ESG is the company passport to the new world.
We’re all familiar with the notion of sustainability and also environmental concerns. Governments are all over climate change and carbon emissions. However, it is obvious already that any changes made, any statutes passed will have a heavy financial penalty attached. The government certainly won’t be paying, and business and the consumer certainly will. That’s not a bad thing but now is the time to start thinking very carefully about what ESG might mean for your business or organisation.
Firstly, let’s clear up a misconception, ESG does not mean environmental, sustainability and governance.
Oh no, the ‘s’ stands for social. Sustainability fits under the environmental umbrella. Some people will be thinking, ‘yeah, yeah, whatever’ but I am writing this to say that ESG will NOT go away any time soon and is already becoming the bedrock upon which green finance is operating and consumers are judging companies and brands. Companies’ business practices will be improved by paying attention to ESG and regulators already have their eye on compliance. Photo: Markus Spiske
ESG is very specific.
Going green is rather amorphous whereas this outlines exactly what your company should be planning for and will provide the data you need to make informed decisions.
The most obvious section of this framework is Environmental
· We get it in its broader terms but how does that affect the performance, in environmental terms of your particular company? If you are not sure, right now consider the following:
· Have you done anything about reducing carbon emissions in your physical locations and throughout your supply chain?
· What have you done to improve the efficiency of your resources?
· Do you have a waste reduction policy?
· Have you checked whether you actually comply with environmental regulations?
· What about climate risk management?
Then of course there is the social aspect of this framework. This can cause slight confusion until you delve deeply into a businesses true relationship with its employees. Think about the following aspects and consider how far you comply right now:
Photo: Jose Martin Ramirez Carrasco
· What about workplace safety?
· How far have you interrogated every possibility of the safety issues, from working late, lone working, to entering and exiting the building as examples.
· How far are your employees engaged?
· Are they ‘done to’ or do they feel part of the company journey?
· How often are they consulted or asked for feedback?
· How often are they encouraged to share ideas, improvements, observations?
· Are they trained and encouraged to be company ambassadors?
· Do you obsess about customer satisfaction?
· How robust are your data and privacy policies?
· Are they customer centric?
· Do you enter into the spirit of GDPR, for example and not just comply with the bare minimum?
How often do you interrogate the business leadership and structure?
Do things carry on, business as usual, year after year or are there meaningful conversations regarding current leadership and also the structure of that which should change regularly?
Ask yourself the following:
· How much does the top team get paid?
· What kind of composition is the board? Should it be reappraised regularly?
· Can shareholders have a meaningful voice? Can they vote?
· Do you conduct audits? Are they transparent?
· How do you prevent bribery, backhanders and corruption?
· How do prevent complacency?
· How do you manage risk?
· How do you mitigate risk?
· How contemporary and up to date is your thinking and practices?
You may imagine that ESG is just another time hungry initiative that will simply cost
However, that is a simplistic approach. If your ESG framework is working effectively then it will reduce costs in a number of ways. Happy employees stay much longer and retention is cheaper than recruitment. McKinsey Research demonstrated an effective ESG strategy can have an impact on operating profits by as much as 60%. This is not a surprise as government are focused on it, society demands more, consumers are interrogating companies and brands and investors want to be part of the Green Finance movement. Executive teams that truly understand the value of ESG and what it can do for every aspect of business will succeed, or at least not suffer the same fate as the dinosaurs.
To prevent extinction, you need to hire well. I can help you. To begin this process do book a no obligation call. I'd be delighted to have a conversation.