Making ESG Relevant to the Secondary Market

“Short term gains pork us long term" was one of the UNEDA more succinct and colourful way of putting the definition of sustainability. "Meeting the development needs of the current generation without compromising the ability of future generations to meet their needs". What on earth Sustainability meant to whom was one of the first discussion points at my presentation to the UNEDA conference in early September.

The Big Picture

Sustainability – making things work long term – is not a new concept. However, the metrics around demonstrating it are. Growing understanding of the amount of species we are losing, the number of particulates in the atmosphere, shrinking availability of fresh water and other resources is leading to ways of quantifying our effect on this. Businesses are expected to report on these alongside their financial performance in a centralised way.

New Legislation

The Corporate Social Reporting Directive (CSRD) and the Corporate Due Diligence Directive (CDDD) are EU legislation but have much wider effect. Both see their full set of reporting this year. In simple terms, all information on environmental, social and governance (ESG) risk needs to be in the company reports for those in scope. This applies to the risk from the organisation as well as risk to the bottom line of changing climate and society. Reporting is for their own organisation, and its supply chain, which means that anyone with a customer in scope will need to answer the same questions.

This year, the companies are those who were already covered by the Non-Financial Reporting Directive. Next year it will be all listed companies in the EU. The following year, it will be all EU Small and Medium Sized Enterprises. At the same time, you have bodies like the IFRS asking the same questions in the financial sector. And investment companies stating that ESG considerations are a big part of their decision making.

The Effect on the Market

Sustainability is moving from a story telling approach from the communications department to something that is more structured, standardised and data focused. It is now part of interactions with customers, investors and stakeholders. The good news is that, although the metrics may be unfamiliar, many organisations are doing better than they think. Recognising this and celebrating wins is a great way to build confidence on doing the rest.

Putting things in Context

UNEDA is an industry association represents companies involved in the sale and resale of used and refurbished networking equipment, such as routers, switches, and other networking hardware. Earlier talks at the conference – on the risks posed by ghost companies and counterfeit goods – showed that UNEDA understands the governance issues that apply to this sector better than anyone else. More than that, the organisation is proactive about addressing them.

UNEDA members are typically committed to offering high-quality products, ensuring equipment reliability, and following best practices in the resale of networking gear. They care about maintaining a transparent, legal and ethical supply chain in the secondary market because it increases trust in the market and future proofs the sector. However, their efforts to combat criminality and shady business practices have further reaching social benefits.

Verifying ethics and legality in the supply chain helps avoid unwittingly funding organised crime, bonded servitude and human trafficking. It also builds customer trust in the secondary market meaning more resources can be saved. It also has financial benefits because you don’t have to compete with companies which do not add taxes. These three results – people, planet and profit – are what ESG reporting are intended to capture. The revolution here is having to write them down.

Next Steps

Even large companies can find recording this new data daunting… especially as they have to report on how these issues pose a risk to making profits going forwards. Understanding the fundamental concepts of environmental sustainability, like planetary boundaries and natural capital, provides a solid foundation for this. From there, it is easy to assess which aspects matter most to your business, calculate how much of an impact there is, and create an improvement plan on the back of this.

We started on this together at the presentation I gave UNEDA. The slides helped draw a line between macro risks, legislation, company reporting and how to show benefit as a supplier. All attendees found they knew more about this than they first believed and were doing more than they thought. I am excited to see how this translates into actions going forward, particularly about the environmental cost of manufacturing networking devices. Measuring effect is the first step to making things work better… and that’s an aim everyone shares.

For more information on Techbuyer’s IEMA certified training offer, including times and course overviews, check out IEMA Sustainability Training | Accredited Training Courses | Techbuyer.