Customers, clients, investors and the public are talking more and more about ‘ESG’ but what does it mean and how can you make it work for your business – as well as for the greater good?
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ESG – Environmental, Social, Governance.
These metrics essentially map out how a business is behaving as a corporate citizen, measuring its impact across a range of different areas.
For example, on Environment, how is a business minimising its impact on climate change? Is it taking steps to reduce its carbon footprint? How does it go about improving its local environment?
When it comes to Social impact, what is a business doing to foster diversity across its workforce? Does it work with suppliers that hold the same values as it claims to hold? Does a business donate to the local community or encourage employees to perform volunteer work?
Common questions on Governance include how accurately and transparently does a business report its affairs? Do stakeholders get the chance to play an active role in decision making? Does the business have safeguards to prevent potential conflicts of interest among board members?
Why is ESG growing in importance?
In the past, such issues were often seen as “nice to have” but not essential in the same way as a business’s legal or financial responsibilities.
However, increasingly ESG factors are playing a greater role in every area of the economy, from retail to technology, property to finance and across the private and public sectors.
Improving your ESG can help in a wide range of areas including:
Access to finance: it is now commonplace for ESG assessments to be carried out by institutional and individual investors before making a decision on whether to put money into a company. More and more banks and other financial institutions also offer loan facilities at more attractive rates to businesses which meet certain ESG criteria while lenders such as HSBC offer preferential rates and even cashback on loans for projects which improve companies’ sustainability credentials.
Reputation: businesses which score well when it comes to ESG are held up as examples of great corporate citizenship, with accompanying positive profile raising; those who rate poorly on ESG criteria face an increasing risk of being ‘called out’ in the media, via campaign groups, journalists or activist investors with the potential to cause serious damage to their reputation, standing and their bottom line. Just look at how activist investor Cevian is making companies like Vodafone and Unilever change their practices.
Customer/client sales: consumers are increasingly drawn to spend money with businesses that score highly on ESG factors and shun those which are shown to fall short. A recent survey found that over 84% of consumers said they were more inclined to be loyal to a brand whose values aligned with theirs. In B2B circles, many clients also have their own ESG scores to think of and so will include ESG factors in their final purchasing decision. Another survey found that business leaders are increasingly likely to turn down working with companies whose ESG does not come up to scratch. And since 2021, public sector organisations have been required to expressly evaluate ESG-related factors in their procurement exercises with a minimum 10% weighting given to those factors when making procurement decisions.
These are just a few of the reasons why ESG can’t be ignored.
What should I do about ESG?
Too many times, companies view ESG as part of their regulatory burden – a box to be ticked so they can carry on in their business as normal. As a result, responsibility for ESG issues is hived off to a company’s HR and regulatory function where compliance is the beginning and end of its function.
However, this approach means companies don’t make the most of the opportunities ESG offers as well as increasing the risk of failing to communicate those values across the organisation.
Instead, ESG should be at the centre of operations, accessible to all functions from finance to sales and used as a tool to drive the business forward.
Seeing ESG as an opportunity rather than a burden could revolutionise how you approach your business – and bring some major rewards.
Read on to find out more.
Can ESG really boost my business?
Outdoor clothing company Patagonia was founded in 1973 by climber Yvon Chouihard and its mission statement is “we’re in business to save our home planet”.
Among other things, Patagonia:
Many of those activities would seem to fly in the face of commercial common sense, even if they are good for the planet.
So how is that working out for them?
Sales in 2013 were at a healthy $570m but since then they have grown well past the $1bn mark. Patagonia operates more than 100 retail stores across the US, Europe, Japan, Argentina and Chile and employs around 2,300 people. The company has some of the most loyal customers of any brand in the world and founder Yvon Chouihard is now a billionaire.
“Customers become advocates of brands because they develop an emotional connection with their core purpose. Brands that elicit advocacy provide a value beyond just product quality and experience. This connection is something that deserves analysis, as it is the foundation of true loyalty.” – former Patagonia CEO Michael Crooke
Patagonia is also an example of a Certified B Corporation, a movement which is growing in popularity and media profile.
What is a B Corporation and how could my business become one?
Businesses which want to make a point of their purpose and have that independently recognised can apply to become a Certified B Corporation.
B Corp Certification shows a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.
To achieve certification, a company must:
Certified B Corps have to be verified every three years to show they are continuing to improve.
The number of B Corps has grown over the past few years and there are now over 5,000 of them in 80 countries across 154 industries.
As the B Corp movement has grown, so has the profile of the companies involved with major recent features in publications including The Times, The Guardian, Reuters, Forbes, This Is Money and the Wall Street Journal.
Harrogate Spring Water has been a B Corp since 2020 when it became the first North Yorkshire company to gain B Corporation certification.
The company had to demonstrate its accountability, performance and transparency across a range of factors including environmental impact, employee benefits, charitable giving and supply chain practices.
Among its achievements, Harrogate Spring Water:
We recently helped Harrogate Spring Water to put together its latest B Corp impact report outlining the company’s continued improvements to its ESG commitments and to boosting its B Impact Assessment score.
How should I publicise my company’s ESG work?
When talking about your ESG commitment and living your values, getting communication right is key.
Media organisations and the public at large are becoming increasingly sceptical of companies’ claims of responsible business and care for the planet.
The term ‘greenwashing’ is on the rise in the wake of activities which portray a company as environmentally friendly when in practice it is anything but – take this recent example from the BBC of how an ambitious tree planting scheme ended up in costly failure. That’s why such activities need to be very carefully planned and executed in order not to backfire.
In a similar vein, it is true that talk is cheap – warm words need to be backed up with concrete actions.
A good example of this is long-standing Cool Blue client Barker and Stonehouse.
The company approached us to help communicate its sustainability strategy to customers, press and key stakeholders. Here’s what we did.
There are some sensible steps you can take to draft, execute and maximise your ESG strategy:
How we can help?
Cool Blue has experience in helping clients of all sizes in a wide range of sectors with their ESG needs.
We can help you with:
Formulating your ESG strategy – what should go in, what should be left out and how to make it really work
Drafting and design – making your strategy say the right things and ensuring it looks as good as it sounds
Communicating ESG across your audiences – ways to make everyone from your bank to your budding customer understand what you are doing and why
Activations that do good and get noticed – creating eye-catching and authentic ways to ensure everyone hears about what you are doing
Helping retain credibility and make further connections – because an ESG strategy launch is only a starting point
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