Navigating your business through a sustainability lens

Luke Manning is Head of Sustainability at London Stock Exchange Group (LSEG) and specialises in developing, delivering and communicating core business strategies, with measurable commercial and reputational impact.

LSEG supports financial stability and sustainable economic growth by enabling businesses and economies around the world to fund innovation, manage risk and create jobs.

Can you tell us a bit about your background and what led to your interest in sustainability?

Communications has always been the main thread of my career. I was a journalist, I've led corporate communications and marketing teams, and I've founded two communications consultancies. Along the way I’ve increasingly shifted my focus towards sustainability, an area that interests me personally as well as professionally.

How did you come into LSEG and tell us more about the exchange?

The path that led to LSEG started at Thomson Reuters. I led the communications team for what was then their financial and risk division (F&R), before leading operations and marketing teams within F&R and then becoming Chief of Staff to the CEO. Fast-forward a few years and F&R was acquired by Blackstone and Refinitiv was spun out of Thomson Reuters.  Within Refinitiv, I was responsible for leading the sustainability strategy as well as leading their charitable entity, Refinitiv Charities.

Fast forward another couple of years and Refinitiv was acquired by London Stock Exchange Group. LSEG plays a central role in convening and mobilising global financial markets, enabling companies to raise sustainable finance and providing investors with deep and broad data, index and analytics capabilities. It is an exciting combination when it comes to driving sustainable economic growth, speeding up the flow of capital into green and blue economies, so the world can adapt to climate change and preserve biodiversity along the way.

Diving into a single company level and thinking about ESG, how does a company go through the process of deciding what is material for them and what isn't?

Sustainability is a hot topic with a lot of momentum, and with it comes an increasingly high-profile atmosphere; there are more standards, more think tanks, more reporting standards, more partnerships, more targets, more ratings. The considerations any business has to take into account are therefore also growing exponentially. So how you approach materiality and prioritisation is very important otherwise there’s a danger you'll just get lost in all the noise.

 “Start with the overall business strategy because any sustainability approach has to be aligned to, and supportive of, that overall strategy.”

You need to map out the full continuum of your sustainability landscape, including the macro trends and how other businesses are making impactful, strategic steps. Then you need to match those issues and standards to the ones that are most important to your key internal and external stakeholders.

If you're going to prioritise what you focus on and make the best use of your resources – be it expertise, time or capital - having a considered and robust framework to make decisions against is absolutely crucial.

Can you go into the commercial case for ESG and how businesses are thinking about this?

When considering the commercial case for ESG, always remember the sustainability goal, which is ensuring a business has a positive environmental and social impact. This has to remain the focus, but there is a pragmatic commercial rationale in there as well. In an article I wrote a couple of years ago with a colleague on sustainable business, we outlined five commercial pillars - purpose, people, practices, performance and partners – which still stand up well today.

For the context of ‘purpose’, sustainability is the fundamental issue of this generation, and almost certainly the next as well. Any business that doesn't align its purpose with a more sustainable outlook and output will quickly find itself on the wrong side of being relevant.

For ‘practices’, there’s going to be an explosion in sustainability-related regulation. 

 “If a company doesn't embed sustainability practices at the very core of its operation, it will seriously impact its ability to do business.”

For ‘people’, determining how sustainable a business is has become arguably the second most important factor in deciding who to work for. They want to know what type of business they're joining and what it stands for. So your sustainability approach directly impacts your ability to attract and retain the best talent.

Businesses also have to be particularly vigilant regarding who they partner with; if key organisations within your supply chain are exposed or vulnerable to sustainability risks, it's going to create a weak link in your chain. However much you have your own shop in order, who you partner with is equally important.

Lastly, ‘performance’ relates to how efficient a company is with its resources - it directly impacts your bottom line. The cost to procure resources such as energy and water is only going to increase as commodities become more scarce. Similarly, the cost of dealing with recycling waste is going to increase - the amount to recycle within a growing business only goes in one direction. It’s therefore simple maths; the more efficient a company is in dealing with their resources and processes, the more they will protect their bottom line.

If you add the five pillars together, that’s the commercial case for sustainability.

