An interview with Rebecca Self, Founder and Managing Director of Seawolf Sustainability Consulting
We sat down with Rebecca Self, Founder and Managing Director of Seawolf Sustainability Consulting, a firm which advises financial professionals and management teams on sustainability, to hear her insights on the importance of communicating impact.
Can you tell us a bit about your company and your work with impact reports?
Seawolf advises accountants, finance professionals and management teams on sustainability. I come from an ESG background myself, having had approximately a decade of experience leading environmental, social and governance investor work for HSBC, where I also acted as the bank’s Chief Financial Officer for Sustainable Finance.
As companies and businesses prioritise sustainability activities, the use of impact reports are on the rise. These reports are an effective metric to convey and report activities companies have undertaken which have resulted in positive change. It also acts as a way to build trust and communication with stakeholders.
What is the value in companies communicating their impact?
There are two main rationales for companies to communicate their impact. Firstly, doing so effectively improves the cost of capital, as companies can diversify with ESG investors and asset owners by communicating transparently with them.
Secondly, reporting impact helps companies improve their social license to operate – a social license being the general acceptance of a company’s standard business practices and operating procedures. This will help to create the concept of ‘shared value’, which is a framework suggested by Michael Porter and Mark Kramer of Harvard Business School for increasing profitability whilst also addressing the needs and challenges in society.
Where has the concept of additionality come from in this area?
If we look at recent statistics, the global economy and majority of organisations are not on track for meeting the United Nations Sustainable Development Goals. The UN progress report shows that the efforts across the world have been hindered by Covid-19 setbacks, global conflicts and record inflation. The current national commitments point to an increase in greenhouse gas emissions, and in certain areas progress has even been reversed. For example, carbon emissions began to decrease due to Covid-19 induced factory shutdowns in 2020, but emissions went on to rebound to a record high during 2021.
Under this backdrop, just reporting the status quo no longer suffices, and this is how the concept of additionality has risen. Additionality put simply is whether a positive outcome would have occurred without investor, business or public intervention. For example, greenhouse gas reductions in carbon markets are considered additional if they would not have occurred in the absence of a market for offset credits. If the reductions would have happened anyway, even if no offset credit had been sold, then it is not considered additional. This concept makes reporting much more transparent and credible and helps avoid the risks of greenwashing.
Is additionality broadly recognised yet?
Yes, but in practice additionality is not always reported on. While this may be due to a lack of awareness of the concept on the part of organisations and their stakeholders, it is also worth noting that measuring additionality is challenging. It requires quantifying both the impact of an upfront investment as well as the longer-term benefits. For example, the fact that greenhouse gas reducing activities occur all the time, whether it be out of cost saving benefits or being mandated by law, makes it difficult to measure and confirm additionality.
Keeping this is mind, companies should include the new business activities or updated business decisions undertaken as a result of ESG considerations in their public reporting and communications.
How does it fit in with the other ESG criteria that companies need to communicate?
ESG usually includes a double materiality assessment, which includes principled prioritisation, which is the practice of considering opportunities for your organisation to contribute to the SDGs by assessing impacts, and reporting on ESG risks and opportunities for the business through methods such as ESG policies. Impact reporting tends to be a subset of ESG Key Performance Indicators (KPIs) and metrics when the organisation is contributing to meaningful positive environmental or social change.
One way to think about it is as a spectrum of capital for investors. Every investment decision has an impact, and impact investment projects sit on a wealth continuum ranging from traditional investment to philanthropy. While ESG fits into the category of ‘responsible’ capital, ‘impact’ capital concerns tangible solutions and opportunities, rather than mitigation.
What are the communications implications of it becoming more used?
Companies will need to consider KPIs and sustainability where they wish to improve their impact, as well as what they want to convey. Communications can play a key role in helping present the company’s accomplishments to their stakeholders through tools such as impact reports. However, it is important to be open and transparent, meaning that even when things do not go so well they should still be included. To foster this habit of transparency and enable comparison, impact KPIs should also not radically change from year-to-year and the minimum standards should also be reported on.
We hope you found this interview with Rebecca insightful. If you would like to learn more about how you can clearly convey your impact or enhance your ESG communications, please contact us.