Climate Change & Business Metrics

• These notes cover metrics that matter in business, especially regarding climate change, impact measurement, and ESG (Environmental, Social, and Governance) considerations.

Climate Change and Business

• Businesses should address macro trends, including the causes and impacts of climate change and associated social trends
• It is important for businesses to measure their impact, looking at both positive and negative outcomes
• Climate change refers to long-term changes in Earth's temperature, rainfall, and weather events, all often caused by human activities like burning fuels and deforestation
• Total carbon dioxide emissions Total carbon dioxide (CO2) emissions increased in 2024
• 2024 was the warmest year since 1850, exceeding 1.5°C above pre-industrial levels
• Extreme fires have increased tenfold in the last 20 years
• Rising temperatures lead to more moisture evaporation, escalating extreme rainfall and flooding
• Ice sheets are rapidly shrinking, and Europe is experiencing its worst drought in 500 years
• Climate change causes economic losses and has resulted in over 7,000 major disasters, over 1 million deaths, and $3 trillion in economic losses over the past two decades
• Social consequences include climate-induced displacement, food insecurity, infrastructure damage, biodiversity loss, water scarcity, economic inequality, and job loss

Social Trends

• Social trends raising concerns include labor rights, diversity, conflict, economic inequality, and mental health

ESG Overview

• ESG stands for Environmental, Social, and Governance
• Encompasses the 3 central factors for measuring the sustainability and social impact of a company or business
• It determines a company's future financial performance
• Environment: Company's impact on the environment, including emissions, waste management, and resource utilization
• Social: Company's relationships with employees, suppliers, customers, and communities
• Governance: How a company is run, including leadership, employee relations, and internal controls
• The "Triple Bottom Line" includes People, Planet, Profit. Such metrics are mainstreamed as integral parts of a company's long-term value creation, risk management, and competitive advantage

Importance of ESG & Sustainability

• The reasons businesses change is as follows: increased customer awareness
• They also change to adjust to regulatory changes
• Businesses also change for greater transparency and investment risk
• Long-term viability and performance due to ESG metrics; lower capital costs and better operational performance
• ESG issues are investment criteria

Attracting Investment

• There is an increasing amount of ESG-focused funds that target start-ups w/ strong ESG policies
• Investors are increasingly considering ESG factors into their due diligence processes
• Poor ESG performance may be a warning sign

Recruiting and Retaining Talent

• Younger generations prioritize socially responsible and environmentally conscious employers
• ESG is associated with positive working conditions and boosted employee satisfaction and retention

Operational Efficiency

• Environmental factors drive resource efficiency, which reduces costs
• Socially and environmentally responsible supply chain management reduces supply chain disruption risks

Brand Considerations

• A growing number of consumers prefer socially and environmentally responsible brands
• Positive ESG actions lead to positive media coverage, while negative actions do the opposite

License to Operate

• Companies that proactively incorporate ESG are better prepared for potential future regulations
• Some jurisdictions prioritize fulfilling certain social or environmental criteria

Regulatory Compliance

• Companies that solve ESG-related problems are increasingly innovative and forward-thinking
• Companies that consider ESG factors are often better equipped to adapt to market and social changes

Competitive Advantage

• ESG credentials set companies apart in crowded markets
• Larger companies prefer to collaborate w/ start-ups with strong ESG performance

Cost Aspects

• Enhanced ESG practices translate to a lower risk profile, reducing the cost of capital
• Grants or low-interest loans are more available to companies focused on sustainability and/or social impact

Consumer Preferences

• Consumer preferences for sustainable and socially responsible brands grow across all demographics
• ESG-committed products grew 28% over five years, versus 20% for non-ESG products
• In 2020, 47% of internet users switched brands over value violations, prioritizing environmental responsibility

Product Categories

• 66% of millennials consider sustainability in fashion purchases (McKinsey)
• Sustainability conversations for food and drink rose 22% in 2020 (Tastewise)
• 61% of consumers prefer eco-friendly tech products (Consumer Technology Association, 2019)

ESG Environmental Impact

• This includes how climate change and other environmental factors impact a company and its finances

Primary Sector

• It includes natural resource extraction companies and it includes Mining, Fishing, and Agriculture

Sector Affectations

• Rising temperatures, changing growing seasons, water scarcity, and soil degradation impact those in the primary sector

Secondary Sector

• This includes processing, manufacturing, and construction, transforming sectors and resources

