EY: Creating business value from sustainability and ESG

Steve Varley, EY Global Vice Chair – Sustainability, talks exclusively to us about creating business value from sustainability and ESG

Sustainability. It’s the mantra of the moment when it comes to business success – an essential area of focus for any organisation serious about remaining relevant. It is also an opportunity – a chance to differentiate from the competition while also doing ‘good’. It’s a fact: sustainability is good for business, and businesses need to adapt swiftly.

That is nothing new, but when the Big Four consultancy firms (Deloitte, EY, KPMG, PwC) allocate their leading minds to helping clients create business value from sustainability and accelerate transitions to a lower-carbon future, you know it is top of the agenda.

Steve Varley stepped into a newly created role at EY that was the first of its kind among the Big Four, leading the consultancy’s climate change and sustainability agenda globally while also leading EY’s overall environmental sustainability strategy across the US$36bn professional services organisation and its 300,000 people.

It’s fair to say Varley doesn’t just ‘walk the walk’ when it comes to sustainability but leads others along the route. EY achieved carbon neutrality in 2020, became carbon-negative in 2021, and has a net-zero commitment for 2025.

Varley is also founding co-chair of the S30 – a group of 30 Chief Sustainability Officers from some of the world’s leading businesses, launched in 2020 in collaboration with HRH The Prince of Wales’ Sustainable Markets Initiative.

In this exclusive interview, Varley discusses his new role, the challenges ahead for global organisations, and what business leaders need to do right now to secure our future.

Steve, please explain your role at EY?

I help EY clients create business value from sustainability and ESG, from reframing strategy and accelerating transformation to how they govern, operate and build trust. I also lead EY’s overall environmental sustainability strategy and decarbonisation efforts, including our carbon ambition, which saw us become carbon negative in 2021 and will get us to net zero in 2025. 

You joined EY in 2005 – how has the consultancy changed during that time?

EY has changed a lot in the past 15 years, in many ways driven by the introduction of disruptive technologies like AI and blockchain to help clients tackle big challenges. However, one of the biggest changes I’ve seen is the move across all EY service lines – assurance, tax, consulting and strategy and transactions – towards a model that is focused on helping clients build long-term value for all their stakeholders, especially their shareholders. This focus on stakeholder capitalism is the bedrock of the EY strategy, called “NextWave”, through which all 312,000 EY people contribute to helping create and protect long-term value for clients and wider society.

Do you think sustainability is top of the corporate agenda right now?

Yes – sustainability is increasingly being viewed as extremely important by business leaders. For some leaders, the starting point is ESG but a major theme for most is carbon reduction and the climate. Even before COP26, business was beginning to realise its crucial role in tackling the climate crisis. Many companies have set net-zero targets, and more are being announced every day. In Glasgow, business was highly visible, and we heard multiple world leaders reference the growing role of the private sector in their speeches. And it’s not just about decarbonisation – businesses are also looking at the impact of issues like biodiversity and nature loss, water shortages, the circular economy, and plastics. But the bottom line is that businesses need to shift focus away from setting targets that may be many years in the future to reducing their absolute emissions today – and evidencing action each year.

Is aiming to be net-zero by 2025 ambitious, or achievable? What are the biggest challenges?

It is ambitious but it’s also achievable. We’re a professional services organisation and our biggest asset is our people, so we don’t face many of the same complexities and challenges as some industries. It’s going to take some businesses longer to adapt, but those that can move faster, like EY, need to do so. A big challenge we face is helping our people take actions that will reduce their carbon footprint as they go about their work – for example, by taking fewer flights. We have a seven-point carbon point action plan to help us achieve our carbon ambition and part of that is the EY Engagement Carbon Calculator, which is a tool that enables EY people to assess the amount of carbon they emit, has been a big help in helping our people understand and then work to reduce their carbon footprint when delivering client work. Members of our Global Executive – the most leadership body at EY – also have their performance judged against progress on our ESG metrics, which include our carbon reduction ambition. This is important because it helps set the tone right from the top of the organisation. 

Tell us about S30 – who is involved and what your role is? What does S30 hope to achieve?

The S30, which is part of the Sustainable Markets Initiative (SMI) led by HRH The Prince of Wales, comprises Chief Sustainability Officers from some of the world’s most influential companies and its aim is to accelerate business action on sustainability. It was launched in collaboration with EY and [communications agency] freuds, and S30 members represent companies with a total market capitalisation of US$6.7tn, revenue of more than US$2.3tn and more than 5 million employees. It’s all about helping business leaders in sustainability to work together, learn from each other, raise their profiles and influence within their organisations, and take collective action. Its members are focused on outputs and actions that drive best practice and will collectively benefit not only the S30 but the business community as a whole. 

Sustainability is about a lot more than ‘just’ climate change and decarbonisation. How is EY tackling issues like DE&I?

That’s true – there is far more to ESG than sustainability. EY has been on a DE&I journey for decades and we’re still on it. We work hard to cultivate a diverse and inclusive culture, where all our people can feel like they belong and are empowered to be themselves at work. We’ve always believed that setting the right tone and agenda from the top of the organisation is critical and that’s why, in 2020, we formed our Global Social Equity Task Force to develop and prioritise cohesive global actions specifically addressing inequity and discrimination. The EY Global Executive, the senior-most governing body, has also signed a Global Executive Diversity & Inclusion statement which is a commitment to hold ourselves accountable at the highest level. There’s lots more to say about this but hopefully this gives a flavour of how seriously we take DE&I at EY.  

