The Future of Environmental, Social and Governance Criteria in the Corporate World, According to Buro Happold's Mike Stopka Mike Stopka gives insight into how ESG can strengthen strategic positioning, impact operations and what he sees as the next frontier.
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These days, Environmental, Social and Governance (ESG) is on everyone's radar, but many companies don't have a solid grasp on what it is, why its important or what to pay attention to. It is even harder for many corporate leaders to wade through the myriad ESG issues, separate signal from the noise, make key decisions about the future of their companies and operationalize their strategies in a way that maximizes business, environmental and societal outcomes.
Mike Stopka of Buro Happold is an expert on ESG implementation. Trained in architecture, environmental studies and executive leadership, his sustainability journey started when he created and led an architecture firm's sustainability program for six years, an experience he credits with teaching him how company decisions around sustainability and ESG are made. With a greater understanding of how to educate teams and build sustainability into a successful business, he moved on to the University of Chicago as director of sustainability. He encountered the challenges of departmental silos and recognized the need for an overriding strategic plan that aligned universal institution goals. His successes led to him forming his own consulting firm advising public and private sector organizations on how to advance ESG across their enterprises, and then to Buro Happold, where his strategic work is backed by a robust team of engineers, policy makers, social scientists, economists and planners who can turn strategy into reality.
I spoke to Stopka to learn how ESG can strengthen strategic positioning, impact operations and what he sees as the next frontier.
What are Buro Happold's clients' key concerns? How prepared are they to tackle ESG issues?
The work encompasses strategy and technical analysis backed by engineering expertise, with some change management too. Our clients are each at different stages. Some don't have a sustainability team yet. They're just figuring out what ESG means. Others are global, with hundreds of assets around the world and an established sustainability team that's clearly ready to go. But even in the case of the big clients that seem like they're really put together, there's a surprising lack of accountability internally, and that's the number one thing that I see. Big goals and big ambitions, but the organizational setup and resources aren't there to achieve their goals. Very often we're dealing with the Chief Sustainability Officer who is facilitating conversations between us and the head of HR or the CFO or other people with keys to the castle. We have to convince them to make certain maneuvers, whether that's putting in a change management program or electrifying all of their buildings or changing the policies that they use to hire vendors in their supply chain. I wouldn't say that we get pushback, but what we do get are clients that aren't always equipped to sustain the kind of change that's needed to achieve lofty goals. They want to, but it's obvious they aren't at a place where they can meaningfully execute.
Are there any common triggers that bring them to you, or are they all different?
The triggers vary. For the innovator and early adopter companies, their brand is sustainability aligned, so they are organically driven to seek expertise. For those who are new to sustainability it's often the fear of regulation, or a potential investor has said that they won't invest unless X, Y or Z is done differently. A lot depends on the sector. The real estate industry wants GRESB reporting and a credible stance on ESG. In the corporate sector, it might be something around supply chain and GRI compliant sustainability reports or having a science-based target. That's a new one that I love to see. People are being pulled along at this point, trying to avoid risk around stakeholder expectations or infrastructure resiliency, like operational continuity with climate change. We often discuss supply chain vulnerabilities, like the volatility of fossil fuel prices. It's really the fear of what's going to happen. The changing regulatory landscape, financial considerations, access to investors. That pool is shrinking, and companies need a credible take on ESG to get capital.
We do get folks who want to be leaders, and they usually have fairly audacious questions like, "How can I remove every ton of carbon I've ever emitted from the atmosphere and make sure I don't do anything like that ever again?" We're great at talking to early adopters and getting better at talking to the laggards, which is more about risk vs opportunity. Buro Happold needs to do both. It's a personal mission of mine to make sure we have a lot of different answers for why these matters. We need many different value propositions to help clients buy-in to doing ESG work. We have amazing engineering brains to unleash that can solve nearly any challenge, but if we can't communicate why this work is needed to secure board room buy-in and resources, we never get off the ground.
Where do you see the role of technological innovation in advancing ESG?
It's multi-pronged. On the pure environmental side, it's knowing what technology to put in place to remove fossil fuels: a lot of questions around electrifying everything, renewable energy, equipment that doesn't use natural gas. There are developments cropping up all of the time that make that more feasible to do. But a need that is more fundamental and applies more to the E, S and G, is data. There's a lack of understanding and consistency in what data is needed, what metrics are needed, how it's going to be collected and how to streamline that so it doesn't feel like such a daunting challenge to know what your "ESG footprint" is. I see the greatest need for innovation around that. There are ongoing conversations among CDP and SASB and others to combine thinking and get rid of this proliferation of rating systems so we have a common set of metrics, but it's moving slowly. That's forcing companies to push forth on their own, which is great, but they could move faster, be more targeted and more efficiently use resources if there was clarity and consensus on what they need to hold themselves accountable to.
We definitely need to start integrating and finding ways to tell a consistent story.
