It starts at the top: The C-suite must go green to set the stage for corporate ESG
Posted: September 30, 2022 | Word Count: 720
By Brendan P. Keegan, Chairman, CEO & President of Merchants Fleet
The biggest acronym in boardrooms across the U.S. today is ESG — Environmental Social Governance. ESG is a framework for ensuring business practices have regard for the environment (‘E’) in which they operate, social issues (‘S’) and governance (‘G’) of the business.
While it may come across as a passing trend, ESG is real and here to stay. The concept has been around since the 1980s, and was heightened in importance during the COVID-19 pandemic when both brands and consumers rallied behind a range of causes.
Increasing interest at the top
Corporations are finding it increasingly important to have a stake in corporate social responsibility. This is driven by consumer expectations that the organizations they buy from or do business with match their own moral opinions and beliefs. According to PricewaterhouseCoopers (PwC)’s 2021 consumer intelligence survey, 83% of consumers polled believe that companies should be actively shaping ESG best practices. Amazon put knowledge like this to power. It leaned in and committed $2 billion to the Climate Pledge Fund, which supports reduction of carbon emissions; pledged to reach net zero carbon by 2040; and purchased 100,000 electric delivery vans from EV startup Rivian.
By and large, the boardroom is where ESG is first prioritized and mandated, largely due to the immense risks and opportunities ESG topics pose today and especially in the future. It transcends beyond the boardroom to the C-suite, where you see it actualized. Seen in the push to hire executive leaders and directors for sustainable product lines, manufacturing, supply chain and even fleets, this underscores that sustainability is naturally baked into the business culture and not a casual add-on.
There’s pressure to be a market leader in this arena and demonstrate an ESG agenda. While big-name brands are setting their ESG goal posts, an ESG knowledge gap still exists and remains too wide for others. Per a recent Vontobel Study, 59% of respondents do not know an ESG approach to saving and what investment to make. Additionally, 47% would welcome greater support and advice on ESG.
Where to start? Start with ‘E’ and go EV
As it is National Drive Electric Week, a nationwide celebration to raise awareness of the many benefits of all electric and plug-in hybrid cars and trucks, the Environmental pillar of ESG comes into focus. EVs are becoming more of an answer for companies to meet this objective, because one of the fastest and best ways to become more ESG compliant is vehicle electrification. Examples beyond Amazon include Unilever, which has committed to converting its fleet to 100% EVs by 2030; and Wal-Mart, which plans to electrify its fleet by 2040 and have a 100% renewable energy power supply for its facilities five years sooner.
Transportation is one of the biggest contributors to emissions globally. Data from the MIT Trancik Lab indicate that 20% of U.S. emissions come from cars and trucks. According to the EPA, the carbon dioxide emissions produced by a fleet of 10,000 sedans is equivalent to the emissions from over 5 million gallons of gas. Converting those vehicles to EVs would be the equivalent of recycling over 1.9 million trash bags of waste or planting and growing 750,000 trees for 10 years.
With EV makes and models coming onto the market at a rapid pace and battery advancements increasing range and decreasing cost, fleet has been identified as one of the most significant and accessible ways for companies with ESG plans to make progress on their goals over the next 10-20 years.
EVs are also becoming more affordable: battery prices have dropped nearly 90% over the past 10 years, and BloombergNEF is projecting that EVs will reach price parity with internal combustion engine (ICE) vehicles by 2025. As demand is outpacing supply, organizations that delay EV implementation risk losing a significant ESG opportunity and falling years behind their sustainability goals.
There’s a tremendous amount of work to be done and businesses cannot afford to risk complacency. The ever-changing ESG landscape poses a challenge for boards and their C-suite, and behavioral and cultural changes will take place, but also great opportunity will come. For those that choose to adopt EVs, they’ve embarked on a journey to take advantage of economic, operational and sustainability-related benefits.