Here’s a niggle. It’s 2022. We all know COP26 was important, but nobody truly understands what they can do, individually or professionally, to make the changes necessary to reverse the effects of climate change. As Founder Director of the ESG Foundation, I am eager to demystify the next steps we each can—and must—take.
Most decently run businesses have a corporate social responsibility (CSR) plan. But if they’re so good, why did the UN’s Intergovernmental Panel on Climate Change recently declare, “Climate change is widespread, rapid and intensifying, and some trends are now reversible, at least during the present time.”
One reason is that CSR can’t be compared and contrasted like for like between companies, sectors or even countries. In our hearts, we all know that CSR data can be selectively chosen. How many CSR reports from your competitors have you read and thought, “Well that’s just greenwash?”
So is reporting on your organisation’s Environmental, Social and Governance (ESG) performance any better? Absolutely.
Don’t confuse”‘ESG investing” with “ESG strategy.” ESG funds and ESG investing which are so much in the news at present are misguided at best, and mostly hypocritical. Investment strategists who remove themselves from investing in polluting industries like oil and gas just move the problem somewhere else. By all means, take an ethical stance against investing in discretionary sectors like tobacco or weapons manufacturing, but can you seriously be anti heat, light and power generation? Or mining for vital raw materials, like iron, copper, or lithium?
ESG strategy is more mature than that. But let’s not confuse ESG investing in publicly listed companies with why every organisation—and especially the senior leadership team—needs to look at itself in the mirror and ask where’s our ESG strategy?
Three reasons why you need an ESG strategy:
Are you good enough to work for? New recruits in their 20s and 30s are increasingly prepared to sacrifice salary over substance. Most existing members of staff want to know too that they’re working for an organisation that has purpose and makes a positive impact.
Are you able to show you care about the environment on which you depend, your staff, suppliers and stakeholders? Environmental husbandry is vital but so too is your footprint on society. What difference are you making? Could it be better?
Are you worth the investment? We all have an exit strategy, so what will attract the attention of an insightful investor when you sell? Increasingly organisations deploying an ESG strategy attract attention to themselves but those without ESG credentials will not fetch the best market price, simply because they are not the best.
If you can answer these three questions with 100% conviction then you already have an ESG strategy. Amazing. Congratulations.
If you can answer some of these questions then, congratulations, you’re doing really well, but you appreciate you have to keep pushing on.
If none of the questions have ever occurred to you then welcome to 2021, you’re like the majority of owner managed businesses. But not for long.
Once global standards are unified for publicly listed businesses regulation for privately run businesses will surely follow. That process would usually take years to embed but as we’ve learned over the past two years technology and the demands of society can shift behaviour at the jab of a needle when needs must.
So as you look ahead to the type of company you will be in 2022 and beyond ask yourself not if you’ll have an ESG strategy, but when?
We’ll look at the “how,” in our next article.
The ESG Foundation was founded in 2020 to encourage senior leadership teams to implement an ESG strategy, regardless of the size of the organisation in which they work, and whether it is privately or publicly owned. We believe measuring progress of environmental, social and governance metrics is an essential prerequisite to creating employers with purpose, who inspire their staff, clients and suppliers and are open and transparent in their dealing with others. For business owners in particular ESG best practice is increasingly demanded by potential investors, Gen Z recruits and as proof that sufficient steps are being taken to achieve a Net Zero footprint by 2030.