A recent Forbes article looks into three common ESG (Environmental, Social Governance) questions that many have on their minds.
ESGs have seen a massive push in recent times, from Corporate Knights' annual release of its Top 100 Sustainable Companies, to moving into ESGs as an investment strategy in their own right, through to the creation of global digital tracking systems such as that recently launched by Fair Trade, to record the movements of raw materials to hold organisations to account in terms of their ESG efforts.
But still, many question remain as to the feasibility of effective implementation, and of course, the effects of ESGs on supply chains is one of recalibration and transformation.
Forbes' recent article tackles the three following questions, to attempt to assuage any misgivings relating to viable ESG accomplishments:
1. If ESG data is self-reported, why invest the effort and money to actually follow good ESG practices?
The article points out that ESG 'footprints' are self-reported, and that for obvious reasons this can lead to problems as to their accurate tracking.
The article states: "If you only think about ESG compliance as part of an annual ESG reporting cycle, it won't be very effective or pay off in the long term. The last thing you want is for your ESG efforts to be a box-checking exercise. Instead, it should be woven into the fabric of the culture and the strategy.
"Look at your ESG goals not just as a yearly report, but rather as the way you work, the way you operationalise and how you consider your impact as a company.
"Your goals." it says, "shouldn't be about achieving better investor scores—better ratings are a result but not the outcome businesses should try to achieve."
2. What if we put effort into ESG compliance and we're accused of 'greenwashing'?
Many companies are anxious that they will be red-flagged for not implementing ESG policies, and will effective become corporate personas non grata, which can be detrimental to business reputation. On the other hand, they also worry that they will accused of greenwashing, with many efforts ramping up to identify those corporations who do not 'walk to walk'.
The article states: "The first—and best—way is to not make claims that are untrue. Don’t make claims that you can’t back up with data or can’t easily be repeated if needed."
Secondly, it says: "create the core list of policies that are priority for your business. Once you have the policies approved and in place, make sure they are readily available on your website." The push here is for transparency, which with the evolving culture of work - and beyond - is becoming embedded in the status quo, and the world that the up and coming younger generations want to see as default.
Lastly, the article states: "make sure you self-report your efforts. Self-reporting is essential because many rating agencies rank you whether or not you participate. So being proactive makes sense.
"Make yourself available to investors’ questions, and allow them the opportunity to provide feedback on what more they would like to see from your organization. This has proven to be an incredibly helpful component to improving our ongoing ESG plan."
3. Will investors think investing in my company is risky because their funds won't be in diverse funds/portfolios?
The article points to the fact that Investors increasingly want to invest in companies reporting ESG data. It states: "Being conscious of the environment and your suppliers, hiring diverse people and having an independent board are all factors that can make a company a more solid investment.
"Often, companies providing transparency are coming out ahead of companies where investors don't know what's happening inside."
It highlights that doing well while doing good is absolutely possible. As the new world emerges, companies will need to find ways to implement ESGs into all of their operations and their very culture.
Avoidance would be self-defeating in this instance. ESGs are not an empty shell, no matter how many organisation may try to pay lip service to it.
What we are dealing with is the world, and all of the people in it. The name's on the tin.