Each Public Company Needs to Reach Carbon Zero, Says Bank of America CEO

With economies around the world grinding to a halt due to COVID-19 and its impact on the oil and gas industry, chief executives are reckoning in public with the challenge to reset their missions and steer their corporations towards minimizing carbon emissions. While corporate leaders have previously been vocal about, if not committed to, implementing emission reduction strategies, one CEO has led the way and is now asking the same of his peers.

Brian Moynihan, Chairman & CEO, Bank of America, in a June 16 panel discussion on stakeholder capitalism and ESG disclosure, appealed to directors on the boards of public companies to have a carbon neutrality commitment in order.

Moynihan raised the point on a webinar while discussing effective ways to operationalize and implement ESG disclosure for the measurement of stakeholder capitalism. He was joined in the discussion by a range of heavyweights. They included: Klaus Schwab, Founder & Executive Chairman, World Economic Forum;  Carmine Di Sibio, Global Chairman & CEO, EY; Brian Stafford, President & CEO of Diligent Corporation and Betsy Atkins, a director of companies including Volvo and Wynn Resorts. Diligent, a corporate governance company that sells software for collaborative board work, hosted the webinar. In light of the COVID-19 crisis and its exacerbation of socioeconomic inequities, the discussion highlighted the need to align capital growth with an accelerated implementation of United Nations-formulated Sustainable Development Goals (SDGs) by developing and implementing an ESG matrix.

The participants acknowledged but did not dig into the need to retrain and refocus executives on issues of justice and equity. Moynihan, though, made a declaration that carbon-free work would have to become a matter of corporate policy.

While a timeline need not be reported at present, Moynihan added that it is crucial for companies to chart out and disclose their path to achieving carbon neutrality. He argued that such a commitment is key to helping companies reevaluate their current operational strategy in order to reduce their environmental footprint, citing Bank of America’s success in achieving its carbon neutrality target 4 years after it was declared in 2016. He further added that the board of directors, through measurable steps, can inspire companies into action for carbon neutrality and bolster their will to follow through with an action plan. Moynihan believes these measures can then feed into the metrics for performance measurement and improvement.

The panelists agreed on the need to design and effectuate an ESG matrix to guide corporate efforts on promoting inclusive and sustainable growth. Such an approach can help ensure that companies engage in ESG disclosure consistently and this in turn will benefit all stakeholders, leading to the eventual actualization of stakeholder capitalism. Stakeholder capitalism refers to a system wherein the corporations prioritize non-financial measures as well to serve the interests of all stakeholders as opposed to those of only shareholders.

The International Business Council of the World Economic Forum, chaired by Moynihan, is working in collaboration with the Big Four accounting firms – Deloitte, EY, KPMG and PwC- to develop a set of financial and ESG metrics for companies to adopt and consistently report on across industry sectors and geographies. Di Sibio, Global Chairman & CEO, EY mentioned that the metrics from existing frameworks and disclosures were distilled into 22 core metrics and 33 expanded metrics distributed across four pillars namely People, Governance Principles, Prosperity and Planet.

IBC members, Di Sibio said, will discuss ways of adopting these metrics in August and the member CEOs will then sign the updated Davos Manifesto next January. This will signify their commitment to adopting the ESG disclosure methodology and serve as a demonstration of their ability to create longterm value for all stakeholders. Moynihan also added that with companies resolving to disclose ESG data, regulators like SEC will also jump onto the bandwagon, further aiding the standardization of ESG disclosure and leading to more widespread adoption.

Klaus Schwab, Founder & Executive Chairman, World Economic Forum, remarked on the need to effectively communicate sustainability efforts to youth especially with the rise of social awareness and activism. With millennials and Gen-Z accounting for 37% and 21% of the workforce, Schwab emphasized the need for companies to gain the trust of young stakeholders especially since they will be the ones demanding accountability from corporations. He also added that with governments all over the world rescuing companies affected by the COVID-19 crisis with taxpayer money, societal stakeholders are curious to see how companies will give back to the communities they serve and so often take more from. ESG disclosure data’s potential to revamp corporate strategy to expand the scope of achieving SDGs can effectively serve the societal stakeholders.

By proposing a common set of metrics, IBC hopes to target the current inconsistency in measuring and disclosing ESG data. The variation in standards and methodologies as well as the lack of a need to adhere to a specific measurement and disclosure framework over a given time period makes comparison of progress difficult, thereby affecting progress on SDGs.

The panelists unanimously agreed that ESG adoption and disclosure are key to corporate sustainability efforts. Whether the successful operationalization of ESG adoption via the IBC’s efforts will pave the way for stakeholder capitalism remains to be seen. Until then, Moynihan’s focus on having a carbon neutrality commitment could potentially give rise to huge business opportunities for clean energy companies. For economies to recover sustainably from the COVID-19 crisis, the IEA and IMF have recommended the accelerated deployment of carbon-neutral energy sources. Given the impact COVID-19 has had on the fossil fuel industry, renewables face a chance to claim market share. If public companies can commit to carbon neutrality and scale up their implementation strategies in time, they will create business opportunities for a host of clean-energy developers and financial innovators.