Climate change has been a topic across boardrooms for some time, but it hasn’t always been at the top of the agenda. However, as eyes turn to Glasgow for COP26, business leaders are keen to be seen to place great importance on the actions they are taking across environmental, social and governance (ESG) initiatives.
This focus has been given renewed attention as business leaders look for ways to contribute to climate change targets and solutions; a result of shifting societal, political, and regulatory environments as the world aims to address this challenge and the threat it poses. These initiatives are already delivering progress, and there is evidence that this shift has had the desired effect in accelerating environmental sustainability efforts.
However, there is always more that can be done, and when done well, an effective ESG strategy can have a positive impact for an organisation at all levels, driving growth and contributing to long-term competitive advantages. Additionally, customers, investors, and potential employees increasingly look to a company’s ESG impact before making purchasing and investment decisions. It can also help attract millennial talent, enhance brand value and reputation and support growth ambitions.
In a survey conducted by Deloitte Global and Forbes Insights on the impact of sustainability efforts of 350 executives, more than half of respondents indicated a positive impact on revenue growth and overall company profitability. Beyond positive financial implications, 48% of respondents indicated increased customer satisfaction, while 38% indicated that embracing strong ESG values enhanced their ability to attract and retain talent.
For some firms though, there may be questions about how to create and integrate an effective ESG strategy. For these companies, there are some key things to keep in mind.
Firstly, because an ESG strategy impacts every facet of an organisation and is relevant for all stakeholders, integrated thinking is key. This collaborative and connected approach ensures ESG principles remain at the core of a business and helps companies understand value creation through a new lens that balances short- and long-term outcomes and acknowledges the diverse range of resources on which all companies rely.
Setting the foundation and committing to action is an obvious starting place and without that, it’s impossible for businesses to set meaningful targets or measure progress and Deloitte’s study into Business’ views on environmental sustainability highlighted the issues created by an inconsistent measurement and reporting process. Setting targets aligned with the Science Based Targets Initiative can add additional rigour and credibility to stated ambitions. It also allows businesses to demonstrate that their subsequent targets are in line with the latest climate science. Already we are seeing these types of metrics being asked for by providers of finance.
Something else for businesses to remember is the ‘social’ side of ESG. This is typically forgotten about in strategies, perhaps because it is less easy to define or capture in metrics. However, there is no doubt it makes a difference to trust, confident, diversity & inclusion and the engagement of its stakeholders. A social impact mindset could just be the key to driving your business forward.
Ultimately, the development of a strategic plan is generally accepted as the easy part and the difficulty is how to turn it into reality. However, ownership and accountability of aligned goals for business units, geographies and individual teams can help meet goals, as can willingness and openness to transformation. In doing so, businesses can benefit operationally while accelerating solutions to climate change.
Read the latest issue of the OGV Energy magazine HERE.