Corporate Social Responsibility

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Sustainability in Treasury: A View Beyond Financing Treasuries have a responsibility to support the overall corporate sustainability strategy, but many may not realise that the organisations they deal with on a daily basis – their banks – can be a valuable source of information and assistance with this task.

Sustainability in Treasury: A View Beyond Financing

Lance Kawaguchi

by Lance Kawaguchi, Managing Director, Global Head – Corporates, Global Liquidity and Cash Management, HSBC


There have historically been questions around whether or not treasuries can actively contribute towards their companies’ sustainability objectives. However, in an age where sustainable financing has become more readily available, treasuries now have a seat at the table and are more engaged in helping to drive the sustainability agenda for their firms. As Lance Kawaguchi, Managing Director, Global Head - Corporates, Global Liquidity and Cash Management at HSBC explains, there are several other areas that corporate treasurers can focus on in today’s environment to influence their sustainability goals positively.

In less than twenty years corporate ethics have risen dramatically from something that a handful of large corporates did under the corporate social responsibility (CSR) mantra in a relatively low key manner, to a more comprehensive sustainability approach that is a frequent discussion topic in numerous boardrooms globally. KPMG’s most recent Survey of Corporate Responsibility Reporting [1] underlines this point by revealing that formal reporting of CR performance among the G250 [2] has risen from 37% of companies in 1999 to 93% in 2017. In a survey commissioned by HSBC, East and Partners found that three quarters of European investors judge companies on their Environmental, Social and Governance (ESG) credentials. This increased investor focus has led board members to identify the different types of sustainability measures the various parts of the business can take, and treasury is no exception.


So what can treasury do?

These and numerous other examples of the rise of an Environmental, Social and Governance (ESG) approach to capital management suggest that this is a trend that will persist and extend into smaller corporates as well (the KPMG report revealed a similar CR reporting growth trajectory among N100 companies to that of G250 corporates [3].) In this sustainability-positive environment, every part of a corporation - including treasury - is expected to help advance the corporation’s strategic sustainability aims. But what practical CSR steps can treasury actually take?

Aligned with the investor approach, the opportunities open to treasuries today can be divided into three broad categories:

  • Environmental

  • Social

  • Governance

The reasons why treasury can now play a more active role are varied, but include dynamics such as technological innovation, the rising importance of workplace wellbeing and an increasingly fluid regulatory environment.


Environmental

Recent advances in technology mean that treasuries now have numerous opportunities for making a positive environmental contribution to their corporations’ sustainability strategy. Digitisation is no longer blue-sky thinking, but a practical reality. By adopting electronic transaction processing, treasuries can drastically reduce the amount of paper used by both their own corporation, as well as their corporation’s counterparties. In addition to a potential reduction in water pollution, this also has an environmental benefit in terms of emissions, both during paper production and in the greenhouse gases no longer emitted during paper document delivery.

The international trade cycle is something that for many companies today is unnecessarily extended by a combination of the use of paper and the large number of parties involved. Adopting digital processes instead of paper (and in due course also blockchain technology) could appreciably shorten this cycle. Furthermore, treasury’s adoption of cloud computing can also have a major impact on the environment. A recent report from WSP and Microsoft [5] concluded that Microsoft Cloud was 79-93% more efficient than a traditional in-house data centre and that Microsoft’s Azure Compute had 92-98% lower annual carbon emissions.

All these innovations can be facilitated with the assistance of a banking partner that has not only made its own sustainability commitment to digitisation and the environment [6], but that also has extensive global in-house expertise in these various areas. An additional incentive is that other parties, such as tech vendors and clearing system providers, are also aligned and ready to facilitate this digital transition.

 

Notes
[1] https://assets.kpmg.com/content/dam/kpmg/be/pdf/2017/kpmg-survey-of-corporate-responsibility-reporting-2017.pdf
[2] The G250 are the world’s 250 largest companies by revenue based on the Fortune 500 ranking of 2016.
[3] The N100 is defined in the KPMG Survey of Corporate Responsibility Reporting as: “...a worldwide sample of 4,900 companies comprising the top 100 companies by revenue in each of the 49 countries researched in the study.”
[4] https://www.theguardian.com/environment/2010/jul/25/slow-ships-cut-greenhouse-emissions
[5] “The Carbon Benefits of Cloud Computing: A Study on the Microsoft Cloud” https://www.wsp.com/en-US/insights/microsoft-cloud-computing-environmental-benefit-study
[6] In addition to major investments in digital technology and automation, HSBC has also recently launched a new energy policy - https://www.hsbc.com/news-and-insight/insight-archive/2018/hsbc-strengthens-energy-policy - that aims to reduce environmental damage by no longer providing financial services to five categories of potentially damaging energy related activity

 

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