Do you think the general public, and business, have differing views on what sustainability means and what matters most to them, or are they aligned?

I think there’s been the beginning of convergence in priorities and goals on this agenda across all stakeholder groups. COP26 was a great example of multiple groups coming together for collective action on climate change, and I really believe everyone there shared many of the same common beliefs. There’s still a long way to go, and there will be differences to overcome, but I’m optimistic about the change I’m seeing and the impact of incoming generations on the private sector. When you look at a business like EY, its 312,000 people reflect the communities in which it operates around the world. It’s inevitable that the views of those people will have an impact on the business.

I often hear the phrase ‘sustainability is good for business’ – how is that so, and is that even more true now and in the future?

It’s definitely true today and it’s going to become even more of a focus for business in the future. Sustainability has now gone mainstream, and especially after COP26 – sustainability is everybody’s business. We’re seeing lots of CEOs now putting sustainability at the heart of their business strategy and looking for ways to create value from becoming more sustainable. What’s really exciting is seeing business apply its innate skills at innovation, embracing disruption, and problem-solving to tackle the biggest issues facing the planet, and do so while creating value for all. 

When advising organisations on sustainability, what are their biggest concerns, and how can you help them most?

The biggest concern from business leaders is how to become more sustainable, while also protecting business value. The CEO of a Latin American multinational once said to me: “We can’t afford to go green by first going red” – I think this captures the dynamic very well. The kind of client work we at EY have been doing to help businesses achieve this include building business models to support green consumer products, assisting companies seeking to invest in solar and wind and helping turn oil companies into integrated energy companies, among many other things. We want to build on this work and continue to develop services that help our clients find value in becoming more sustainable.

Regarding COP26, was it just ‘blah blah blah’ and can businesses change the world in ways governments seem reluctant to?

Going into COP26, existing national commitments projected a temperature rise of between 2.7C to 2.9C. With commitments agreed under the Glasgow Climate Pact, the latest analysis suggests we are looking at an increase of 1.8C to 2.4C. While this is an improvement, it isn’t 1.5C – and the commitments agreed to date will require detailed plans, measurement and accountability. I think businesses have a huge role to play in helping keep 1.5C alive – they must develop plans with real, measurable targets and transparent roadmaps to meet them. They must also build trust in their commitments and report on their plans every year. Stakeholders won’t wait and the planet can’t wait for COP27 for answers – business has an unprecedented opportunity right now to lean in and take action. Efforts to protect the natural world have yet to achieve the same high profile as those to limit climate change but I think it’s important that business thinks about sustainability in broader terms than just the climate. COP15 is focused on protecting biodiversity and I think it’s important that business engages with this too, despite it generating fewer headlines.

When it comes to measurement and accountability, how do you do that in a way that is fair, universal, and transparent?

Holding companies accountable to the climate commitments they make is critical. However, the frameworks that currently exist for helping companies calculate and report their carbon footprint aren’t subject to the same level of rigour as financial reporting – and this needs to change. Improved reporting and transparency will lead to increased corporate accountability and investor confidence. It was encouraging to see this issue on the agenda at COP26 and the launch of the International Sustainability Standards Board was welcomed by many. We all understand it’s going to be a difficult journey, but leading companies are already seeing the benefit of incorporating clear and transparent ESG goals into their corporate strategy.

As a father of two, what are your hopes, and fears, for the years leading up to 2030?

I often get asked about my views as a father, but while having children does give me a slightly different perspective, I focus on the universality of the challenges we face as humanity. It doesn’t matter how old you are, where you are, or what your family situation is – sustainability really is everybody’s business. Over the coming years, my main hope is that businesses and governments develop sustainability targets with teeth from measures that matter, keeping 1.5C alive and protecting the planet for future generations.

Steve Varley, Global Vice Chair, Sustainability, EY

Steve leads EY’s climate change and sustainability agenda globally in a recently created role that is the first amongst the Big Four consultancy firms. 

He helps EY clients create business value from sustainability and accelerate their transition to a lower-carbon future. He also leads EY’s overall environmental sustainability strategy across the US$36b professional services organisation and its 300,000 people. 

Steve is leading the organisation’s efforts towards decarbonisation and has overseen its achievement of carbon neutrality in 2020, carbon-negative in 2021, and net-zero commitment for 2025.

Steve was previously EY UK&I Regional Managing Partner and Chair of EY UK, leading the US$3.5b business and its 17,000 employees. He originally joined EY in 2005 and has nearly 30 years of client and consulting business experience in various sectors including pharmaceuticals, oil & gas and public services.

Steve was a member of the Business Advisory Group to UK Prime Ministers David Cameron and Theresa May and was also the UK Government’s Business Ambassador for the professional services industry during this time.

Steve is founding co-chair of the S30, a group of 30 Chief Sustainability Officers from some of the world’s leading businesses, launched in 2020 in collaboration with His Royal Highness The Prince of Wales’s Sustainable Markets Initiative.

Steve is also a founding member of the Social Business Trust, a member of the International Chamber of Commerce governing body, on the Chairman’s Advisory Group for the British Museum and a member of the Productivity Leadership Group. Having earned a BEng at Loughborough University, he is now on its board.

• Join global business leaders and sustainability experts taking meaningful action at Sustainability LIVE, held at Tobacco Dock, London, 23-24 February 2022. Register to attend today! Click here to learn more.  

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