Environmental, Social and Governance, more commonly known as ESG, isn’t a new concept. But it’s certainly boomed in popularity in recent years, thanks to its potential to reduce costs, boost product performance and increase both customer and employee loyalty.
It’s become a critical must-do for every company, regardless of size, industry or service, as these set of practices can reflect a companies impact on the environment and society while also limiting negative outcomes. ESG can also strongly influence how a company is viewed by its customers, suppliers and its employees.
Unfortunately, despite increased interest and investment into ESG practices and frameworks, many companies are finding it challenging to implement successfully. To help demystify ESG and make it more manageable, we recently hosted a discussion that unpacked the mammoth topic of ESG, including adoption challenges, implementing effective strategies and ESG branding.
To help us during this interesting discussion, we enlisted the help of Kate Cooper-Fay, CEO of CXY Ltd. Kate has years of experience in shaping ESG strategies for some of the world’s biggest brands and is passionate about future proofing businesses. Kate was joined by CXY’s CCO, Andrew Howell for part of the session, in which they both discussed some of the biggest ESG pitfalls and how to potentially overcome them.
It was a collaborative and informative discussion, packed with useful advice and insights that simplified the process of implementing ESG strategies and frameworks. This will no doubt be useful for any company wanting to gain a greater grasp on ESG and implementing it more successfully.
Keep reading to check out a summary of Kate and Andrew’s most crucial insights and advice from our ESG webinar.
Despite ESG adoption rates experiencing steady growth in recent years, thanks in part to catalysts like the pandemic, climate change and social justice movements, many businesses are still not taking it seriously or giving it their full effort and attention.
According to a study by GlobalData, only 33% of businesses have changed their behaviour in the past year to achieve their ESG goals. In addition to this, only 27% of the respondents said they believed that their company was fully committed to ESG. These figures highlight that these companies aren’t as concerned by ESG issues, like climate change, as they should be and that minimum action is being taken to reduce the detrimental impact they can have.
This should be a major concern, not only for CEOs and board members, but for the general public who might choose to do business with these companies. Often the reason for this indifference is the misconception that ESG is overly complex and companies see it as an almost impossible task to fulfil. Unfortunately, this means that many businesses are disincentivised from accessing ESG support and lack a genuine interest in their own ESG values and goals.
While burying their head in the sand might seem like an easier option, Kate explained that businesses that don’t have a proactive approach and interest in their ESG are unknowingly setting themselves up for failure. She said:
“To me, if we’re not taking care of our environment, we’re not looking after our people and our communities and we’re not adhering to governance, should we even be operating as an organisation?
ESG should be a holistic leadership approach that considers beyond the scope of a company’s bottom line, including environmental impact, employee culture and the ethics around which the company runs itself- it’s a way of doing business. It’s the only way you should be doing business.”
Companies aren’t the only ones who are becoming increasingly interested in ESG. Now more than ever, customers want more than just a basic transaction. They want to know that the companies they do business with share in their values of protecting the planet and treating people respectfully.
80% of consumers said they are more likely to buy from a company with a strong environmental focus, with 76% saying they would stop buying from companies who treated the environment or their employees poorly, according to a report by CGT.
These findings were further backed up during our discussion when Kate shared that 70% of the consumers they surveyed said they would pay an additional 5% for a green product if they met the same performance standards as a non-green alternative.
By communicating their commitment and actions to achieve their ESG goals, companies can not only strengthen the loyalty they have with their existing customer base but can also attract new like-minded customers with shared values too.
“ESG is one of the largest influencers of customer loyalty today. Ultimately, a truly purpose-driven ESG strategy can serve as a strong differentiator, building trust with stakeholders, enhancing customer engagement, and protecting market reputation- in short enabling long-term growth while having a positive impact on the greater good.”
One of the most simple and effective ways a company can start to build further integrity and customer loyalty and engagement is by communicating their ESG and sustainability effort through their branding.
Andrew explained that if companies want to evolve their brand, they not only need to be authentic and communicate regularly, but they should also have ESG embedded at the heart of their brand messaging. He said:
“The best way to build up your ESG brand is through the people who make up your business. Make them the building blocks and give them the opportunity to define and create this whole piece. If you get that right, you’ll have something that is self-perpetuating.
To craft that authenticity, you need to talk to people. You need to understand what makes your stakeholders tick and consider why they care about ESG, why they buy from you and what their expectations are. If you don’t understand what they want to hear about, when they want to be told about it and how they want to be told about it, you’re not going to craft the right messaging. It’s so important that you drill down into the absolute essence of why someone wants to be part of your business.”
In a recent study by PWC, it was found that 83% of consumers and employees think companies should be actively shaping and improving ESG best practices. This clearly shows the demand and expectation for businesses to play an even bigger role in accelerating ESG progress and not just simply reacting and adapting.
However, before a company dives headfirst into improving their sustainability and ESG frameworks, it’s crucial that they take stock of their internal readiness first. Without a genuine interest from the team and a clear understanding of where potential resource and capability gaps lie, progress will be slow and may even stall. This could be a big risk to their reputation and the relationship they have with their stakeholders and customers moving forward. In some cases, this can be almost as bad as taking no action at all.
Having a designated department to champion and manage ESG process and delivery can seem like the most logical answer to this problem. However, Kate explained that this isn’t necessarily the best course of action and instead, ESG needs to be personal and ingrained into every level of a company, not just the top.
“Transforming inside is a win-win. How we behave and communicate internally is how we behave and communicate externally and is based on a basic psychology principle that feelings create thoughts, create actions, create outcomes. The time to focus on ESG is now. We need to think differently and start leveraging the power of a symbiotic community approach.
Having an ESG committee to oversee, priorities and ensure ESG delivery should become a part of your business’ DNA and BAU. Don’t just have this at the top, it needs to be multi-level and multi-functional. Please don’t have an ESG department. It should be across the business, top to bottom. If it sits in a department, it will not become part of BAU and won’t change how you behave and operate.”
We feel like we’ve merely scratched the surface of ESG during this session and there is far more left to unpack and discuss. As it continues to grow in importance, it’s likely that this topic will also continue to scale. If Kate and Andrew’s expertise and insights into ESG have taught us anything it’s that ESG can only truly be successful if its fully ingrained into a business’ culture, from the top down. Only then can real progress be made.
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From the Experts Industry Insight