the data to understand the performance of their supply chains. They don't have even the visibility of who is part of that supply chain. So they, they need a lot of support to calculate and manage and find solutions to address scope tree emissions from data collection to capacity building, including also how to implement innovative instruments to promote carbon reduction in their key suppliers. For example, supply chain finance instruments. So I think that their scope tree and supply chain are something that companies need or are requesting more support and needing more support.

Interesting, data in particular, you mentioned there is a huge topic so that's perhaps the topic for another episode of our podcast. Back to, I guess, the net zero journey that companies are on. So the journey to net zero carbon emissions is a complex one, I'm sure you'll agree, but can I ask how confident you are that we can actually build a marketplace that is at least committed to that journey?

I am positive person by nature, so I want to believe that we will be able as humanity to really do the transition to a lower carbon economy and, that we will achieve the net zero goal. But it is true that there are huge challenges to do, to do that. The first challenge is, of course, the. cost of doing the transition companies need companies, countries, communities, cities all over the world need to do huge investments to ensure that we do the transition needed to reduce, the emissions, but also to offset.

The remaining emissions, so the economic cost, it's one of the of the barriers and that's why in the COP 28, one of the key topics to be discussed is how to keep financing, channelling the resources, to finance the transition to a low carbon, economy. I think that there is a second challenge, the technological challenge.

We don't have the technological solutions to ensure that we move the world with clean energy at an accessible cost, and there are also important limitations to our capacity to ensure this needs zero economy. A third challenge. I think that is very important. It's also the supply chain constraints. To ensure the transition to a low carbon economy and to achieve net zero, we need to mine minerals.

We need to ensure that we have the manufacturing facilities producing all the technology, all the equipment, we need to, to, To transition to this low carbon economy and that we have the workforce trained to do so. So I think that supply chain constraints are also very important here. And the last issue, and maybe something that people do not see all the time, and it is something related to human rights issues when we say that we need, for example, the minerals to ensure that we have solar panels and that we have the wind, energy generation.

We are also maybe forgetting that we have significant human rights issues in the minerals supply chains, for example, forced labour, child labour in the prediction, for example, of cobalt. so. We need also to, to consider the challenges regarding the human rights situation all over the world. Also, for example, when we say we are committed to zero deforestation, we need to consider what, what impact that can have in the small producers, small farmers in the Latin American countries, for example.

So there are, very important human rights issues tied to our environmental goals that we also need to consider and that are a pretty important challenge when we talk about net zero and the just transition.

Wow, thank you. I'm really getting the picture that everything's connected. So even though this episode is called the E and ESG, perhaps actually that's impossible. Everything is interconnected with the S, with the G. So thank you for making that clear and explaining all the different facets to, the net zero journey. That's more or less the end of our questions today, but having described all of those different components for businesses to consider, could I ask you just to finish by summarizing some of the most important or main barriers and opportunities, that you would like businesses to keep front of mind?

Yes, a key barrier, it's a political, maybe political willingness to do this. We need really to, to do what is necessary to ensure the, the net zero and the transition to a low carbon economy. And, even if private sector has a, a key role to achieve that, we also need the commitment of governments and states all over the world to implement the public policy that will allow and motivate private sector to do it.

But even in the absence of those policies, we really need to increase the awareness of public policy. Business leaders, to understand that there is no future for private sector if we don't address climate change. And if we don't really invest time and resources to reduce the emissions all over the world and across our value chains, as I mentioned, some challenges are there related to the cost, the technological, challenges, supply chain constraints, human rights issues, but we need, to do it if we want to have a chance as humanity. so yes, the main barrier is. In the mind of people that we are not able to do it and we are able to do it and we need to commit to do it.

If we want to a chance to survive. but there are also a lot of opportunities regarding net zero. I think that this whole transition to a low carbon economy, it's a huge opportunity for inclusion, inclusion, job creation, development of new markets and new industries. So we need also to, to think about those opportunities for the private sector and Yes, take advantage also of the opportunities.

Wonderful. Marcela, truly, thank you so much. you speak with such knowledge and passion on this topic and it really makes my job easy in connecting our listeners with really valuable, expert insight. So I'm sure you've inspired many today. and thank you again so much for your time. Thank you, Holly.

Have a good day. And finally, just a reminder to our listeners that you can learn more about Our Planet, Our Plan on the LRQA website and see our digital dashboard, which tracks our progress against all seven pillars. You've been listening to the LRQA Future in Focus podcast.

Thanks so much for giving us your time and we hope to see you soon.