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How to get sustainability target setting right in 2025
From a social perspective, ESG in real estate could range from providing affordable housing and remodelling public spaces and public housing to new investments in green buildings.
The last few weeks of the previous year were filled with news of organisations that had cut back on their climate or sustainability targets or had them revised.
This change to targets, though sometimes unavoidable, should be infrequent and done transparently.
Taking a transparent approach to target revisions helps organisations with their stakeholders from a trust perspective, particularly investors who might wrongly infer that returns were compromised by organisations for sustainability or ESG (Environmental, Social and Governance) ab initio in some cases.
Therefore, while the business case for ESG is evident to organisations that have embraced its standards and principles, it is vital to ensure that the target setting and agreed timelines for achieving the set goals are realistic and grounded in market realities.
When adopted appropriately by an organisation, sustainability should result in growth from new opportunities, reduced costs from efficient systems and better risk management by organisations.
For organisations to deliver on this business case for sustainability without being seen as compromising shareholder returns when setting targets, they should pay particular attention to the following.
First, organisations must ensure they entirely translate sustainability's why, what and how to their short, medium and long-term performance. The assessment of an organisation's performance should highlight revenue and profitability impact in a manner that demonstrates the contribution of sustainability compared to the traditional growth trajectory and performance.
Secondly, organisations should scrutinise the data for this exercise to ensure that they make decisions with accurate data.
Most organisations that have yet to develop an internal audit program for sustainability-related data have implemented sustainability plans and programs only to discover later that the underlying information was inaccurate, leading to some of the pullbacks we have witnessed.
Another aspect to consider is the impact of government policies and regulations over time. Organisations must consider various scenarios of the future effects of policy changes, not just the present policies and regulations.
Some changes to targets have been due to recent changes in government policies, which have adversely impacted those organisations from a sustainability perspective.
Organisations considering these measures when setting sustainability targets will make less frequent revisions and build trust with their stakeholders and investors by clearly demonstrating the business case for sustainability.
Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics
