In focus: Building a more sustainable advice business (part 1)

4 min read 21 Oct 21

Advisers estimate that ESG investments will make up nearly half of all assets recommended within five years, up from 19% now, according to research by the lang cat. The same research found that 83% of consumers claim their personal ethics influence their buying decisions, at least some of the time.

With ESG growing in importance for many people, and clients becoming increasingly likely to judge the companies they deal with on their ethical credentials, should advisers be thinking about the effect their own firms have on the environment and wider society? And what practical steps can you take to become more sustainable as a business and make a positive social impact?

 

The history of corporate responsibility

The idea of businesses taking their corporate responsibilities seriously isn’t new. For instance, there are lots of examples of wealthy Victorian philanthropists improving the lot of their workers over 100 years ago through model villages with better housing, recreation, and education facilities, as well as providing benefits like pensions and insurance and shorter working days.

What has changed in recent years though, is the scope of corporate responsibility. Today it isn’t just about how well you treat your employees – although that is still important – it’s everything from environmental issues to inequality. Our understanding of the effect businesses have on local and global communities, eco-systems and resources has grown, particularly over the last 18 months when Covid restrictions saw a significant reduction in air, water and noise pollution globally.

 

Upcoming policy changes for smaller business

The Government has set out ambitious goals to cut carbon emissions by 78% by 2035 and 100% by 2050. It launched the Together for our Planet initiative ahead of the UN Climate Change Conference (COP26) in Glasgow this year, which aims to highlight the role of businesses and the public alongside the Government in reaching the UK’s ‘net zero’ target. Legislation is already in place for larger businesses to reduce emissions and the Federation of Smaller Businesses has stated that policy in this area is changing rapidly and it expects regulation to reach smaller businesses in time.

 

The business benefits of sustainability

More businesses than ever are now recognising the important role they have to play in delivering positive change, with a survey of 1,000 SMEs carried out by Virgin Money last October finding that 85% now believe sustainability is important to their business.

And making your firm more sustainable can be good for your profitability as well as the environment. According to Accenture, companies with consistently high ESG ratings outperform their peers, achieving operating margins 3.7 times higher than lower ESG performers and generating 2.6 times higher annual total returns to shareholders between 2013 and 2020. Similarly, a report earlier this year by the Enterprise Research Centre found that SMEs that introduce net zero practices are more likely to grow.

 

Practical changes

So what can advice firms do to embrace sustainability and reap the business benefits at a practical level? Here are just a few examples that can get you started on the road to becoming a more sustainable advice business.

 

Working from home

Home working has been the norm for many people in financial services for over a year and from an environmental perspective, you might not want to rush straight back to the office now things are opening up again. According to the Carbon Trust, the UK could save more than four million tonnes of carbon a year if people able to work from home continued to do so three days a week. This is equivalent to approximately 28 million one-way passenger flights from London to Berlin.

 

Getting to work

Of course, it might not be possible or desirable to work from home, so if commuting to the office is essential, then encouraging staff to walk, cycle or use public transport can help reduce your overall carbon footprint. The Carbon Trust estimates that 282kg of carbon was saved in the UK during Covid lockdowns for each person who avoided commuting.

In the financial advice sector, travelling to face to face meetings can also rack up your carbon emissions, so continuing with virtual meetings where possible or arranging a number of physical meetings in the same area can make a difference. If you offer company cars to advisers, by switching to electric vehicles you can not only cut emissions: you can also take advantage of the various tax breaks and financial benefits on offer.

 

A more sustainable office

And there’s much you can do to make the office itself more sustainable, from moving to renewable energy, to switching everything from lightbulbs to laptops with more energy efficient versions when the time comes to replace them.

It’s also important to think about recycling as many of these old or unwanted pieces of tech as possible because with figures from DEFRA showing that the UK currently recycles less than half of the waste it produces, it’s clear that we all need to think beyond recycling paper and lunch leftovers. Carrying out an audit of the waste produced across your business is a good place to start if you’re keen to do more.

And don’t forget the everyday household items used in offices which can easily be switched for more sustainable versions, from toilet rolls and cleaning products to notepads and printing paper. Speaking of paper, it’s becoming increasingly popular to move away from paper-based processes not just because of the environmental benefits but also the efficiencies and ease they can create for you and your clients. 

Of course, the increasing reliance on data, tech and paperless processes does require greater cloud and data storage which carries its own environmental impact. The good news, however, is that some large data storage providers are considering their own sustainability credentials, with Amazon World Services (AWS) claiming to be one of the largest corporate buyers of renewable energy in Europe, having recently invested in nine new renewable energy projects.

If this is starting to sound like quite a lot, it’s because sustainability is no small task. And with this in mind, it’s definitely worth considering allocating key people and specific roles, sometimes referred to as a ‘Green Team’ to take responsibility for creating ideas, encouraging participation and keeping an audit of progress.

Sustainability isn’t necessarily an easy win for businesses anymore – it requires committing to some pretty big changes to how you work. But, as well as the growing credibility sustainability has amongst your clients, this effort can also be a positive force within your business that gives team morale a real boost by taking decisive action to tackle what is a growing issue in all our lives. 

 

Our own steps to sustainability

As part of our shared vision with M&G we are taking action to put sustainability at the heart of everything we do. Together we have launched our first sustainability report which introduces clear commitments, set priorities and key dates for addressing long term challenges facing our business and society. Some of these include:

  • A commitment to being carbon net zero in our own business operations by 2030 at the latest. And M&G will achieve carbon net zero investment portfolios by 2050, to align with the Paris Agreement on climate change.
  • When it comes to the important issue of diversity and inclusion, we will continue to achieve external benchmarks such as the National Equality Standard and LGBT Great Equality index. And we will work towards greater representation of gender and ethnicity in our senior leadership by 2025. Goals include 40% female representation and 20% from Black, Asian and minority ethnic backgrounds.

Lastly take a look at our article from Robin Neilly, senior creative lead at M&G plc, about the philosophy and sustainability goals behind the design of the new websites, social media channels and your usual service emails next month. M&G Wealth rebrand: Delivering sustainability by design

We’ll share the M&G Wealth and Ascentric’s rebranded M&G Wealth Platform website as soon as they’re live.