The transition to net zero for the global energy and commodity sector is intensifying the need for market participants to shift to more sustainable and innovative business models. For the past decade, HC Group has been supporting clients in the development of more sustainable products across commodities as global supply chains have been adjusting to this transition. But there are still gaps. The imperative for businesses to meet their environmental, social and governance (ESG) targets from a holistic perspective means there is no one-size-fits-all solution, especially when it comes to talent.
Investment
The road to greener and more sustainable business practices and economies is not a straight line. The year 2022 has exposed how much governments, institutions and companies continue to face conflicting forces in their attempts to meet sustainable expectations. Such conflicts showed in the mixed feelings and disappointment post-COP27 over the phasing out of fossil fuels. Despite this, the energy crisis sparked by the Russia-Ukraine conflict led to calls by the European Commission to step up the development of renewable energy sources to compensate for reduced Russian gas supplies that may never return.
Yet, according to a recent PwC report, ESG-oriented assets under management (AUM) could “more than double” in the United States to $10.5 trillion in 2026. They are expected to rise 53% in Europe to $19.6 trillion and more than triple in Asia-Pacific to $3.3 trillion. According to PwC, Africa, the Middle East and Latin America are investing aggressively in ESG products as well.
The lack of consistency, transparency, and comparability in ESG data and reporting is generating doubt in the investment world, further compounding the talent shortage in the sector.
In any case, such reports point to companies’ continued efforts to build capabilities in navigating ESG risks. On the talent front, this has paved the way for key appointments this year across various industries. Deutsche Bank’s Jörg Eigendorf moved from the position of Global Head of Communications & CSR with responsibility for Sustainability to Chief Sustainability Officer. This move is part of a programme to develop the strategy and implementation of the bank’s sustainable practices across several sectors.
Other appointments include Francis Ugboma as Head of Business Development for Sustainable Fuels at SHV Energy and Sophie Dejonckheere as Partner, Associate Director, Climate and Sustainability at the Boston Consulting group.
These hires indicate that some businesses are banking on C-suite and executive talent to help shape and drive their sustainable strategies.
Business model
As more companies are embedding sustainable practices into their operations, there is no standard solution when it comes to shaping a sustainable business strategy that breaks away from the ‘business as usual’ model. In fact, firms often struggle to identify, develop, and implement sustainable business solutions that are innovative and suit their business purpose. Part of this challenge stems from companies’ different exposures to scope 1, 2, and 3 emissions, depending on their capabilities to monitor and assess emissions as well as where they sit in their respective supply chains.
The principle of sustainability is rooted in the need to decarbonize global economies and supply chains. But on the ground, sustainability has become increasingly multi-dimensional, calling on greater balance between its three fundamental pillars – Environmental, Social and Governance (ESG). Sustainability aims at transforming the economy by incentivizing the transition to clean energy, resilient infrastructure, and social equity.
For example, diversity is increasingly recognized as a key driver of sustainability innovation. Achieving gender diversity and removing the pay-gap remains key for many businesses and is a driver for competitive hiring practices. Based on a sample of market moves of executive sustainability roles across eight different industries collated by HC Group, 78% of new appointees are male and only 22% female.
From its own experience, accompanying a wide range of clients, HC Group has been able to understand the variety of ESG opportunities and challenges facing utilities, consultancies, private equity, banks, power generation and operators, majors, midstream and logistics participants, and refiners, to name a few
By meeting ESG targets, a sustainable business may achieve increased employee satisfaction, customer and staff loyalty, creativity, innovation and improve its public image. Crucially, businesses are in a better position to increase productivity, reduce costs, and boost their ability to comply with evolving regulation.
Businesses are now increasingly able to make public commitments to sustainability through their actions. For instance, the decarbonization of the energy sector through the growth of renewable energy is one of the first building blocks of sustainability, together with recycling waste and re-using resources. This has also paved the way for participants in the wider corporate world to invest in ESG companies and sustainable strategies. For instance, Coca-Cola, the world’s leading soft drinks manufacturer, set itself the goal to make 100% of its packaging globally recyclable by 2025 and make at least 50% of packaging using recycled materials by 2030.
Talent challenge
Undeniably, sustainability has become a top consideration for businesses in the commodity world. HC Group has been supporting companies developing and trading more sustainable products across our practices: from renewables and dedicated power projects, investment in renewable technologies, carbon and biofuels in the energy sector; plant proteins and biotechnology in the agricultural area; to scrap recycling and the development of a circular economy in the metals and mining segment.
Notably, rapid changes in markets and products such as biofuels, carbon and recycled metals have intensified the competition for C-Suite and executive talent in these niche markets. HC Group’s unique position across various commercial commodity sectors has allowed us to deploy innovative solutions amid increased correlation and adjacencies between different markets.
The demand and drive from participants to either bolster their sustainability strategies or hire leaders to shape a new one is tangible. “Everyone in the commodities and corporate world is desperate to hire sustainability experts,” says Manuel Pallister, Portfolio Director of HC Group’s Sustainability practice. “But often, they have no idea how to quantify their hiring needs.”
One critical challenge lies in finding senior talent in this space, or at least, talent with fully-fledged skills across the environmental, social and governance space. Until now, hiring efforts have been focused on recruiting junior professionals with a strong commitment to decarbonization and sustainability, or experienced senior candidates, even though their profiles may not necessarily encompass all three ESG pillars. “Employers are having to trade off some of the sustainable skills in senior positions as they are considering and building upon skills brought on by new recruits,” Pallister says.
From its own experience, accompanying a wide range of clients, HC Group has been able to understand the variety of ESG opportunities and challenges facing utilities, consultancies, private equity, banks, power generation and operators, majors, midstream and logistics participants, and refiners, to name a few. Its strong experience and relationships in the commodities and wider corporate world, have given HC Group unique insight into participants needs, and the ability to offer bespoke talent solutions so that companies can take their sustainability strategies to the next level. - FS
HC Group supports a broad selection of clients that are prepared to take bold, systemic approaches that create a net positive impact on the world. As more investors consider the energy transition and other ESG issues in their investment decisions, HC Group also works with those financial institutions that are increasingly reallocating capital towards sustainable assets. Click here for more information.
For queries related to HC Group’s insights into sustainability roles across commodities and corporates, please contact:
Manuel Pallister, Portfolio Director at HC Group’s Sustainability practice