Examples of Impact

• Automobile production, Textile, Aerospace space are examples
• Increases in energy demand, supply chain disruption, infrastructure damage, and raw material costs impact those in the secondary sector

Tertiary Sector

• This includes service and financial organizations
• It includes Restaurants, Tourism, and Insurance
• Tourism is impacted from extreme weather due to climate change, and related disruptions of the transportation system

ESG Social Impact

• This includes People related impact in businesses
• It includes human capital as well as customer suppliers
• Recognize employees as valuable assets
• They are focused on well-being, safety, and development
• Invest in employee training, promote work-life balance, and ensure fair wages and benefits
• Create an inclusive workplace that fosters diversity and equal opportunities
• Actively engage with local stakeholders
• They would contribute to community development efforts
• Support social causes aligned with goals
• Address the needs of local communities and work towards creating shared value

CSR Compared to ESG

• CSR practices are usually self-regulated with lots of variation
• CSR provides and internal framework for communicating with employees
• Delivered by dedicated tea, with little impact on a company's products/service
• ESG, on the other hand, provides measure they can use to evaluate companies
• ESG provides measurable goals
• Prioritize responsible business across the entire company

"S" Stands for Social

• Diversity, equity, and inclusion are key factors
• This includes data protection & privacy
• Employee engagement becomes important There are issues relating to wage equality as well
• Workers and safety conditions must be considered
• Internal focuses on training and workforce development

"E" External Factors

• They include customer satisfaction but also community relations
• Human rights
• Ethical Supply Chain practices

Internal Training

• This can be accomplished by a Employee education program to provide the resources necessary
• It improve the lives of workers
• It improves communities to create a strong supply chain by improving crop output and providing training

Challenges with "S"

• Often social impacts are intangible
• There are multiple views for social impact
• There were rules to incorporate more S in reporting framework

What can be done

• Employees care more when employers care for their welfare
• This requires strong ethics and creating a culture that is equal
• This gives companies a reputation of safety
• Communication builds trust and long term relationships

The core values of a business

• Identify topics to define benchmarkers at peer levels
• Establish a Calculation formula with an information source
• Develop metrics that are on a periodic dashboard
• Measuring impact is the process
• This process helps allocate resources more efficiently
• Measuring and transparency helps a company demonstrate to stakeholders there commitment
• There is potential for creating more social responsible companies
• Europe is the 1st Impact-Neutral Continent by 2050: 55% reduction in emissions by 2030

Laws coming into place

• Fit for 55 aims to align EU laws into EU climate goals
• There is a Zero pollution to reduce pollution The is the Circular economy action plan, action points
• European Climate Laws set by direction
• EU Biodiversity Strategy aims to re-establish Europe's ecosystem Farm to Fork: Aims to establish to reengineer farm production toward sustainability

Current Legislation

• The Non-Financial Reporting Directive (NFDR): ESG is used to measure for sustainability
• SFDR: Managers disclose the sustainability of a market

New Legislations

• Detail required from corp to report on sustained progress
• New rule require companies prevent sustain behavior
• It shows how the Corp model impacts sustainability
• Reporting the use of 3 emissions

CSRD Details

• Significant impacts on supply chain for eco
• A revisit if contract is in works
• Considers the Double the materially: tech and in/out

Outside View

• What sustainability affects the company
• This includes economic performance
• Compliance
• progressive
• The Nordic
• The legal

Actions to take

• Have a positive impact on the environment
• Outside view: examines the eco effects

Global compliance performance

• sweden and norway are strong countries

Internal & External Stakeholders

• "the S in ESC"
• This means Capital, community and the customer

Recognise employees

• Training is important
• Create and equal enviro

Stake Holders

• Prioritize the impact
• Integrate impact reports
• Have a base of info
• See external views
• Is it increasing
• Strong relations
• How we engage

Preserve the company

• The product makes this company unique
• Create impact that does is innovative

"Solar System"

• Creates a process and partners with the company
• Creates sustainability in purpose and partnerships
• Creates partnerships
• Focus, innovation and management improves sustainability
• B2B = customers with sustained product

Value Creation

• Strong partnerships for sustainable products or it can lose customer

USLP

• Big goals is introduced as a team
• "Do Well" is well explained

USLP goals

• Strong employees create value

Reasons USLP makes sense

• in tune
• Social priority

Action of the vision

• Double of footprint - Sustainability leader
• Transform partnerships