A hot-button topic in 2022 is ESG. With more and more companies focusing on integrating ESG practices into their structures, how can they get it right?
RegTech firm Diligent recently outlined comments made at the Modern Governance Summit 2022, where a panel of climate, diversity and policy experts discussed the growing importance of ESG and how organizations can prioritize ESG issues to set the stage for long-term success.
Veena Ramani – research director at FCLTGlobal – said that while some argue more regulation means more risk, that is rarely the case.
“The lack of government engagement on climate change means risks are enhanced, not that they’re going away,” said Ramani. “It’s the board’s job to work with management and ensure the organization makes smart decisions that allow it to be positioned for long-term resilience and success.”
Diligent highlighted that boards must examine, and reassess if needed, the company’s purpose. They should also ask questions such as what is their purpose and what do they add to the world.
Michael Levine – chief sustainability officer and VP of sustainability and managing counsel at Under Armour – said, “There’s money to be made as we transition to a decarbonized economy, and the companies that do that are the ones that will do well.
Meanwhile, Ramani advised approaching ESG initiatives like any other business decision. He said, “It’s all about risks and opportunities. Many companies make the mistake of seeing environmental issues as a silo, separate from the rest of the organization. But these are business and financial issues and risks, so they should be treated as such: run them through the companies’ risk management systems. Identify the risks and opportunities, then figure out how to navigate a path toward long-term success.”
Leaders can also work to demystify ESG by moving away from labels and toward meaningful goals, while working to understand how those goals and metrics impact people.
Just Capital CEO Martin Whittaker said, “The number-one stakeholder is the worker. Not surprisingly, we were all reminded of this after COVID. The ‘S’ is ESG has become much more important, although less understood. How can you possibly have a successful business if you’re not investing in human capital?”
Focusing on the mental health and wellbeing of employees is the path to financial and competitive success, but so is showing them that your values align with theirs.
“After the pandemic, we realized that cash is still king, but care is queen,” said Helle Bank Jorgensen, CEO of Competent Boards. “If you don’t care for your employees or suppliers, how can you expect them to care about you? We can learn so much from our stakeholders, but we need to open our ears and actually listen.”
The panel offered several tips for organizations that want to achieve long-term ESG success. These included actively listening, knowing your audience, collaborating with leadership and management and getting clearer data.
Diligent concluded, “Given the geopolitical issues, inequalities and environmental crises that characterize today’s world, it’s important for organizations to understand the broader impact of their business and consider the role they’d like to play in achieving progress.
“We are at an inflection point — businesses must balance their choices between positioning their companies for long-term value creation, versus short-term wins. Navigating these decisions can only be done through business strategies that consider environmental, social and governance issues.
“By pushing aside divisive labels, leaders can get to the heart of these issues and work to find solutions. Technology can provide the data and insights your organization needs to get started.”
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