With Environmental Social Governance (ESG) conversations dominating the investor relations and regulatory spaces, business leaders are facing increasing pressure from all angles to make decisions based on environmental, social and human impacts not just profits. Media headlines and a growing cancel culture exacerbated by social media provide evidence every day that there are significant financial and reputational consequences to not taking ESG seriously.
The 2021 BNP Paribas ESG Global Survey points in this direction: 59% of respondents indicated brand and reputation motivate their ESG investments. But a lot has changed in the last two years. Even though climate action will continue to be a priority, there are three major trends that make a strong case for business leaders to increase focus on the “S” factor.
1. It’s a business reality. Across all industries, people’s preferences and expectations of their work and workplaces have changed since Covid19. Therefore, the leadership team’s ability to foster a positive, flexible, and meaningful corporate culture is key to addressing labour shortages, skills mismatches, and employee turnover. The corporations that do this well are proving to be more productive and attractive to shareholders.
2. Society has significantly shifted in the last decade. Generation Z consumers wield significant purchasing power—it has doubled in the last 3 years according to Bloomberg—and they put sustainability and inclusion as values they want companies to proactively embody when they make decisions on where to spend their money. The older generations care too. They expect total transparency and have little tolerance for preventable or mishandled mistakes in terms of a company’s image, treatment of employees or its products, which can result in quick and durable damage to the bottom line.
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3. Regulators are also looking into increasing company social disclosures and have an arsenal of options to design rules to address any societal issue. In today’s fragmented world, the oversight of supply chains and related obligations become increasingly challenging for multinational corporations that operate in global markets. Technological progress will incentivise governments to regulate even further whenever they perceive jobs and national industries might be at risk. And investors now seek the most effective options to comply with new and forthcoming regulations to favour assets considered best practices in terms of ESG criteria. Therefore, such regulatory measures addressing social factors can present substantial material risks and existential threats should non-compliance occur.
All this to say, stakeholders now more than ever carefully choose which companies they will buy from, invest in, or partner with based on how well they tackle social challenges. This goes beyond image building exercises as stakeholders demand substantive numbers and impactful projects that make a tangible difference.
While it’s easy to focus on the challenges businesses face in the ESG context, the most successful companies of the future will see the opportunities. A proactive approach towards social and stakeholder considerations in an organisation’s ESG strategy will help position a company as a leader in the field and enable the leadership team to anticipate different regulatory trends and commercial threats. Further, the more companies adopt strong ESG strategies the more these actions will collectively form a strong basis to advocate for regulatory harmonisation across borders to improve socioeconomic outcomes and stability in global markets.
To be clear, this is not about the unrealistic notion of purpose over profit. A strong society depends on businesses’ ability to thrive, invest, and make a difference. It is about the growing expectations of companies to deliver a “profit with a purpose” mission.
To support business leaders as they try to balance building an effective ESG strategy that mitigates risks and recognises opportunities while delivering on growth and profit expectations, Ibec has partnered with Competent Boards to offer the Global ESG Competent Boards Certificate and Designation programme to C-suite executives and their boards in Ireland and across Europe.
Launched by Ibec Global Academy last year, this unique programme is delivered over 12 sessions online, where C suite executives from across different sectors come together to learn from an international network of experts on how tackle specific topics and challenges in the evolving arena of ESG, from climate risk mitigation to diversity and inclusion to cybersecurity.
Upon successful completion, participants will receive the Global ESG Boards Certificate and Designation (GCB.D) and master their own ESG approach to developing a best-in-class, future proof corporate sustainability and governance strategy that’s right for their business.
For further information on this course visit www.Ibecacademy.ie or email sarah.oleary@ibec.ie
Jackie King, executive director, Ibec Global