What types of ESG commitments resonate the most with employees?

The ones that resonate the most are the ones people can actively contribute to. Employees love to see firms commit to meaningful environmental and social targets, such as science-based emissions targets or strong diversity and inclusion pledges. But the ones that really resonate are those where they can personally play a part, such as reducing their travelling or improving their recycling. On the social side, this includes aspects such as where to volunteer their time and expertise.

Two years ago, no sustainability presentation would have been complete without a question on single-use plastics and what part could businesses or employees could play when it came to recycling or changing behaviours. Then the COVID-19 pandemic hit and the top issue was supporting physical well-being and mental health. The death of George Floyd has also prioritised a long-standing focus on diversity, equity and inclusion.

Issues impacting employees’ lives directly will always rise rapidly to the top of the priority list.

And one issue that remains constant is climate change; if you think COVID has impacted the way we live, the impacts of climate change, and the magnitude of those impacts, will be far greater.

Can you tell us about the transition from TCFD to TNFD?

I’d say it’s more of an evolution than a transition. I believe climate change is the most important issue of our lives and will continue to be so. But within climate change, we can't just talk about emissions and temperatures - which is how we broadly look at it at the moment. TNFD is putting a spotlight on what climate change means to nature as well, focusing on preserving biodiversity and what it means in terms of maintaining balance in the ecosystem that supports us.

 “It's not a zero-sum game between climate and nature. Both have to be considered and both have to benefit from increased focus and protection.”

Zooming back a little bit onto the mega trends of sustainability. What are the megatrends with sustainability?

Let me give you four megatrends.

1. As mentioned previously, the shift to nature – looking at climate and nature together to figure out how to protect that finely balanced ecosystem in which we live.
2. 2050 as the goal for net zero - put simply this is too far away and we will see that target date ‘shift left’ rapidly, in terms of both the ambitions and commitments you see from businesses and governments.
3. Reducing inequalities - the momentum around social issues such as human rights, modern slavery, diversity and inclusion, health and education inequality, will continue to accelerate.
4. The fourth one is the big one to my mind - a greater focus on the explicit link between climate change and health. Some of this will be very direct, such as how our bodies are going to adapt if temperatures rise or what happens if or when we face prolonged water scarcity. Other direct impacts will come from the loss of biodiversity, and how this profoundly impacts our ability to feed ourselves, shelter ourselves and protect ourselves through medicinal development. The link between climate change and health will also be more indirect. Think about the areas of the world which could become uninhabitable due to extreme weather and the wider effect that would have - forced migration, overcrowding, the spread of disease and conflicts over resources - all of which will impact health. I think the climate/health nexus is going to be where we really see the climate change debate reach peak awareness.

Obviously social issues have been getting a lot more attention recently, how are social issues gaining more attention?

The reason we've seen more focus on social issues is just because of ease and speed of communication. The spotlight on social issues is being shone more readily and brightly across the globe through social media, smartphone use and rolling 24-hour news cycles, all of which allow people to very quickly compare and contrast how they live in relation to others around the world. There's no hiding place anymore and that’s why the social issues are gaining more attention and that's why our lifestyles are increasingly becoming more interconnected.

If a business is very new to sustainability and ESG, what are some recommendations for those first steps that it should be taking?

Sustainability can no longer be done off the side of a desk. You either need to invest in capabilities within your business or you need to hire wisely. Either way it requires ensuring focused subject matter expertise is embedded within the business, allowing you to navigate the sustainability landscape and accelerate your ambitions. This expertise is as nuanced as it is technical, so it requires specific skills.

You also need to link into the wider sustainability community so you can start to identify forward-looking trends.

Lastly, you must have the ability to communicate your sustainability strategy and ambitions, because if it doesn’t resonate, you won't get any engagement. As part of this communication, ensure you’re robust, thorough and defensible with how you approach reporting - be transparent about what you have achieved and what you still need to do.

What excites you most about ESG in the years to come?

ESG is no longer a nice to have; it’s a strategic driver to business growth and also contributes to the greater good. Any high-performing business needs to ensure that sustainability sits at the very top table of decision-making. This can only be a good thing.