This piece is by Michael Willis, Management Practice Associate Professor at Cambridge Judge Business School, Academic Programme Director of the The ESG & Sustainability Strategy for Financial Leaders & Practitioners Programme
What’s going to happen tomorrow? Next week? Next year? Next decade?
While it is impossible to answer these questions with certainty, much of the work of the modern finance leader focuses on making decisions based on informed and careful projections. After all, finance theory tells us that most of the value of a company today comes from cash flows expected to flow into the firm in the distant future.
As organisations incorporate sustainability and ESG agendas into their strategies, finance leaders must confront and understand new layers of uncertainty, and expand their decision-making toolkit. An assessment of the changing global landscape is a good place to begin.
At the core of ESG and sustainability ideas lies a fundamental question: what does it mean to be a good business in the context of modern society? The answer to that question varies depending on where it is asked. As a result, norms, policies and regulations differ and change over time, sometimes rapidly! For example, the election of Donald Trump to a second term as President of the United States signalled not only the likely withdrawal of the world’s second-largest emitter of greenhouse gasses from the Paris Agreement, but a potential shift in broader environmental, social, and governance related policies with global implications.
In contrast, the European Union has taken an ambitious approach to ESG-related policy, by adopting the Taxonomy for Sustainable Activities, the Corporate Sustainability Reporting Directive, and the Corporate Sustainability Due Diligence Directive. Together these create extensive new sustainability reporting requirements and a legal obligation for firms to conduct sustainability due diligence. Some have expressed concerns that the cost of complying with these requirements may weaken Europe’s competitive position in the global economy. Perhaps in response, the November 2024 Budapest Declaration on the New European Competitiveness Deal includes a pledge to reduce reporting requirements by at least 25% in 2025.
Developing and emerging countries are no less dynamic and complex in these dimensions. Sustainable economic development and prosperity remain a primary goal but are complicated by the strong likelihood of being impacted most severely by climate change. The idea of a just transition brings the promise of support but struggles to leap from paper to reality. Sustainability considerations arise from connections with more developed economies through supply chain relationships or the effort to attract foreign investment and develop stable private capital markets.
Understanding global trends is just the beginning, and these are just highlights of a few important ones. In the ESG and Sustainability Strategy for Finance Leaders and Practitioners Programme, participants will continue the discussion in much more depth, and explore practical tools and frameworks for improved decision-making.
The ESG & Sustainability Strategy for Financial Leaders & Practitioners Programme is a collaborative programme between Cambridge Judge Executive Education and the Institute of Chartered Accountants in England and Wales (ICAEW).
The 4-day ESG and Sustainability Strategy for Finance Leaders and Practitioners Programme is a face-face-programme which will equip participants with the knowledge and tools to integrate sustainability into their organisations’ strategies and operations. Covering climate and sustainability; the information ecosystem; sustainable finance and leadership, it will run from 22-25 April 2025. Book your place https://execedinfo.jbs.cam.ac.uk/esg-sustainability-strategy
