Business Principles: Unmasking the ESG Veil

“Creating a strong business and building a better world are not conflicting goals. They are both essential ingredients for long term success.” – Bill Ford

Good business is good the organization, its people, the community, government and the environment. This is the embodiment of the ESG (Environmental, Social and Governance) Principles. In the recent past, there has been a growing focus and interest in measuring sustainability metrics by each organization as espoused in the Sustainable Development Goals (SDGs). This focus and attention on the role of businesses beyond profits is a worthwhile course with key principles as outlined by the UN Global Compact with a growing endorsement by corporations across the world. I believe there is so much good that can be done by businesses especially when they leverage on their core business functional competencies and capabilities with a commitment to excellence. This is a topic I’ve written about over time in this blog with relative reference to contributions by Howard Schultz of Starbucks.

As a member of the business community, I’ve envisioned and worked to model my practices on the best attributes of business excellence anchored on the triple bottom line success measurement i.e. financial profitability, social impact and environmental protection. I have however at the same time acknowledge a growing trend of ESG marketing in the corporate world transitioning the entire ESG principle & basis from a culture shift in the business community to a marketing gimmick. In an article in the Harvard Business Review on An Inconvenient Truth about ESG Investing by Sanjai Bhagat, he posits that there is a growing trend for poorly performing (financially) investment portfolios to focus their communication to ESG while in reality, they have not integrated ESG principles in their business operations. This highlighted my current thinking around this and why I believe as members of the business community we need to do better. We all acknowledge the role and value of sustainable business practices both for the organization and for the society & environment. Unfortunately, these have been watered down to take up after the CSR initiatives of the earlier years where companies would pollute the environment, violate labor laws among others and ultimately pay lip service to community support through charity projects as Prof. Colin Mayer argues in his lecture at Oxford University. More needs to be done and this needs to be strategic and deliberate to ensure we actually realize the benefits that we so wish for.

The best way to achieve these successes would be to:

  • Acknowledge the role of the business in promoting social development and environmental growth. This needs to be in line with the core business functions to ensure there is reduction of negative contributions as much as possible and improving on the positives. This can be in the form of contextual assessment on the company position when it comes to ESG.
  • Leadership commitment to ESG with clear metrics for success to ensure there is the necessary resourcing to enable the same. Policies documents and theoretical principles will not drive change. Meaningful investment in financial & human resources will.
  • Culture change is a prerequisite for incremental investment and contribution to ESG. Embedding ESG principles in the organizational culture rather than having ESG as stand alone priorities will help align organizational priorities to the expected contributions on ESG pillars. This leads to business process optimization and sustainable development in the industry.
  • Finally, we have to distinguish marketing from ESG communication. The blurry lines between marketing and ESG communication is the reason we are currently having the ESG priorities being watered down by not being integrated into organizational policies or being used to explain poor performance.

As Ray Anderson argued and I’ll quote him; “I always make a business case for sustainability. It is so compelling. Our costs are down, not up. Our products are the best they have ever been. Our people are motivated by a shared higher purpose – esprit de corps to die for. And the goodwill in the marketplace – it’s just been astonishing.” Sustainable business practices are an imperative for wholesome success and we need to commit to it with honesty & genuine commitment to ethical business practices.

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