by Daphne Biliouri-Grant
Environmental, Social and Governance (ESG) considerations have been gaining momentum over the past couple of years within the business community. This is due to a cultural shift driven by the climate emergency and the pandemic crisis that has increased public pressure and an evolving regulatory framework. Today ESG issues are considered mainstream concerns due to a combination of factors, such as the growing number of investors demanding more transparency, policymakers insisting on greater accountability, and the rise of conscious consumerism and stakeholder capitalism.
However, this is not a new concept; ESG issues have been dominating the corporate space for many decades but often as an add-on concern. Several terms have been used over the years, such as Corporate Social Responsibility (CSR), Socially Responsible Investing (SRI), Responsible Investment (RI), Impact Investing, Social Investment, Corporate Stewardship, Corporate Social Purpose. And they all have one thing in common, they are driven by the core value of sustainability. In turn, sustainability as a concept is about taking into consideration the environmental, social and economic impact of our actions to ensure a balance between environmental protection, social equality and economic prosperity.
Corporate accountability is increasing and the realisation by the corporate world that the integration and implementation of ESG considerations within their business strategy is no longer an option but a necessity, has carved a new path for the business community.
Market leaders are taking a strategic response to ESG by changing their products and services, processes, operations and supply chains and no longer treat ESG as a box-ticking exercise. A compelling corporate purpose and a strong ESG proposition improves business performance and long-term value.
The CEO of a global financial institution commented: “Viewing the way our organisation functions through an ESG lens has streamlined our decision-making process and has strengthen our presence in the market”.
However, while the demand for change is growing, most corporates are struggling to translate these expectations within their own business strategy. Moving along this new direction is not without its challenges and a stumbling block that companies often encounter is the confusion around these issues, where do ESG concerns fit within their operations, what do they need to prioritise, how can they actually implement them.
And even when ESG considerations are successfully integrated within a company’s strategy, the next challenge is how to ensure that ESG factors are monitored and measured so a company can report on their impact. There is a plethora of data metrics, monitoring processes and reporting systems that only add to the confusion.
So to help companies navigate through this complex landscape, there are a few pointers to take into consideration.
The main one is the acceptance that there are two elements of equal importance surrounding the need for ESG integration and implementation: a) ESG considerations need to be addressed as part of a company’s overall risk management process, and b) the integration and implementation of ESG factors creates business opportunities.
This leads to another point; the need to recognise that reluctance to integrate ESG considerations within a company’s corporate strategy is a financial, operational and reputational risk. There has been more pressure from all stakeholders to address environmental and social issues and increase transparency and accountability. So, by incorporating ESG considerations, a company can articulate more effectively its corporate purpose and as a result safeguard its reputation, identify risks early and enhance its financial performance.
Another fact that as a company needs to acknowledge is the importance of integrating and implementing ESG factors both from the top down and bottom up within its organisational structure. While it is the responsibility of the Board and the senior management to embed ESG into a business and drive this transition, it is also essential for employees, clients, contractors to drive the demand for change.
And finally, it is the level of willingness of the company to become a leader in its industry by raising the standards. In this case, the integration of ESG considerations creates opportunities for a company to operate as an innovator within its sector, become proactive and mitigate risks, as opposed to simply react to any upcoming challenges.
The fact remains that pressure to fully embrace ESG considerations is growing and expectations for a value-driven business community are rising. So it is important for the business community to be at the forefront of this evolution.
If you have any questions or would like to find out more about how Sibylline can help you integrate and implement effectively ESG considerations, please reach out to our ESG Senior Advisor, Daphne Biliouri-Grant