How should industry leaders approach sustainability?

A conversation on Sustainability: Your Competitive Advantage with Lara de Mesa and Leticia Álvarez Alonso.

Lara de Mesa has worked for Santander for almost 16 years, the last three of those as their Global Head of Responsible Banking. Leticia Álvarez Alonso is a Sustainable Development Goals (SDG) strategist with a focus on sustainability metrics that can be applied across sectors. Both are both part of the faculty on the Sustainability: Your Competitive Advantage (SYCA) program at IE University.

This intensive, four-day program has been designed to help business leaders and board members reevaluate their organizations’ commitment to sustainability, while giving them the necessary tools to begin the transition successfully.

We joined a conversation with Lara and Leticia to hear their thoughts about the program, and their insights on both the implementation of sustainable business practices, and the current sustainability trends we’re witnessing.

Leticia Álvarez Alonso: Sustainability entails a radical change in the business model for any company. Sustainability is not just about incorporating new criteria into the existing strategy. In fact on many occasions it implies a radical change in a company’s strategy. How do you see this playing out with financial companies?

Lara de Mesa: Embedding sustainability into our strategy and day-to-day activities includes how we deal with employees, customers, investors and suppliers, and society as a whole. This means successfully managing a wide array of changes that will range from onboarding customers to approving operations. Our responsibility goes beyond our own operations, as banks’ main contributions to sustainability comes from who and what we finance. At Santander our goal is to support our customers who are making the transition to a business model that takes sustainability into account. We do this by assessing Environmental, Social, and Corporate Governance (ESG) performance of our clients’ businesses and supporting their improvements.

Leticia: Leaders of the financial sector are placing greater emphasis on the need for board members to have access to training and understand how to integrate ESG factors into the bank's risk management, business strategies and investment policies. What sustainability training topics are, in your opinion, key to guaranteeing a proper solution to sustainability issues for a bank or other financial intermediary?

Lara: First, the concept of materiality—which ESG issues are relevant for each institution in terms of financial impact for the firm and external impact for society. Focusing discussions and actions on material items is fundamental to this agenda. Second, the need to truly embed ESG at the core of the business and align strategy and business model with the Paris Agreement and SDGs. Third is covering relevant technical elements of the ESG agenda: reporting, standards, climate, and the metrics we use to define alignment and transition.

Leticia: For an executive or board member to not face surprises in terms of risk management, they need to be up to date with the informal framework that governs sustainability, and understand the different entities that have taken over this governance role by leading and implementing sustainability practices. What would be your advice on this?

Lara: Training is a key enabler here. For the teams to embed ESG and deliver sustainable solutions while engaging with customers to support them in their transition, they need to understand what sustainability means and how to support and measure it. All this requires awareness, training and strategic implementation of this newer, more sustainable model. At Santander we are developing a whole ESG training model to address the needs of everyone, from the Board of Directors to the people in branches or in specialized teams.

Leticia: We have witnessed multiple complaints of greenwashing when certain companies talk more than they act. We have also seen the opposite in recent examples of CEOs of companies like Danone or Hellman's, who have suffered as a result of implementing their sustainability strategy within their companies. I believe this risk would have been avoided with a better understanding of sustainability. What potential risk factors do you see for companies unsuccessfully implementing sustainable practices?

Lara: Sustainability has to add value and contribute to the firm’s results. Advocates for sustainability should be subject to the same scrutiny any leader is subject to, and thus they should deliver results. The balance between short-, medium- and long-term results is not always easy to find.

A complete shift cannot be done in a day. It’s a long process, but stakeholders demand results. Setting intermediate goals and delivering on them can help build confidence in the overall execution and the added value that ESG can bring to business performance.

Leticia: I’m a strong advocate of the importance of measuring impact as the basis for any sustainability strategy. In the Sustainability: Your Competitive Advantage program we dedicate ample space to understanding how to put numbers on ESG issues. We are seeing campaigns like “Flight Shame,” “Who Made my Clothes,” or campaigns against meat consumption, which can sometimes have the effect of misinforming the consumer. For instance, how many people know that air travel is only responsible for as little as 6% of the transport sector’s carbon emissions? How do you think impact measurement and other initiatives contribute to a healthier understanding of sustainability?

Lara: The comparability of relevant and reliable information is key. We need to provide information to people so that they can make decisions that align with their values. Measuring our environmental footprint, social contribution and ESG performance in a way that stakeholders can easily understand will be increasingly expected and requested. It’s important to understand the starting point and the challenges that are a part of the transitioning process, so that as consumers and users our support can encourage change and progress.

Leticia: Regarding the case of exporting companies, they generate a significant carbon footprint from the mere transport of their products. They have a need to have access to information on how to deal with these issues, which can be very detrimental to their competitiveness. How do you approach the lack of information on these topics, as a teacher of the program?

Lara: First, it’s important we understand that sustainability requires a holistic approach. This is important because a company may be creating a positive social impact but not accounting for their environmental impact, and similarly they could be supporting the transition to a green economy yet not ensuring that no social harm was done.

The equilibrium can be reached, but it will require a collective effort, not just individual involvement. An understanding of this is needed to have the tools to manage and improve your overall ESG performance. The toolkit is not always as complete, available and reliable as we would like, but it should not keep us from doing everything possible to progress as much as we can. The clock is ticking and action is needed from everyone.

Thanks so much to both Lara de Mesa and Leticia Álvarez Alonso for letting us sit in on their fascinating conversation about the challenges and opportunities presented by corporate sustainability. Click here for more on the Sustainability: Your Competitive Advantage program.