Podcast Summary: "Der Große Neustart" - Episode Featuring ISSB Chair Emmanuel Faber
Podcast Information:
- Title: Der Große Neustart
- Host: Sibylle Barden, Publizistin
- Description: Exploring Revolutionary Ideas to Transform Our World
- Episode: ISSB Chair Emmanuel Faber: Leading Sustainable Finance Transformation
- Release Date: April 17, 2024
Introduction
In this pivotal episode of Der Große Neustart, host Sibylle Barden engages with Emmanuel Faber, the Chair of the International Sustainability Standards Board (ISSB). Faber, renowned for his visionary leadership in sustainable finance, brings a wealth of experience from his tenure as CEO and Chairman of Danone. The conversation delves deep into the formation, significance, and future of the ISSB, as well as the broader landscape of sustainable finance and corporate governance.
Understanding the ISSB
Emmanuel Faber begins by elucidating the genesis and mission of the ISSB. He emphasizes the necessity of a unified sustainability reporting framework amidst the proliferation of disparate ESG metrics.
Emmanuel Faber: "We can't be perfect in using this new language. It's a new economics language... Climate is urgent." [00:00]
Faber explains that the ISSB was established to create globally consistent sustainability disclosure standards, addressing the shortcomings of existing ESG metrics that lacked correlation with financial performance.
Faber: "The IFRS foundation... would be well placed to play a role in that." [03:07]
Rapid Development of IFRS S1 and S2
Sibylla Barton acknowledges Faber's recent reappointment as ISSB Chair and congratulates him before probing into the ISSB's significant achievements within a short timeframe.
Faber: "With the creation of the International Sustainability Standards Board, which I have the pleasure and honor to lead... creating an accounting quasi language for sustainability..." [03:07]
Faber highlights the swift development of two pivotal standards:
- IFRS S1: General requirements for the disclosure of sustainability-related financial information.
- IFRS S2: Specific climate-related disclosures.
He notes the accelerated timeline, with both standards published within a year of the ISSB’s inception.
Faber: "We published IFRS S1... and IFRS S2 which is the specific climate requirement in June 23rd." [07:55]
Incorporating Scope 3 Emissions
A significant portion of the discussion centers on the inclusion of Scope 3 emissions within the ISSB standards, underscoring their importance in comprehensive sustainability reporting.
Faber: "Scope three, which is this indirect greenhouse gas emissions in the value chains beyond the scope of the company itself. They represent 70 to 80% of on average any company's global emissions." [11:29]
He explains that Scope 3 emissions often constitute the majority of a company's carbon footprint, making their inclusion critical for accurate risk assessment and strategic planning.
Reception by Companies and Investors
Faber shares insights into how companies have embraced the ISSB standards, recognizing the strategic importance of sustainability in maintaining competitive advantage.
Faber: "So when you're telling them that you're going to design a tool... they realize that climate change will change their competitive advantage." [14:44]
He cites the example of the Rhine River's low water levels affecting supply chains, illustrating the tangible impacts of climate change on business operations and the necessity for resilient strategies.
Faber’s Sustainable Leadership at Danone
Reflecting on his tenure at Danone, Faber reveals his pioneering approach to integrating sustainability into the company's core operations without confining it to a dedicated sustainability officer.
Faber: "We decided to cut that. And in exchange for that we added sustainability in the yearly bonus of all the managers of the company." [28:37]
By embedding sustainability metrics into managerial bonuses, Faber ensured that sustainability became a collective responsibility across all managerial levels, fostering a culture of accountability and proactive engagement.
Cultural and Historical Influences on Sustainability Adoption
The conversation delves into why, despite early leaders like Danone and Unilever embracing sustainability, many companies have yet to follow suit. Faber attributes this to varying corporate cultures and the historical evolution of companies' approaches to sustainability.
Faber: "Every company, every culture is unique and how the culture is built... All of that is really a matter of decades, sometimes of cultural evolution." [33:42]
He emphasizes that sustainable practices often naturally integrate into business operations when they align with the company's long-term strategic goals and cultural values.
Education and Capacity Building for Sustainability Standards
Addressing the challenges of adopting new sustainability standards, Faber underscores the importance of education and capacity building. He highlights the ISSB's initiatives to develop educational materials and partnerships to facilitate the global adoption of their standards.
Faber: "We are developing educational materials, e-learnings, knowledge hubs... we provide the material, et cetera, et cetera." [38:22]
This commitment ensures that companies and regulators worldwide can effectively implement and benefit from the ISSB's sustainability disclosures.
Role of Boards and Leadership in Sustainability
A critical aspect of the discussion focuses on corporate governance and the pivotal role of boards in steering companies towards sustainable practices. Faber cites a PwC survey revealing that 76% of executives felt their boards were ill-equipped to guide sustainability efforts.
Faber: "I do believe that boards have a fundamental role in propagating and authorizing companies to invest." [44:21]
He advocates for boards to not only approve sustainability strategies but also to actively engage in fostering a cooperative and integrative approach among executive functions.
Integration Between CFOs and CSOs
Faber highlights the historical tension between Chief Financial Officers (CFOs) and Chief Sustainability Officers (CSOs), emphasizing the need for collaboration to bridge the gap between financial accountability and sustainability objectives.
Faber: "Unless you work together, it's not going to work." [49:23]
He suggests that sustainability should be perceived as an integral part of financial strategy, rather than a separate concern, to ensure cohesive and effective implementation.
Personal Insights and Final Thoughts
In a personal reflection, Faber shares his philosophy on leadership and impact, emphasizing the importance of maintaining freedom to drive meaningful change.
Faber: "If you want to have an impact, you have to stay free." [58:17]
He encourages leaders to remain adaptable, challenge existing norms, and continuously push the boundaries to foster innovation and sustainability.
Conclusion
Emmanuel Faber's insights in this episode of Der Große Neustart provide a comprehensive understanding of the ISSB's role in shaping sustainable finance. His experiences underscore the necessity of integrating sustainability into the core strategic framework of businesses, supported by robust standards and collaborative governance. As the ISSB continues to influence global sustainability reporting, Faber's leadership exemplifies the transformative potential of aligning economic practices with environmental and social responsibility.
For more episodes and information, visit www.zabitrdenbarden.com and the official World Economic Forum site.