As the world grapples with mounting environmental challenges, social inequalities and issues around governance, sustainability has evolved from a mere buzzword to a critical imperative for businesses. In this era of heightened consciousness and accountability, business leaders are recognising that Environmental, Social and Governance (ESG) factors must be integrated into corporate strategy because they contribute to long-term success and profitability.
Consumers, employees, investors and regulators are demanding greater transparency, ethical practices and positive impact. Therefore, those leaders who fail to proactively address those concerns cast doubt into the future viability of their organisations.
Speaking at Criticaleye’s 2023 Sustainability Forum, held in association with Accenture, Toby Siddall, Managing Director & Sustainability Lead for UK & Ireland at Accenture, unpacked the pros and cons relating to the ascendance of ESG as a core business concept.
“ESG scores can too often be just a shareholder or fund manager's tool. But we also see businesses saying it’s about more than that,” said Toby during the Keynote address.
“It's about a credible story for customers and consumers. It's about getting to affordable price points on sustainable alternatives. If we can do that, we are good for growth over the next 10 years,” he proclaimed.
There are many ways in which a strong ESG focus can contribute to growth, not least through the categorisation of risk factors along Environmental, Social or Governance lines. By taking a proactive approach, CEOs gain greater visibility in areas like potential reputational damage, regulatory non-compliance and possible disruptions to operations.
"For any business to act responsibly means to consider its long-term impact on the entire ecosystem in which it operates," said Nigyar Makhmudova, NED at Jungbunzlauer.
Thankfully, there is a realisation amongst virtually all businesses that they cannot thrive in complete isolation from the world around them. Blasé approaches of the past are being replaced with an understanding that sustainability-led strategy fosters trust and enhances relationships with multiple stakeholders, not least employees, customers, communities and investors.
"Business leaders must develop sound strategies for their enterprise to amplify its positive impact well beyond its immediate business model, bringing benefits to all involved. I am a big advocate and believer in mutuality as a foundational principle for business sustainability," Nigyar added.
The role of the Board in driving ESG strategy was also discussed in detail. Catriona Schmolke, a Board Mentor at Criticaleye, stressed the ‘slightly different lens’ that NEDs view the formulation of sustainability strategy through. She advised: “[It’s] best to get your house in order; have policies and procedures in place for how you will govern the execution of your strategy.
“The Board has to lean in and become more familiar with what has to happen in the organisation for it to deliver, because writing the strategy and setting the dynamics isn't actually making it happen. That's the starting point.”
On the subject of defining and measuring ESG goals and performance, it was agreed that these should be aligned with an organisation’s broader purpose, and targets should be integrated into performance metrics and incentivised to drive meaningful change. This is where a materiality audit can be helpful in prioritising where businesses should be specifically focusing on within the broad umbrella of ESG.
“You can take it further and do a double materiality, where you're not only looking at the impact on your business, but also stakeholder importance and the impact of the business on people and planet,” said Joanna Gluzman, Chief Sustainability Officer at PZ Cussons, during a panel discussion on Creating a Responsible Business.
“My team has developed a dashboard for the Board with all the issues that we decided to focus on long term and discuss every quarter. We look at the progress that we make against those goals and the Board is able to ask very relevant questions to the issues that we need to address. That also helped me to understand how we involve everybody in the business and report to the Board.”
CEOs can also leverage collective action by collaborating with industry peers, governments and non-governmental organisations (NGOs). The sharing of best practices and cooperation on sustainability initiatives can create mutually beneficial partnerships, amplify impact and accelerate progress.
“You've really got to collaborate when the world is changing around you so fast,” Toby emphasised. “Some of these collaborations and partnerships are important, long standing reliable pillars in your journey. So you need to make sure you are working flexibly for the interests of people in your supply chain, as well as with technology partners.”
Sustainability goes beyond being environmentally friendly; it encompasses a holistic approach that balances economic growth, social well-being and environmental stewardship. A clear sense of purpose is a powerful driver that motivates employees, fosters innovation and attracts customers.
Through aligning ESG with the overall strategy, fostering purpose-driven cultures, collaborating with stakeholders, embracing transparency, investing in innovation and adopting a long-term perspective, business leaders have the tools to navigate their companies towards a sustainable future.
Arya Ghassemi, Content Intern, Criticaleye
