Impacts of Climate Change on Sports

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Sustainability and sports. There are not many talks or disclosures to gauge the Sustainability (environmental issues in particular) impact on the sport sector. However, the influence of sports reaches out to a wide range of society across regions, age groups and genders, and provides a united social platform for more sustainable behaviours. Sports organisations are encouraged to be more progressive in becoming more sustainable to deepen connections with current and new fans while increasing business performance.

Environmental impacts should really be one of the focus areas for certain sports, such as outdoor winter sports and surfing. These sports are directly affected by climate change. Organisers will face the difficulties to host sporting events such as the Winter Olympics due to the decreased winter periods, and the changes in ocean tides and waves could force current surfing venues to be relocated.

Climate change may also resulted to increase in rainfall that could lead to flooding, and this has already affected cricket events in England and India. The increasing occurrence of intense wildfires that caused detrimental air quality had caused disruptions to the Australian Open in early 2020 and also caused cancellation of baseball games in Seattle. These are just some examples of how climate change are limiting the existing sporting events and the trend is likely to remain.

The business financial implications due to these cancellations are severe. For instance, the infamous Hurricane Harvey had forced the displacement of Houston sport business and clubs needed to participate in extended road games due to the fact that it was just not possible to host games especially for fans to crowd the stadiums.

Apart from that, the locations of the sporting facilities and stadiums are at risks of climate change, especially at coastal areas. The coastal areas are threatened by rising ocean sea levels and have high likelihood of facilities flooding with damaging effect.

Based on what has been mentioned so far, it is quite vivid to see how detrimental environmental i.e. climate change issues impose on sports, to both organisers, sport clubs and also the fans. 

Sports organisations’ environmental impact assessments tend to lack certain important aspects. Normally, sports organisations would only look at short impact on the facility or sporting event itself. They also need to focus on the externalities that poses direct environmental impacts that include carbon-producing transportation of teams and fans, food consumption and waste production.

It is also observed that sports organisations have not reached out enough to external stakeholders and experts on environmental initiatives. Like many other businesses, this is probably due to the lack of awareness and direction from the organisations’ management on the overall value from the initiatives.

It might be a surprise to some to know that fans are actually keen on and even participate in reducing sporting events’ and their own environmental footprints during a game. This is evident in environmental awareness campaigns that advocate fans to increase the use of mass transit, increase waste recovery and purchase carbon offsets to mitigate personal impacts when attending a sporting event.

Events surveys are helpful to formulate and assess the social and financial returns on investment of the said campaigns. The change of behavior to be more environmentally friendly does not only occur during a sporting event, but it leads to day to day behavior changes in sustainable living of individuals and local communities.

Sports organisers could also benefit financially from these initiatives and investments. Environmental initiatives are attractive for certain categories of fans such as the millennial.  They view these initiatives and investments to uplift their sports organisers’ brand perceptions and will drive towards lucrative returns in merchandise sales. The advocacy on environmental sustainability by organisers can be benefitted to promote a social norms of sustainable living that can lead to obtaining corporate sponsorships by other sustainable organisations.

Sport organisations should take the first approach of assessing their environmental impacts before begin to invest in initiatives to gain financial and social returns.

The Seattle Mariners had conducted its energy audits and facility upgrades. It was found that it has managed to save significant amount of energy and cost. Another example is the Ohio State University Athletics Department that extended its waste management programme of its facilities to the surrounding community to achieve zero waste. Some also extended their initiatives to the fans such as the Philadelphia Eagles and Seattle Sounders offset their teams’ carbon emission through carbon offsetting programmes including facility operations, team travel and fan travel.

Another energy cut saving initiatives is seen at Levi Stadium of San Francisco 49ers. The organisations are consuming renewable energy featuring solar panels. This is also seen at the Johan Cruyff Arena in Amsterdam that features battery arrays that are capable in storing enough energy to meet the consumption of an entire event.

Another interesting example is from a football club in England. The Forrest Green Rovers had come up with a design to build a stadium that will be completely made out of sustainably sourced wood. The team’s current facilities are powered by 100% renewable energy. The facilities’ concessionaires only features plant-based food items. All of these efforts play a substantial role in minimizing its environmental impact.

 

All views and opinions expressed on this site are by the author and do not represent any particular entity or organisation 

 

 

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Why is it Difficult to Develop Better ESG Case Studies?

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Introduction

Does Environmental, Social and Governance (ESG) management bring financial returns to companies? That is the common question that from companies when they are encouraged to go beyond reporting compliances.

Whenever companies are being asked on the limitations to uplift their sustainability management, one of the common responses is budget restrictions. To them, investing in environmental protection or in the workforce wellbeing or other social issues would bring no or little financial profits to shareholders.

Failure to present convincing insights on the financial outcomes, will make getting companies on board to focus on sustainability issues to always remain a challenge. But since the Covid-19 pandemic has impacted business around the world, only now companies have started to realise the severe effect in putting sustainability risks on the side-line.

It is in fact not a new discovery that integrating ESG considerations into business strategies is not only important to mitigate external risks, but also profitable as well as important to customer allegiance and protecting against the rising number of major threats to social stability, vibrancy, and inclusivity.

 

But why is it difficult to build sound and comprehensive ESG business case?

Variations of ESG reporting – Companies around the world, in different sectors as well as different regulations, are self-reporting using different ESG metrics. Particularly for early reporters, the majority of ESG reporters disclose data and information that are not audited hence the accuracy and credibility of the disclosure are not determined. Hence, it is a challenge to validate and compare ESG performance clearly.

Limited standardisation of ESG ratings by third parties – Third-party ESG data providers are organisations outside of reporting companies. These third parties would normally use different data and rating systems, resulting in a substantial deviation of assessments.

Unclear linkages of the reporting ESG metrics to the effectiveness of ESG strategies – Many companies tend to report on whatever they have, including based on the operational initiatives in place pertaining some material matters but not directly derived from the companies’ overall ESG strategy. This restricts companies to gauge the effectiveness of the ESG strategies as the data they are monitoring is not exactly the data that they need to focus on to deliver value creation, rather than the data that they have for annual reporting purposes only.

Clear segregation of ESG metrics with financial metrics – As mentioned earlier in the article, qualifying the financial outcome of ESG initiatives could be difficult. To date, only few companies are able to track the return of ESG initiatives to their overall business revenue, and even lesser companies can provide comprehensive and consistent data.

Intangible ESG values are not easily measured – Companies often find that accounting is not the best tool to measure ESG performance as there are a lot of variables to monetise ESG values that are intangible that to date is over 80% of companies value.

To work on building a good business case, we also first need to understand the relationship between ESG and the overall business financial performance.

Companies by now should understand that integrating ESG into business operations is not just mere through corporate social responsibilities programmes. ESG integration should be aligned and centred together with business corporate strategy. A few research has found that companies that have integrated ESG into their core business outperform companies that have not in financial performance as well as stock market performance. This is because these companies strategically focus on managing the material matters that truly have impact on the business and stakeholders. This kind of research is widely available, but it is not good enough to be considered as sound business case for ESG. This is mainly due to the fact that there are still inadequate presentations on the details of how the management strategies or efforts actually work in making performance enhanced or profitable. This is why top leaders are not able to be relate and be convinced the ESG management levers that push towards financial performance.

Case studies on financial performance from sustainable investment on the other hand, have been rather complex due to various investment strategies having different performance profiles. For instance, in reference to negative screening (avoiding investment in industries, such as tobacco or weapons, that work against certain values or social goals) may limit performance as it reduces portfolio range and diversity. But currently, negative screenings that omits coal portfolios are doing well.

Regardless of these research complexity, the trend of ESG performance is showing that there is positive correlations between good ESG performance, stock price, cost of capital, and operational achievements.

 

Conclusion

A clearer business case on ESG’s financial impact are still needed to provide companies to relate and get inspired to make the move towards sustainability excellence. The business case will pave way for companies to scale up their investments in ESG in the face of pandemics like COVID-19, as well as other pressing issues such as climate change, inequality, and many other perceived or real challenges to their bottom lines. The companies’ commitment to meet its fiduciary duties as well as overseeing ESG performance should go hand in hand.

 

All views and opinions expressed on this site are by the author and do not represent any particular entity or organisation  

 

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