ESG FOR EVERY BUSINESS

ESG is fast becoming business critical and a license to operate for all businesses with Leadership Responsibility at its heart.

Our diagram explains some of the key concepts of ESG that will help you to join the “discussion”.

At its most simple, ESG refers to three core pillars of business conduct:

• “E” - How a business interacts with and impacts the environment

• “S” - How a business interacts with society creating value generation

• “G” - How an organisation is governed

Stakeholders

Putting sustainable and responsible practices at the heart of your business is fast becoming a requirement and expectation for customers, clients, regulators, investors, and other stakeholders.

Customers, both B2B and B2C, may actively choose not to engage with businesses with poor practices (e.g., human rights in supply chain), or a perception of unsustainable/unsafe products. On the flip side, customers will look favourably on those who are able to demonstrate their commitment to action.

ESG extends past an organisation’s direct impact and considers where the environmental and social issues are across the whole value chain.

Some financial services organisations have started to offer ESG products to the market. For example, providing discounted lending rates in return for performance against ESG targets, such as greenhouse gas reductions.

Investors are increasing ESG reporting requirements across the ownership cycle. As part of this, many private equity investors are signed up to the ‘Principles of Responsible Investment’ and this is leading to downward pressure for their portfolio businesses to develop their own targets and track performance.

Businesses are also coming under increasing pressure from their own workforces to implement ESG strategies. Failure to act runs the risk of disenchantment and increased attrition as employees increasingly vote with their feet over this issue.

Key focus for SMEs

The sheer breadth of ESG as a subject can make it a difficult subject to begin to grapple with. Businesses often ask us, “Where do we start”? Understanding the key topics that are most important to your business can help direct efforts to the areas you can have the most impact.

Top tips

1. Baseline assessment - really understand what your organisation already does in this area, you may be surprised by what you find out about your organisation.

2. Consider what makes for a sensible strategy and policy approach given the context of your business.

3. Identify the gaps – assess what is missing in your current approach versus where you want to get to.

4. Develop a continuous improvement mindset – it is a “journey” not a tick box exercise.

The soon you start on your Environmental, Social and Governance (ESG) journey, the sooner you will be well placed to take the related opportunities with your customers, your team and other stakeholders in your business.