Business
Newsday
of the modern business environment. Photo courtesy Dr Axel Kravatzky
The transition towards global sustainability is reshaping the corporate world, challenging traditional paradigms and urging a re-evaluation of business impacts on society and the environment.
Businesses in the Caribbean are facing a pivotal moment. What is the best approach and how can they practically adapt to these changes, embracing integrated decision-making that aligns with the new wave of global sustainability expectations?
The International Sustainability Standards Board (ISSB) published its first two standards in June 2023. IFRS S1 is titled General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2 is titled Climate-related Disclosures.
Both standards are effective for annual reporting periods beginning on or after January 1. At present, four jurisdictions – Malaysia, Singapore, India and Canada – are doing sustainability consultations on the adoption of these standards. We can expect that jurisdictions within the Caribbean will follow suit, but as usual, there is a high degree of regulatory uncertainty.
The imperative of sustainability reporting
The ISSB’s introduction of comprehensive sustainability reporting standards represents a significant leap towards unifying how companies report their environmental, social and governance (ESG) impacts.
This new reporting paradigm mandates a deeper reflection on how companies engage with their natural surroundings, treat their workforce and contribute to societal well-being.
This shift presents an opportunity for Caribbean companies to redefine their societal roles, transitioning from traditional profit-centric entities to holistic, sustainability-driven organisations.
Companies can use these standards to meet global expectations and leverage sustainability as a strategic advantage, fostering innovation, enhancing brand reputation and securing long-term viability.
Choosing the path forward: Reactive or proactive?
Companies stand at a crossroads, with three distinct paths to consider:
- Adopting a wait-and-see approach,
- Complying with the minimum legal requirements focused solely on financial implications, or
- Adopting the more comprehensive double materiality perspective that considers financial and non-financial impacts.
Though more demanding, the third approach offers far greater opportunities for innovation, stakeholder engagement and leadership in sustainability. By proactively integrating financial and sustainability considerations, companies can pioneer new market trends, develop sustainable products and services and establish themselves as leaders in the burgeoning green economy.
This proactive stance is particularly crucial for Caribbean companies, which are uniquely positioned to lead in areas such as renewable energy, sustainable tourism and biodiversity conservation.
Tools for navigation
Two practical tools that can guide and assist boards on this transformative journey are the ISO 37000 Governance of Organisations, the national standard for good governance in TT, St Lucia and Jamaica and the Capitals Coalition’s recently launched business decision template.
ISO 37000 provides a principled framework, emphasising the sustainability of organisational activities over time.
It advises boards on assessing and managing their reliance on and impact on vital resources and systems, ensuring long-term organisational resilience and value creation.
The Capitals Coalition currently invites companies to test and give feedback on its practical board paper template, which illustrates how companies can consider integrating natural, social, human, and financial capital into the decision-making process.
Such a holistic approach ensures that decisions reflect a broad spectrum of impacts and dependencies, moving beyond traditional financial metrics to include factors such as employee well-being, ecosystem health and community relations.
For Caribbean businesses, applying these frameworks can illuminate pathways to sustainable growth, helping to navigate the complex interdependencies of modern business environments.
Achieving global goals with SDG Impact Standards
A third and complementary tool is the SDG Impact Standards. These management practice standards (not reporting standards like IFRS S1 and S2) enable companies to integrate impact measurement and management that contribute to the UN’s sustainable development goals into their governance and management systems.
In this way, companies have a structured approach to embedding sustainable practices into corporate strategies. These standards guide companies in operationalising their commitment to global goals, ensuring that sustainability is woven into the fabric of business operations, from supply chain management to product development.
By adopting these standards, Caribbean companies can demonstrate their commitment to global sustainability agendas while addressing local and regional challenges, such as climate resilience, economic inequality and social inclusivity.
In doing so, they will then be well prepared to comply with the IFRS S1 and S2 standards when they are adopted in the region or when their business partners and investors expect them to provide documented evidence for how they are applying these standards or the ESRS standards applicable in the European Union.
Towards Caribbean leadership in sustainability
In October 2023, Australia issued a legal interpretation that established the responsibility of directors to address risks associated with nature.
It emphasised the need for caution and meticulousness regarding this matter. Recently, the UK adopted a similar legal stance, and Social Value International urged directors to integrate environmental sustainability into their financial reporting.
A new legal analysis has reaffirmed that, under British corporate law, directors are mandated to account for environmental risks that may affect their business. This highlights the rapidly evolving legal and regulatory landscape surrounding the obligations of companies and their directors.
To make effective decisions, Caribbean companies are encouraged to take a comprehensive and forward-looking approach.
This entails adhering to accepted global standards with an eye to emerging guidance and continuously redefining corporate success in terms of sustainable development and societal well-being.
Begin by embracing the guidance provided by ISO 37000, the Capitals Coalition and SDG Impact Standards, recognising the legal imperatives.
Keep an eye out for the ISSB sustainability standards. Many of the requirements of these standards overlap and are easily accommodated in ongoing board and management decisions. Caribbean companies can navigate the complexities of the modern business environment, positioning themselves as leaders as the region and the world transition towards sustainability.
Dr Axel Kravatzky is managing partner of TT-based Syntegra-360 Ltd, vice-chair of ISO/ TC309 Governance of Organizations and president of EUROCHAMTT. He enables companies to flourish through integrated governance, certified management systems and transformational leadership.
