A Baby-Step Approach to Embracing and Leveraging ESG
September 08, 2021
The environmental, social and governance (“ESG”) framework is one of 2021’s hottest business topics. However, these concepts have actually been part of the business lexicon for more than 70 years, under tags such as corporate social responsibility, sustainable business practices, values-based business (B Corporations) and corporate social value.
Whatever the name, the basic concepts are the same. Businesses can thrive while still operating in ways that contribute positively to the lives of their employees, customers, communities, countries and the world. It is not only possible but practical and profitable to consider issues of sustainability, environmental impact, social responsibility and effective thoughtful governance as we develop strategies, business plans and operational practices.
We hear a lot of acronyms and even talk of new regulations. But what does all this mean to an individual business, and how can you leverage the positive aspects of these practices while minimizing the burden of change and potential disruption? First, we recommend clients consider doing the following:
- Identify and clarify your company values. You might also include your family’s values if you are a family-owned business. What is important to you? How do you want your leaders and other employees to act on the job? What reputation are you trying to build? When you consider your people and your community (including the larger, global community) what is important to you? For some owners, it might be providing a safe, fair and welcoming work environment. For others, it might be contributing to certain charitable organizations that have a strong personal draw. Whatever it is, think about how these things translate to the values you hold dear. Write these values down and reflect on how they translate into day-to-day behaviors. How will you know that you, your leadership team and your employees are abiding by these values at work?
- Once the values are written, discussed, clarified and translated into actual behaviors, now identify the things you are already doing to support them. This is the beginning of identifying your existing ESG principles and practices. For some companies, this might include a list of the charitable organizations they support or a list of their internal policies that support diversity, equity and inclusion. Perhaps you have a robust mentorship program that provides unique opportunities for younger employees to learn, grow and advance in their roles.
- Next, think about how you might expand and support these efforts and ensure that you are undertaking activities that specifically support the values of the leadership and/or family.
This is a positive and productive way to build upon your current business successes and identify a few baby steps for moving in the right direction. Starting with internal policies, which can have a particularly positive impact on employees, is usually a win-win strategy. It provides an immediate return for your ESG investment in the form of higher engagement, reduced turnover and increased ability to attract talent. Likewise, building upon existing community involvement programs and team member volunteerism can be an easy win, which is good for the company’s brand and image as well as good for the local community.
Most companies we have worked with over the years have some impactful and commendable programs already in place and may not even know how important or special they are. It is simply their way of doing business. Now is a chance to step back and re-examine the company’s practices, expanding where possible, celebrating what’s going well, and aligning these actions with the vision and values of the business.
Later, when these activities have been acknowledged, improved upon and supported, the business can begin to expand its efforts. This might include:
- Reviewing the 17 United Nations Sustainable Development Goals and determining what areas of improvement currently fit your business or seem like a potential future fit.
- Reviewing the Global Reporting Initiative’s Standards for ESG and potentially using them as a guideline for developing some of your company’s goals.
- Exploring B Corporation Even if you have no interest in becoming one, the framework is very useful for companies that wish to find additional ways to positively contribute to a fair, just, safe and equitable world in which everyone can reach their full potential.
- Learning more about the nonprofit Carbon Disclosure Project (“CDP”), particularly for manufacturing companies and others active in a supply chain. The CDP is a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.
- Learning more about your own supply chain. Evidence suggests that emissions are far higher in a company’s supply chain than in their direct production. Furthermore, instances of forced or child labor are often discovered buried deep in a supply chain, much to the great shame and embarrassment of the commissioning company.
The journey toward fully embracing ESG principles and practices will be ongoing. It is vitally important that we all work together to encourage companies to do their best for the best interests of the environment, local communities and the world at large. The most important steps are to build upon current successes and find ways to expand, enhance and improve current practices. Next, education will be key. ESG must become a topic that remains relevant, dynamic and integral to running any effective company going forward.