ESG needs to become a strategic imperative priority.
Establishing, maintaining, and growing environmental, social, governance and sustainability measurement and reporting strategies are no longer a nice to have but mission-critical and it’s also good for business!
Leaders need to quantify the relationship between their financials and ESG sustainability.
The symbiotic relationship between ESG and DEI. Why it takes culture change to succeed with both.
Companies generate value for a wide range of stakeholders, including investors, staff, consumers, and suppliers. These stakeholders are increasingly relying on facts about a company’s risks and strategies related to environmental, social, and governance (ESG) considerations. And being transparent to Stakeholder’s priorities holistically is no longer optional now. Hence, it’s imperative that companies now design and maintain processes and controls for ESG reporting.
ESG initiatives entail more than just doing the right thing. They can effectively influence society’s views of the business, strengthen its competitive position, and boost its market value. ESG are three separate strategies to achieve sustainability (sustainability is an output: achieving the needs of the present without compromising the ability of future generations to meet their own needs). Well-executed and well-communicated ESG strategies can generate intrinsic value by effectively managing key risks and cultivating opportunities. When a company is transparent about its ESG priorities, its market value also increases over time.
Environmental criteria look at how an organization behaves as a steward of nature.
Social criteria look at how it deals with staff, vendors, clients, and the cultures in which it works. Governance deals with a company’s leadership composition, executive pay, audits, internal controls, and shareholder rights.
A majority of the institutional investors now have well-articulated ESG mandates and strategies that they refer to before making any investment decision. Companies that are falling behind in highlighting their ESG strategy publicly will incrementally find it difficult to secure investments. On the other hand, the consumers also have easy access to information and prefer to do business with companies that uphold sustainable practices.
Under the social and governance considerations, a major element is embedding Diversity, Equity, and Inclusion (DEI) best practices within the overall organizational fabric. It not only indicates how the companies should recruit and retain staff, build culture internally but also how it conducts businesses and communications with external stakeholders including customers, investors, and suppliers.
There is a clear link between the organization’s sustainability (based on ESG) and DEI initiatives. The strategies for each initiative support the other, and opportunities for collaboration make both initiatives stronger. Leaders and practitioners in sustainability participate in the DEI initiative and vice versa. Both work with diverse stakeholders and report progress to the public.
The Global Diversity Equity Inclusion Benchmarks (GDEIB) by the Center for Global Inclusion aptly summarizes the best practices in connecting DEI with sustainability or ESG strategies.
When it comes to asserting values and commitments to DEI and ESG, it’s essential for companies to truly internalize and demonstrate regular positive actions towards change. Otherwise, it easily shows that the ambitions lack integrity and authenticity. At the same time, it also evidently shows the benefits of DEI and ESG initiatives, when right implemented, through greater financial returns and stronger company culture.
A common mistake done by the companies when it comes to DEI is that they look at diversity in isolation. It doesn’t help when you recruit from diverse backgrounds and stop just at that. It will still not be an inclusive or DEI-compliant culture unless all members of the staff feel psychologically safe, supported, and empowered. This takes executive buy-in and also conscious day-to-day participation of everyone involved. And, that is essentially a culture change.
Implementing ESG and DEI initiatives and navigating culture change that comes with it brings in the best results when they are managed with a structured approach for change management.