People in the business world talk about ESG, or sometimes about CSR. But what do these initials mean, and why are they important?
ESG stands for Environmental, Social, and Governance. It’s a framework that measures a business’s impact on the environment and society, as well as its governance practices. This is also sometimes known as Corporate Social Responsibility (CSR).
Why does it matter to employers?
Businesses face ever increasing pressure to uphold environmental and social values which are important to employees and potential employees. In particular, many people at the younger end of the employment market are passionate about these things and blame previous generations for not caring more.
The “governance” bit of ESG is about how you run your business, what are the values, rules and practices that control your company. This includes your relationships with your employees, customers, suppliers, shareholders and other stakeholders.
If you want to be able to recruit and retain workers, it is critical that you put your ESG responsibilities into the centre stage and live and breathe those values, rather than paying lip service. It is no longer good enough just to have a policy, or to declare your credentials – you need to act and be seen to act in a responsible manner.
If you don’t take action, then there is a danger that your employees and workers will vote with their feet and leave to work somewhere which is more in line with their own values. You may begin to find it more difficult to recruit people to fill their shoes.
A recent survey by global professional services firm Deloitte found that “a consistent majority of respondents think climate change is an emergency” and that 63% of respondents do not think their employers are doing enough to address climate change and sustainability.
The danger of ignoring this is the damage to your reputation, as well as to staff recruitment and retention.
What can a small business do to demonstrate their ESG credentials?
There are many things which you can put in place to demonstrate and improve your ESG credentials. They don’t have to be difficult or costly.
The first step is to audit what things you already have in place which support your ESG journey. You might be agreeably surprised, when you start to look at what you already do.
Such an audit should encompass all areas of the business and all three factors.
You can then make ESG a part of your business strategy and planning and consider the impacts in every business decision you make.
Other things to think about include:
- Communicate what you already do – internally and externally
- Set up an ESG working group from volunteers within your workforce, giving them responsibility to effect change
- Have an ESG policy – and live by it
- Measure the impact of your ESG activity – collecting ESG data is also critical for transparency and due diligence. You could consider a dashboard for employees to see how you are performing against your stated ESG goals.
- Work towards an accreditation (eg. BCorps status)
- Look at your employment practices through the ESG lens and make any relevant adjustments
- Consider how to contribute to the local community or wider social impacts for your business
- Put together an improvement plan, and turn those commitments into actionable plans
- Don’t force it on those who aren’t interested, but harness the power of those who are
- Put in place some incentives for your staff to get involved (eg. offer employees “volunteer days” when you will pay them as normal but they can work on a local community project)
Benefits of an aligned ESG strategy
We have already talked about improved retention and easier recruitment of staff, but these will only come if your ESG approach is genuine and not merely “greenwashing”.
If you get it right, you will also see better productivity and an enhanced business reputation as people want to work for and with you. Your clients and customers (and suppliers and other stakeholders) are also more likely to want to do business with an ethical company which has genuine sustainable values.
And when you see those horrifying news images of places in the world torn apart by landslips, drought, flooding, wildfires or overwhelmed by plastic waste, – or local stories of hardship in your community – you can sleep a bit easier, knowing that your business is doing its best to contribute to turning the tide and making the world a better place.
