Smart Sustainability in a Resource-Constrained Age
By: Vic Svec
When it comes to ESG pressures, the need has just grown bigger and the resources have gotten smaller. That’s the one-sentence assessment of the first half of 2020.
During a time of unprecedented challenges and swirling priorities, companies both big and small face substantial pressures to improve disclosures and practices within environmental, social and governance dimensions. But with a recession of undetermined length at hand, it’s more important than ever to have a playbook that emphasizes early wins, effective pacing and sharp priority setting to identify highest-return ESG actions.
ESG pressures have only increased with the enormous disruptions of the first half of 2020. They challenge many organizations’ already limited resources, and are also being viewed externally as a test of a company’s ESG resiliency. ESG is more important than ever, yet very few companies can afford dedicated sustainability teams to complete ESG Reports, sort through reporting frameworks, complete myriad surveys, and deliver compelling stakeholder-specific ESG narratives.
Unfortunately, external pressures to enhance ESG disclosure and improve performance are only going to increase, and the attention has escalated to boards and C-suites with a far greater emphasis on voting, activism and compensation-linked ESG priorities.
At the same time, internal resourcing challenges can be substantial, and clarity can often be distorted by where the ESG leadership in an organization resides: a corporate secretary or general counsel could view ESG through a very different lens than a human resources head or leader of the IR/Communications functions. These challenges, though, don’t need to drive analysis paralysis or fuzzy ESG priorities at the corporate level.
Call it Smart Sustainability. Now is an excellent time for companies to refocus on a practical “2020 vision and beyond” on ESG. Consider these four points to reboot your sustainability with an emphasis on the highest ROI. After all, your company is cutting costs, consolidating operations and reducing capex. Shouldn’t you force the very highest-return ESG priorities to the surface? The benefits can accrue to all stakeholder groups with quick payback periods.
#1. Understand that ESG/Sustainability is No Longer a Nicety.
Today, a company’s approach toward ESG is a step-level change from early concepts of social responsibility. Awareness of ESG and sustainability measures permeates the C-suite, boards, lenders and institutional investors, customers and suppliers. It is now viewed both defensively – think mitigation of risk, votes against directors and market-cap-destroying controversy avoidance – and offensively, expanding access to people, customers and debt/equity markets while reducing cost of capital. Smart sustainability is your corporate social license to operate – but needs leadership to push it off from the dock, gauge internal comfort levels and identify the largest needle-movers for your business.
#2. Unite Stakeholders Around the Unique Social Purpose You Serve.
We submit that identifying and articulating that purpose in a compelling way is one of the greatest initiatives your company can undertake this year. The world’s largest investment funds are calling on companies to clearly define their social purpose. Most job hunters won’t join a company they don’t see as socially responsible. And customers are more motivated to buy if they view you as having strong ESG attributes.
Done well, defining your social purpose can be a tremendous improvement to employee recruitment, retention and engagement, translating into a tangible driver of your employee value proposition. Beyond representing a company or a product, employees are hungry to be a part of a larger cause that benefits society. Employees who are switched on become more productive, engaged and capable of being ambassadors for the solutions you provide that make life better.
#3. Focus on the Scores that Best Move the Needle.
Is ISS giving you a poor score because you don’t disclose that you oppose child labor and forced labor? Is Glassdoor reporting that only 32% would recommend your company to a friend? We’re not advising that you “study to the test.” But picking the lowest-hanging fruit makes sense. Ensure you provide disclosures that cover the basics as defined by leading frameworks. Then use those improving scores as “proof points” of their own promote areas in which you stand out.
Over time, explore next-step creative solutions that appeal to customers, employees and the broader company narrative. Seek recognition through awards programs. Look for reputable third-party alignment. Pursue low-risk thought leadership such as bylined op-eds on important ESG matters.
#4. Recognize that ESG is Not a Destination but a Journey.
Don’t let the perfect drive out the good. Companies can talk themselves out of advancing sustainability because they are insecure about where they are on the journey. Stakeholders will appreciate candid assessments, sincere commitment to ESG and a drive for continuous improvement. Set realistic goals and timetables and take credit for accomplishments.
Remember, too, that holistic ESG positioning initiatives appeal to visual learners, analytical types and story lovers. Too much to ask of your environmental team, or a strained communications function? Spread it out with a well-defined working group, including HR, Legal, Communications, IR, Safety, Operations and Environmental people. And, of course, pull in specialized external resources to assist.
Take the Next Step
ESG is more important than ever, yet very few companies can afford multi-person sustainability teams to complete ESG Reports, sort through reporting frameworks, complete myriad surveys, and deliver compelling stakeholder-specific ESG narratives. Svec Consulting and Obata can help.
Reach out today for a discussion and complimentary consultation at: ESG@Obata.com
About the Author
Vic Svec is principle of Svec Consulting. Vic is an accomplished senior advisor in ESG/sustainability positioning, strategic communications and investor relations, with more than three decades of experience serving Fortune 500 companies.
Obata + Svec Consulting
Obata brings decades of experience to the ESG reporting process. Our affiliation with Svec Consulting adds additional expertise and thought leadership in sustainability strategy, process, messaging, and content development. Together, we can help you improve your ESG positioning in meaningful and measurable ways.