Archive for October, 2010

Noreena on Sustainability

October 29th, 2010 by admin

Dialogue magazine: ‘Sustainability in Context’ in support of Amsterdam’s Sibos 2010 conference.

Published: Quarter 4 2010

DIALOGUE:
Does sustainability have a broader application than the environment and environmental impact?

NOREENA HERTZ:
I think it’s a very reductionist definition of sustainability to think of it only in terms of green issues. The term has been used in a multiplicity of ways. From a company’s point of view, sustainability involves an understanding of what it takes to survive today, and in the future. That incorporates issues like the environment, but also things like labour relations, human rights, employee discrimination, equal opportunity, and the company’s role in society. In other words, what does it take for a company to succeed today and in the future, beyond what one would associate with a standard balance sheet or a profit and loss statement?

DIALOGUE:
Does that mean it goes beyond the things that the CFO of a company would think that shareholders should be interested in?

NOREENA HERTZ:
Well, it may go beyond what he or she currently thinks shareholders should be interested in, but I would argue that, actually, all of these issues are issues that shareholders should be interested in. If we take a case like BP and we look, with hindsight, at the company and how it works, we can see a host of issues that analysts and institutional investors should have been aware of and interested in: for example, the discrepancy between a very strong focus on personal accident safety reporting and a lack of reporting on the safety of industrial core processes.

DIALOGUE:
If I’m a bank executive and I want to address the issue of sustainability in a comprehensive and concrete manner, where do I start?

NOREENA HERTZ:
There are a few areas where sustainability interacts with what the bank does. One is the kind of products that the bank offers. Then of course, there’s the issue of how analysts evaluate companies where sustainability also needs to come into the picture. Then there are issues around the bank’s own brand and reputation. Those are three of the main elements we could look at. One of the most interesting is the area of valuation. I think we are increasingly coming to see that risk is being underestimated by analysts who are only looking at a very narrow set of metrics in judging the success of a company.

DIALOGUE:
Can sustainability issues be expressed in terms of metrics?…

To read the rest of the interview view Dialogue magazine’s PDF: Sustainability in context: measuring the impact on financial institutions.