Most businesses are familiar with the term CSR and probably have a number of initiatives in place which purport to deliver tangible benefits to the environment or society. What is far less common (at least in the UK) is the term ESG, but mark my words, they are three letters that will fundamentally shape the future of every business on the planet.
ESG stands for ‘Environmental, Social, and Governance’, three non-financial factors that investors are increasingly referring to when identifying material risks and growth opportunities. In a world where the expectations of highly informed customers, employees, and society, in general, are rapidly evolving as the consequences of capitalism on people and planet (in its current form) becomes more widely understood, ’sustainability’ is increasingly taking the centre stage. In fact, I recently noticed a full page advert in The Sunday Times, for a Liontrust ESG investment fund which stated that the high conviction portfolio will ‘focus on the highest sustainability companies.’ To me this message is glaringly obvious, ignore ESG at your peril.
Businesses of different sizes, operating in different sectors and policy environments are approaching ESG in different ways. For many, the current approach to ESG and sustainability isn’t that much different to their approach to CSR. It’s about compliance and doing enough to tick the boxes required to ensure they can continue to operate. But that approach is like trying to fit a square peg into a round hole. ESG is not the same as CSR although the two are inextricably linked. Whilst CSR is underpinned by accountability, ESG has its foundations in measurability. CSR sets the intention, ESG ensures that these intentions are not only achieved, but critically, they are measured, assessed and evaluated.
I’ve witnessed a real sea change in the past 6 months, there’s an energy and urgency around sustainability, and it’s escalating at pace. This is leading many organisations to face an inevitable crossroad; they can either ‘bolt-on’ ESG and hope they’ve done enough -- or can keep on doing enough — to tick the compliance boxes and placate their stakeholders. Or, they can put sustainability at the very core of the business strategy and make it the North Star it needs to follow.
Putting sustainability at the core of the business in the form of a SINGLE ORGANIZING IDEA (SOI) means that leaders are immediately able to determine and plan how the business should be organised for the future and what the business should start, stop and keep doing across all its functions: people and culture, sales and marketing, processes and systems, design, innovation, procurement and communication. Time is running out for even the most hardened climate change skeptics, new rules and regulations will inevitably mean that businesses will soon have no option but to make changes. The industry will demand it, their staff will demand it, and so too will their customers.
Embedding ESG at the core of a business is far easier than many people think, and the biggest obstacle I’ve come across over the past 15 years is simply a fear of the unknown; how long will this take, how much will it cost and how painful will the process be?
Coming from a military background, I liken the hesitation of business to a particular high ropes exercise that we used to do that tested our courage. A version of it features on the Channel 4 programme “SAS: Who Dares Wins”. You’re asked to jump from one slippy ledge to another. Because the ledge you are jumping to is lower and slightly out of alignment with the upper ledge you are jumping from, the gap seems much wider than it actually is. It's an illusion. It still takes courage to jump and you must overcome your fear to do it. But once you have you immediately ask yourself what all the doubt and fuss was about. "If I knew it would have been that easy I would have jumped months ago”.
And that’s the difference between managers and leaders. Leaders not only recognise that they have to take that leap of faith. They actually want to and what’s more, are excited by the prospect. Because they know that the outcome is not only immensely satisfying, but entirely within their reach.
Leaders looking to cross the gap and place sustainability at the core of their business need to first understand where they are right now. This starting point can be identified in just a few minutes by completing the free SOI Confidence Scorecard. Simply answer a few key questions and your results will be sent immediately to your inbox, providing you with the foundations to start important conversations about the future, inside and outside your business.
Starting the discussion is the first step to crossing the gap and unlocking the potential of your businesses by creating a stable, successful and sustainable future for all those that rely upon it. I’d be honoured to initiate that important conversation with you, so feel free to connect with me on LinkedIn, or get in touch via email (email@example.com).