That's what most of our clients want to do, to tell an authentic story, the real story of what they're good at, what they're not good at, and how they're getting better. In some ways, we focus our energy there as opposed to whether they're on a top hundred list. As long as they're serious about that, we can help, and that approach has worked and has led us to more meaningful relationships with clients.
What are your thoughts on looking for opportunities versus managing risks? Do you see a shift in the narrative? Do you see any interest in looking for opportunities?
Risk and opportunity are just two sides of the same coin, but it depends on who we're talking to in an organization. The higher up you get, the more the conversation becomes about risk. When you stay at the staff level, it's "I want to work for an organization that stands for positive change," and it becomes a key talent acquisition and retention tool. That's an opportunity for companies to get the best people to do the best work. You could brand that writ large as stakeholder engagement, whether with customers or employees.
Using sustainability as a branding and differentiation opportunity has almost fallen away because now it's more if you're not doing it, you're branded poorly, but if you are doing it, you're just keeping up with the status quo. I'm not having a ton of conversations around lower cost of capital. The biggest risk and the biggest opportunity is on the appeal that it's going to have to your people and your stakeholders. The generation that we have coming in, they want the truth and they're voting with their dollars and actions. They'll vote to work for an organization or buy from an organization that stands strongly and can actually show what they're doing in the ESG space. The most successful conversations I've had have involved helping employees see that their company is making a real effort at admitting what they're not doing well. They can get behind that and actually want to help problem solve. The real opportunity lies in having the courage to tell your real story, that is who will win the day in the future.
What do you see as the next frontier for ESG and companies? What do you think we're going to be talking about three years from now?
There's this idea of what we would call a collective impact model versus an individual impact model. The individual impact model is essentially what's in my control — my scope, one, and two, carbon, my health and safety, the wellness of my people, my resource efficiency. The collective impact model gets more into scope three carbon emissions, which is largely about an organization's partners, vendors, and broader stakeholders. What communities and people are the whole supply chain and value chain affecting? It's quantifying the carbon footprint across scope three but also quantifying the impact — the social cost — of carbon to all of the stakeholders at those various points, realizing that the environmental and social sustainability can't be separated when we're making decisions.
We know that a supply chain includes everything from raw material extraction all the way to the product's grave years later. There's a carbon footprint associated with each of those steps that we should be thinking about, but there are also social consequences of each step that often get overlooked or swept under the rug. What about the communities where the mineral mining occurs? What about pipeline spills? How are the chemicals used affecting the people working manufacturing jobs? How are construction workers and adjacent community residents exposed to pollution or impurities? We need to be thinking about the environmental and social together, in a collective impact model. They should all factor into the value judgment or decisions that a company is making. I hope that's where ESG going. At least that's where we're trying to send it. I can see spotty positive change right now, but it feels like puzzle pieces spread across the table and we need to put it together. "We" need to have a meeting of the minds, all throwing our tools on the table to make the best collective tool. On the corporate sustainability side of things, there's a sharing attitude. Few in the sustainability community have a problem offering up their secret sauce if they perceive it's for the greater good. The problem is there is a lack of agreement on who the "we" is that must be at the table to make real change happen, so we each continue doing the best we can individually, putting the puzzle pieces together.
I'm really hoping that this focus on outcomes and results, on driving meaningful change, catches on.
It is. It feels like it's happening too slowly, but I see it moving in the direction of validation, authenticity, actual impact, and if we keep moving there, that's great. Nobody knows how fast a company has to go in order to be successful, and that's a huge problem. There are all kinds of targets, but what does each company's specific roadmap tactically need to look like to stay within 1.5 degrees Celsius of climate change? What does that action plan look like over 10 years? It feels like an amorphous blob you can't get your arms around. It pushes company leaders that are used to making decisions with quantitative data points in hand out of their comfort zone when you ask them to commit to zero carbon by 2040, for example. They want to know what resources it's going to take to get there when they make that decision, but that is only knowable with mild certainty, given the number of variables and long timeframe. There is an element of being willing to go for it and say "This is the company we want to be, so we'll make it happen." I am often situated right in the middle of these discussions, and as a trend I do see more companies going for it. We need more, faster though.
It's an undertaking to even get into that conversation. And that's just climate. What about the rest of ESG? What challenges do you see?
At this point, I've worked with over 40 companies in 13 sectors on their sustainability programs, either internally as an employee or as a consultant. And there's a key list of barriers that prevent success. The one I see consistently that's worth noting is that sustainability professionals lack the ability to communicate from a place of value that's not their own. How do you have a conversation that puts your own ethical or moral beliefs about acting in an environmentally or socially sustainable way aside and have a conversation that convinces another person? I see a big need for that. I see us getting better, but that's a huge barrier that I think is consistent with all the clients I've come across. These are massive challenges with many fronts to address, but we will keep plugging away.