As we enter the new year, it is always a healthy exercise to reflect on what seems to be the key variables likely to affect the corporate world in their journey towards becoming more responsible businesses. In the spirit of these Sunday messages (short but hopefully inspirational), I have chosen two key variables where, I believe, most of the corporate focus (especially in Europe) needs to be:

a) Understand the impact of Sustainable Finance
Recent developments in European legislation and the unstoppable engagement of the financial institutions in the process, will definitely put the ESG (Environmental, Social and Governance) agenda at the core of the company’s operations. This is the moment for those companies lagging in terms of Sustainability to finally realize that this is getting serious. It is now down to the real thing: cash and credit. The financial system (where Europe, yet again, is leading the world in terms of Sustainability) has finally got their grips around the issue and put to work all the heavy artillery of their processes and capital – money will flow to companies at different costs and pace, depending on ESG performance.

2022 will certainly stay in history as the year where “the real thing” started to change, where, once and for all, the access to financial credit will include an important variable in the decision-making process: ESG commitment and performance. It will become the key variable (alongside financial performance) in terms of customer segmentation and will no longer be possible for companies to try and access capital (be it financial loans or persuading investors) without a conversation around these issues. The proof that companies are really becoming more “responsible businesses” needs to be there.

As I heard a banker recently saying at a public event: “When analysing my clients, I focus now more on the sustainability report than I do on the annual accounts”. Even if the statement, most likely, is not entirely aligned with the truth, the simple fact that he expressed that sentiment publicly shows how things are changing.

But as we have been defending in the Center this is just the first step. The next move will be around Impact Accounting where we stop talking about financial and non-financial (ESG) measures – they will all be financials since they will all be accounted for. Probably the key variable I will be mentioning in a years’ time when predicting 2023?

b) Understand the search for Talent. 
This has always been a “must-do” for companies to be able to excel, but what needs now to be fully understood by companies is what is really changing in Talent attraction and retention. What are these new generations really looking for? The pandemic has certainly accelerated some of the trends in the labour market (remote work being the most obvious example) but no company can already claim to have understood what the expectation of this “new talent” is, when entering the labour market. 

Something seems to be clear: it will be different and those companies able to show their willingness to adapt will thrive. It is hard to see that many companies still position themselves as if “it will all go away, and things will be back to what they always were”. Well, I suggest they need to make peace with the past and move forward. 

The generations now entering the market have a sensitivity to what is happening around us (Planet and People) that the previous generations did not have. Whilst my generation could say “we did not know what was going on in terms of Planet & People, and even if we knew, it would not affect us” the recent ones “yes, they do know and yes it will affect them”. We need to get to the bottom of this reality to be able to understand why their expectations are different and why their relationship with the labour market is different. In my humble opinion, everything starts there.

When that picture becomes fully clear, then companies will understand that this is much more than simply “more remote work” or a “better work/life balance”. This goes as far as having solid mental health support policies or transparent rules on business rights in the supply chain - just to mention two key issues that will certainly become mainstream in the corporate agenda.

Have a great and impactful ... 2022!

Nuno Moreira da Cruz
Executive Director
Center for Responsible Busienss & Leadership 

This Newsletter covers SDG 8, 9 and 10.

This article refers to edition #120 of the "Have a Great and Impactful Week" Newsletter.
Subscribe here to receive the weekly newsletter