A beginner's guide to ESG

Business can, and should, do more. That is the view shared by 83% of consumers who believe that companies need to be actively shaping ESG best practices, today.

But what exactly is ESG? Why is the topic now garnering so much attention? What do business leaders need to know about fast-changing consumer and customer expectations?

Let's begin the journey together in this short beginner's guide to ESG.

What is ESG?

Environmental, Social and Governance (ESG) is a set of criteria that allows an organisation to assess the wider social impact that it is having beyond profit.

First viewed through the lens of "socially responsible investing" way back in the 1960s, ESG has significant crossover with corporate social responsibility (CSR) but is not the same thing; CSR is qualitative, holding businesses accountable to social commitments, while ESG is quantitative, measuring these social goals for genuine impact.

ESG is a complex, highly intricate and broad topic. It differs widely from firm to firm.

ESG spans everything from Environmental measures (including biodiversity impact, renewable energy use, hazardous waste and emissions targets) to Social measures (including human rights, flexible working, employee satisfaction and turnover of employees) to Governance (including Board cultural diversity and structures, global impact and gender pay gaps).

Given its expansive remit, it continues to be not widely understood as a term yet can be summarised very simply: as CommUnique's Gihan Hyde succinctly puts it: "ESG is how an organisation impacts the environment, society and is run."

WHY DOES ESG MATTER?

The world has changed beyond measure in recent years. Even before the pandemic altered the way in which many of us live and work, a movement had gained great momentum to expect, and demand, much more from companies.

Consumers are now starting to make it clear that corporate actions matter more than words: according to pWc, 57% of consumers say that companies should be doing more to advance environmental issues such as climate change, 48% want companies to progress key social issues like D&I, and 54% expect more from companies on governance issues such as addressing widening pay gaps.

These shifting consumer expectations are beginning to have an impact on the market. The 2021 Global Sustainability Study from Simon-Kucher & Partners found that 85% of people have shifted purchasing behaviours towards being more sustainable in the past five years, with one third of Millennials actively choosing a sustainable alternative when it is available.

"Consumers expect the same [standards] of companies today as they do of Governments," Bruce Simpson, formerly of McKinsey, told the ESG Foundation podcast. "Generation Z wants to see businesses drive genuine change; in this [current] movement of philanthropic living, companies and society are melded together."

ESG vs GREENWASHING

There's been sizeable pushback in recent years amongst ever-more conscious consumers and critics against 'greenwashing' and 'purpose-washing', with Greenpeace going so far as to proclaim that "we're living in a golden age of greenwash ... from 'carbon neutral' flights to 'net zero' bacon, dishonest green PR is on the rise."

Whether it's the grandiose environmental claims of anti-establishment craft beer brewers or climate-tackling promises from some of the world's biggest oil firms, today's informed audiences are savvy to empty words and are willing to invest the time in exploring for themselves whether true impact has been delivered as promised. "The democracy of the internet," Simpson adds, means that "it's not that hard to find out what a company is really doing now ... employees are [increasingly] holding their companies to the fire."

A real commitment to ESG goes beyond words; it is grounded in specific targets that will strive to be met within realistic yet challenging timeframes.

With talk around the climate change emergency reaching a fever pitch and organisational cultures coming under scrutiny like never before, ESG is about committing in the here and now, embedding purpose-driven ESG commitments into your people and culture that will make a difference in both the short and long term. "2050 goals are a joke in this era," Simpson observes, "you need to know what you are doing in 2022 or 2025 to be credible."

WHAT DOES ESG MEAN FOR YOUR COMMS?

If your organisation is ready, and willing, to commit to genuine, impactful change (or is currently in the process of doing so) through adherence to an ESG framework, then it is essential to ensure that you have a sound communications strategy in place to address your stakeholders in the right way.

BE OPEN ABOUT YOUR JOURNEY. Issues aren't fixed, and problems can't be solved, overnight. The expectation isn't there for your business to have all of the answers yet - only that you are committed to working towards a better way of doing business. Share your story and your ESG goals with your audience in a relatable way, recognising that we're all on this journey together. Make it clear to your stakeholders the actions that you will be taking - and what they can do to help you.

EXPLAIN YOUR 'WHY'. Share your story - what's driving you to make a change? What led to you identifying certain areas for improvement over others? Why are you the right business to be taking a stand and driving change forward, and how are you bringing everyone within your organisation along for this ride with you?

INVOLVE YOUR PEOPLE. Employee activism is unquestionably on the rise, and set to transcend new heights in the post-Covid era of working. Millennials and Gen Z, especially, want to work for employers who are committed to values and ethics; the desire for working with purpose already exists internally, with ESG commitments driving employee engagement. Tap into it and empower your people to be your greatest ambassadors and advocates for change.

SET TIME-SPECIFIC GOALS. Involve your stakeholders in the ESG process to lean into your strengths, address internal weaknesses and then set purposeful goals with clear targets and timings to meet. Regardless of whether it's addressing D&I at Board level, reducing your environmental impact through targeting emissions and/or waste or putting tools in place to bolster ethical business practice, understand what success in meeting your ESG aims looks like.

EMBRACE NEW OPPORTUNITIES. This is the dawn of an exciting new era for companies globally. More and more firms are openly embracing the triple bottom line movement - prioritising people, profit and the planet - and, in doing so, are demonstrating that by operating with purpose and working in an innovative and agile fashion, it is more than possible to be successful in business while working for the good of society.

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Ben Veal is the founder & director of Second Mountain, a specialist comms consultancy that helps purpose-driven companies and charities to reach new heights through meaningful communications: compelling content, proactive PR and sound strategy for a brave new world. www.secondmountaincomms.co.uk