Why People, Not Compliance, Will Set the Course for the Future of ESG and Responsible Business
Emex is a Business Reporter client.
It’s no secret that regulatory compliance plays a significant role in driving behavioral change among big businesses, and the threat of fines, reputational risk and, in extreme cases, the need to halt operations are major incentives. However, when it comes to ESG—environmental, social and governance—in the UK today, no single, overarching piece of legislation or regulation exists to enforce its management within businesses.
Legal, financial or moral?
Most ESG policies focus on sustainability and avoiding reputational risk, such as shunning “Big Oil.” While many industry leaders and consultants are trying to create a framework around ESG, a lot is still left to interpretation. Yet there’s clear evidence that most companies are looking to address this area within their operations. One theory gaining traction is that of “compliance culture”; rather than complying for regulation’s sake, businesses are increasingly driven by their culture and values.
While this is promising, it’s important not to overlook the widely reported financial potential of more sustainable business. However, a growing number of brands go beyond seeing ESG as a savvy way to improve profitability, and consider the big picture: By protecting the health of the world, sustainable businesses allow society to continue thriving. And right now, this people focus is driving much of the ESG strategy of business leaders.
Top down and bottom up
The disparity between the attitudes of leaders and employees regarding purpose is revealing. Studies have shown that employees value purpose-led business for bringing meaning to work and building a stronger sense of community. Meanwhile, leaders recognize that the strongest benefit of purpose is supporting a reputation for growth and innovation, as well as providing a point of differentiation. While incentives for focusing on purpose may differ, the net result is largely the same: A focus on purpose makes for a happier business, inside and out.
But it’s also clear that creating a fulfilled team isn’t as simple as trying to do the right thing. The C-suite is under pressure to bridge the gap between aspiration to action and achievement. But if leaders fail to understand the issues within their own organizations before introducing new ESG initiatives, the risk of greenwashing is high; several significant influences in recent years have thrust this topic into the limelight. From the Black Lives Matter movement to the Great Resignation, the potential for ESG to not just protect people at work but help them thrive is being recognized.
In the office and outside of it, people are driving change by holding corporations and executives accountable. The leaders who recognize the opportunity of working with—rather than fighting against—those who challenge their operations stand the best chance of succeeding in the future.
The leading role of accurate data
Having established that sustainable business is influenced by more than just the bottom line, regulatory compliance and CSR commitments to employees, the bigger challenge for many businesses is measuring their ESG progress. Securing and processing accurate data is critical to ensure that companies can meet their ESG goals; inputting flawed data will produce flawed insights.
The challenge for most companies is that ESG and sustainability are either brand-new strategies that have yet to be embedded, or there simply aren’t enough resources committed to do so—a lack of know-how, people, technologies, systems, processes or culture to call upon, both in setting targets and then measuring progress toward them.
The data that companies choose to collect and the way in which they collect it are only valid if all functions and individuals are engaged and aligned; responsibility can’t simply sit with one or two people to tick a box. Partnerships that enable businesses to leverage ESG and sustainability expertise can save a lot of time, pain and cost in setting up the right systems and ensuring that disclosures, impacts and risks are clearly reported. As external ESG auditing becomes increasingly common, assuring the accuracy and quality of data, it will become easier to satisfy the demands of regulators, investors and the community.
Success comes from ensuring the quality of data that a business collects and uses, and properly preparing the data for regular reporting cycles.
Accountability increases sustainability
Accusations of greenwashing plague many brands. At the same time, there’s a reassuring tide of companies and executives taking a more holistic and meaningful approach to sustainability—putting the simple ambition to “do better” at the heart of how businesses are run and profits are made. Consumers rightly hold industry to account when it comes to how their money-making affects the world in which we all live. Leaders need to listen and respond with both heads and hearts.
Want to know more about enabling a sustainable future for your business and your people? Download the Emex ESG & EHS Buyer’s Guide. Check out our latest Inside Emex newsletter to learn more about our latest product improvements and platform insights.
— Daniel Gribbin, VP Sustainability and ESG, Emex Software
