KPMG’s Sustainable Futures KPMG’s Sustainable Futures KPMG’s Sustainable Futures

While sustainability used to be background noise for a lot of companies, it’s now right at the top of the corporate agenda. That’s the view of KPMG Partner Russell Smyth, who heads up KPMG Sustainable Futures, a dedicated cross-functional team of experts which helps corporates and public sector clients respond to the climate and sustainability agenda.

“While sustainability as a concept has been around for decades, over the past 18 months it has shifted from being a relatively minor corporate social responsibility issue for businesses, to being one of the key strategic topics in the boardroom. Businesses have recognised that ignoring the issue could have real economic impacts as regulation and consumer sentiment shifts, while those that embrace it can create competitive differentiation” says Russell. “For some carbon heavy businesses, it could be an existential threat and ultimately no-one can risk being on the wrong side of the climate agenda.” 

Russell also heads KPMG’s Deal Advisory practice in Belfast, as well as its renewable energy advisory practice across the island of Ireland, a specialisation which helped to foster his interest in the wider sustainability agenda.

While local organisations are beginning to recognise the importance of environmental, social and governance (ESG) trends, they don’t always know how to respond to the challenges or harness the opportunities.

“That’s where we come in,” says Russell Smyth. “We help bring structure, alignment with current and future regulatory trends and strategic thinking to help design what will inevitably be a long-term pathway to sustainability, and ultimately net zero.”

KPMG’s 20-strong all-island team, established in direct response to soaring client demand, brings together a wide range of disciplines, including sustainability practitioners, climate scientists, ecologists, economists, engineers, corporate strategists and accountants.

“It’s a diverse set of individuals with a lot of specialist knowledge between them, and it’s a team that can help clients navigate what is a complex and fast-evolving agenda”, Russell says.

In the 18 months since the team was established, it has grown to be the largest ESG advisory practice in both Northern Ireland and the Republic of Ireland. 

While the past 18 months have proved successful for the team, things looked challenging at the start. “We established Sustainable Futures just before the onset of COVID-19. While ESG and the sustainability agenda was gaining good momentum in 2019, we had real concerns that it would stall as the world turned its attention to COVID-19. However, in reality, COVID has had the opposite effect, with the issue galvanised as corporates and governments recognised the similarities between the two issues – massive global threats requiring unprecedented international coordination, where short-term economic considerations become secondary”.

As an example of how the ESG agenda has grown, in KPMG’s most recent Global CEO Survey 2021, climate change is now at the top of the CEO list of key issues, having not even been in the top 10 only four years ago.

“What is particularly interesting” says Russell, “is how the agenda is impacting virtually every corporate in every sector. While larger corporates have been the main focus of investor and regulatory attention, they have realised that if they are to make any meaningful impact on their carbon emissions, they need a coordinated effort involving their supply chain. Accordingly, they are pushing targets and requirement down onto medium-sized businesses, who in turn need to co-ordinate with their own supply chain and operating models”.

“We are also seeing more and more tenders and contracts dependent on the supplier proving their environmental credentials. It’s changing the way business is being done. Sustainable procurement is here to stay, so the advice to companies is to embrace it and work to benefit from it by ensuring relevant data is available and the upside to a more innovative approach to resource usage is considered in the life cycle”. 

Finance is going to be another lever used by government and regulators to drive change. As of this year, banks now have to categorise and report on the sustainability of their individual loans, as well as quantify the climate risk of their portfolios. Over time, regulators want to make it more expensive to lend to unsustainable businesses, and cheaper to businesses which are managing climate risk”.

“What’s important right now is that companies need to put ESG at the heart of the decision-making process and build a business case for following a bold ESG agenda. They need to inject urgency into the sustainability agenda and set a strategy for addressing climate change risk and the transition to a net zero carbon economy.” 

Russell Smyth agrees there is a real risk that Northern Ireland falls behind other countries on the climate change agenda. The Republic of Ireland, he says, benefits from much stronger policy certainty and economic support schemes, as do other UK regions.

“We’re moving too slowly as a region. While we finally have draft climate bills being debated in the Assembly, as well as a recent consultation on Northern Ireland’s future energy strategy, we are already years behind our nearest neighbours.”

“So we’re left in a situation where companies are under pressure to embrace sustainability yet lack any guidance from formal government policy, financial support or real direction. It’s a situation that will have negative results.”

He quotes the case of European dairy giant Danone, which KPMG works with in Ireland. Danone is committed to carbon neutrality and has actively stated that securing a pathway to net zero operations in each country it operates in is an imperative and without this, further investment will be negatively impacted.

“I think we’ll see more and more large organisations taking a similar approach, and that is bound to have real implications for regions which haven’t facilitated sustainability and net zero. 

Locally the team has been supporting a wide range of corporates with their ESG and climate response, including assisting Belfast City Council embed sustainability across all of its operations, advising Belfast Harbour on its ambitions to become to a net zero port, and working with Devenish, the NI-based animal nutrition giant, widely regarded to be a leader in the sustainability field, to optimise its own sustainability strategy. 

Like others working in sustainability, he’s anticipating what’s likely to happen at the COP26 United Nations Climate Change Conference, taking place in Glasgow at the start of November.

“The role of COP26 is to co-ordinate the climate effort on a global basis - there’s no point in some countries decarbonising unless everyone does the same.”

“So we’re looking for real commitments and real targets to emerge from COP26. We’re looking for a genuine global response.”

This article originally appeared in Business Eye magazine and is reproduced here with their kind permission.