Here, Andrew focuses on Environment, Social and Governance (ESG), an important topic for all business leaders and boards to have on their agenda right now.
“It is worth starting with what ESG is and why it should matter, before leading onto some good examples of what you should be doing and what others are doing.
“As a leader you are duty bound to focus on the financial wellbeing of your company, which is often construed as profits. ESG up until recently was seen as an extra cost. But the result of this thinking is that we ignored the impact on our environment, and our wellbeing.
“Leaders are now seeing that ESG is interlocked with long term profitability. You can have both and that by including it in their business strategy businesses can unlock opportunity, reduce waste and future proof your brand in the eyes of all your stakeholders.
“According to KPMG nearly 70 percent of business leaders acknowledge that ESG is essential or good for business. But what is important to recognise here is that the three elements of Environment, Social and Governance when brought together becomes a strategic approach looking beyond shareholder return, by evaluating and operating your business in a way that takes into consideration the entire ecosystem of your operational sphere.
“You cannot miss this topic in the press and social media e.g. Net Zero targets, UN sustainability goals, rise in ESG certificates in B-Corp and environmental standards like ISO27000. More and more I am seeing investors, customers, consumers, governments and employees demanding to see and understand businesses approaches with many valuations being impacted. This is a trend that is here to stay and we must embrace it.
“Taking each one as an individual approach, environment is how your company’s activities affect the world with its pollution, emissions, energy, use of natural resources water consumption, waste but also investments in clean technologies and net zero strategies. Typically, these are all focused by Government led environmental policies, but it needs to be more that a list of things to do from the Government. It needs real action and demonstration of change at all levels and none more so than the SME. For example, the energy trilemma has never been more at the forefront of business’s minds in a world reeling from covid, the Ukraine war pushing gas prices to record levels, and a cost-of-living crisis – all exacerbated by the now daily impacts of climate change. Energy affordability, security and sustainability is a tricky balance, but behind this is a growing, collective consciousness in the business community about ESG and the bigger picture beyond profit. The reality is a significant majority of businesses cannot operate without energy and you can’t always pass on increasing costs to consumers
“One company that has been delivering low carbon and renewable energy projects for over a decade, Reheat, works directly with clients who are now accelerating their transition to decarbonised production. The economic situation is of course a key driver, as biomass heat solutions, for example, provide a viable, ready-to-go alternative to oil and gas, with lower prices that aren’t subject to interruptions in global supply chains and the dramatic price-hikes that fossil fuels have experience recently.
“However, environmental and social responsibility is an increasingly significant factor in client decision making. Some of Reheat’s major clients, such as the National Trust, know their customers - the general public - are highly aware of such a large estate owner’s environmental impact. But as an organisation there is a responsibility to ensure their operations are as low carbon as possible. Reheat has supported the National Trust to decarbonise the heat production across a dozen sites, installing over 2MW of renewable heat generation capacity, and delivering a wide variety of heat consultancy.
“Another Reheat client, Yearle House in Northumberland, has transitioned to 100% biomass heating and promote on their website the owner’s ambition to align sustainability performance with Northumberland Country Council’s carbon neutral by 2030 plan. In addition, many businesses (including Yearle House) seek to be stewards of natural resources, sourcing sustainable and local wood fuel that not only has environmental benefits but also supports local supply chains.
Founder of Reheat, Ben Tansey told me:
“From a renewable and low carbon energy perspective, businesses in the North East can start their ESG journey with access to advice and schemes that consider how they can use less energy, increase energy efficiency, explore renewable and low carbon energy options and offset remaining emissions. A useful place to start is measuring your current environmental impact through disciplines such as carbon accounting – for example visiting Smart Carbon (smartcarboncalculator.com), based in the region. Exploring low carbon and renewable energy sources can put a business on a purpose-led path to making a significant contribution to society beyond profit.”
“The Social element of ESG focuses on how as a business you treat people, namely stakeholders both in the business and in target audiences. We touched on a lot of these topics during my previous Diversity, Engagement and Inclusion articles, such as gender pay gap, reskilling and training, health and safety, human rights and equality.
“And Governance, the ‘G’, which is an arena I personally love and excel in, outlines how a company executes its highest-level functions, including decision making, ethics and adherence to company articles. Ecosystem ESG falls within this, too, making leaders think outside of their immediate concerns and consider an entire perspective of possibilities.
“Commitment to ESG brings a competitive advantage, and allows for increased innovation in solving problems, if you fully embrace it.
“An organisation that has done just that is Accenture, a computer technology services business with offices around the globe, and one right here in the North East. The company shares their ethics, corporate governance and policies transparently on their website allowing the world to hold them accountable. Chair and CEO of Accenture, Julie Sweet, says:
“Across the globe, one thing is universally true of the people of Accenture: We care deeply about what we do and the impact we have with our clients and communities. It is personal to all of us.”
“This is a clear example where ESG has been used to shape the culture, and define the character of the company, putting them in a clear pole position for their behaviours. That has instilled into their team, also making it a great place to work for anyone who has values.
“Investors also take ESG commitment seriously so it goes without saying that if you want to grow and want to attract investment, ESG should be high on your agenda right now. Next month I will look more closely at the Social and Governance angles for you.”
If you need help in homing in as a leader how ESG could benefit your organisation, then please do get in touch with Andrew on andrew@marshbusinesstransformation.co.uk