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Delivering on sustainability: a licence to do business in the 21st century*

BNP Paribas Asset Management

Amid a growing chorus of stakeholders keen on sustainability – ranging from investors to increasingly environmentally and socially aware consumers – more and more entrepreneurs are exploring solutions that are actually sustainable and responsible.­

They are incorporating sustainability into companies’ DNA and strategies, because they realise that this approach not only makes business sense, but also has the great potential of finding favour with consumers and being endorsed by parties including regulators, civil society and investors big and small.

More than lip service

These days, achieving sustainability – not merely ‘green washing’, but actually delivering – is an important cog in many business processes and in many products. It has become one of the ground rules and it is as much part of a licence to do business as is, for example, a trading permit or a management degree. This is especially so in a world marked on the one hand by, for example, a seemingly growing incidence of extreme weather phenomena seen as harbingers of climate change and on the other, by a heightened awareness of the urgent need for local, national and multilateral action.

Unique drivers of change

That need for action is reflected in an unprecedented set of drivers of change affecting the future of business. At a transnational level, these include the Paris Agreement resulting from the COP21 meeting, which set a worldwide target for capping global warming to below 2 degrees Celsius.

Signalling its support for the Paris Agreement, BNP Paribas Asset Management has endorsed the Paris Pledge for Action, joining businesses, cities, civil society groups, investors, regional bodies, trade unions and others who have promised to ensure that the Paris Agreement goals are met or exceeded.

Transformative sustainable development targets and principles

Setting standards for the private sector, the UN Global Compact’s Ten Principles reflect fundamental universal norms agreed to and ratified by the vast majority of countries in the world such as human rights, working rights, environmental protection and anti-corruption. Underscoring the force of these norms, investors are adopting the principles as well. At BNP Paribas Asset Management, the principles are integrated in investment processes to ensure that all companies we invest in comply with the international standards for multinational enterprises.

Globally applicable actionable targets include the United Nations’ 17 Sustainable Development Goals (SDGs) setting the 2030 development agenda aimed at transforming the world. They address issues ranging from eradicating poverty and hunger to promoting good health and well-being. They also seek to ensure gender equality, decent work and economic growth and aim to promote responsible consumption and production and making cities inclusive, safe, resilient and sustainable. The goals are meant as a source of inspiration, encouraging business to play its part in a better future for all by acting responsibly and helping solve societal challenges through innovation and collaboration.

Consumers have become outspoken on sustainability issues

In addition to the markers set out by these global pacts, there is a bottom-up factor driving sustainability in business: changing consumer behaviour. Greater awareness of the societal, environmental and health aspects of products and services has seen consumers turn their backs on polluters, human rights abusers and others engaged in unethical and irresponsible business practices.

At the same, consumers have embraced companies ‘greening’ their operations, cleaning up their product offerings and practices, steering clear of controversial products such as tobacco, alcohol and even just sugary drinks, and boosting management transparency and accountability. Both as customers and as investors in companies, consumers are increasingly taking an activist stance, voicing concerns and urging action.

Thus, to manage reputational concerns and business risk, business leaders are under pressure to implement greater energy efficiency, adopt renewable energy sources and clean technology and take other measures that bear witness to good stewardship and sound ethics. Extra-financial reporting and disclosing one’s carbon footprint are becoming mainstream elements of a business’s public accounting.

That includes a greater openness to dialogue with stakeholders, be it at set-pieces such as the general shareholders meeting or a more ad-hoc basis. As an investor – holding material interests in many companies in fund portfolios – BNP Paribas Asset Management believes that voting at general meetings is an integral part of its investment responsibilities and a crucial component of the dialogue with companies on behalf of clients. For many companies, it has become clear that a long-term role as an investor requires active stewardship.

Regulatory pressures for sustainable practices

A final driver of change in business has taken the form of top-down policies and regulations. Authorities are chiming into voter calls for action and are converting multinational accords such as the Paris Agreement into local law in a bid to fulfil the increasing public and stakeholder expectations of responsible and ecologically sound government.

More and more, governments are setting up dedicated specialist bodies to monitor and legislate on sustainability issues, so that they can take sustainability legislation into account in their processes and practices. Equally, asset managers including BNP Paribas Asset Management have established research capabilities so that they can track regulatory developments impacting current and future investments and act on them.

All these parties appear to have accepted that their licence to operate in the 21st century requires an actively implemented sustainable and responsible approach, not only to safeguard their reputations and credibility, but also for the sake for our future. Standing by will no longer do.

* Delivering on sustainability: a licence to do business in the 21st century was a key theme at the 2017 BNP Paribas Sustainable Future Forum entitled ‘Investing for tomorrow’s success’.

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