Environment, social, and governance (ESG) commitments should be precisely that, commitments. Each one should form part of your culture that underpins every action and decision that your organization takes.
What is ESG?
First mentioned in the United Nations PRI report in 2006, ESG standards are a set of criteria designed to show how companies are impacting the environment, how they manage their relationships with employees, suppliers, and the wider community, and the extent of their ability to self-govern.
In the Fall of 2020, the International Business Council and the Big Four accounting firms introduced Stakeholder Capitalism Metrics—an ESG reporting framework—to the world. The aim remains to track corporate performance against a host of issues—from energy usage and waste management to diversity and inclusion, community impact, and ethical practices. The framework has since been adopted by 60 of the world’s largest companies.
Why does ESG matter?
ESG is not just a box-checking exercise; it’s good for business. As investors become more focused on sustainable business practices, those companies whose ESG performance is both strong and transparent become more valuable. According to Bloomberg, global ESG assets are on track to constitute more than a third of the total assets under management by 2025. Why? Because investors benefit too. Research has shown that ESG performance positively impacted 63 percent of equity returns. There is also evidence that, at the outset of the pandemic, most ESG funds outperformed their benchmarks and suffered less as the markets collapsed.
But ESG is more than just a vehicle to attract investment. By focusing on sustainable business practices, companies are responding to the demands of the market. Today’s consumers look beyond product and price when making purchasing decisions and expect more for their loyalty. That’s why, in recent years, Burger King, McDonald’s, and American Airlines have all launched products or initiatives to meet the social and environmental needs of their customers.
How to improve your ESG commitments
Without the infrastructure to support them, commitments to ESG are merely words. For any organization to deliver against them, these commitments must be embedded into both strategy and operations.
What three areas should you focus on first?
Unity of purpose
For ESG commitments to be embodied, the company’s entire DNA needs to evolve to integrate initiatives like sustainability, transparency, ethical behaviors, and corporate social responsibility, and doing that can require a culture shift.
Large businesses can work in silos, sometimes divisions can have conflicting goals. Only by setting business-wide goals with a unified purpose can each business area focus on the bigger picture when making decisions.
Shared goals around ESG are a great enabler. They are an opportunity to invest in technology that frees your skilled employees from mundane tasks and allows them to focus on delivering sustainable outcomes. For example: take the need to manually process invoices away from your Accounts Payable team, and they’ll be able to put their skills to better use, finding ways to reduce energy usage across your company’s sites, offices, or stores.
Accurate data
ESG is centered on quantitative, measurable criteria rather than the development of qualitative goals and principles. This means performance can be tracked and measured to demonstrate improvements and, ultimately, their success.
When it comes to environmental performance, accurate data is essential to reporting—and, perhaps more importantly, understanding—exactly how much energy the business consumes, the waste it discharges, its resources, and the impact its footprint has on the rest of the planet.
Energy usage is the perfect starting point. Utility billing data can be complex to interpret and consist of thousands of line items—particularly in large, multi-site organizations. Tools like Utility Bill Management automatically validate bills against contracts and other predetermined criteria, which improves data quality. The information produced is accurate and ripe for analysis, which provides a perfect opportunity to identify and address any low-hanging fruit.
Investment in employees
If organizations are to meet their social commitments, investing in talent and workplace culture is no longer optional. Both are considered crucial parts of the business, much like sales and customer satisfaction. Today’s workforce demands far more from an employer than ten years ago. Their intrinsic values rise above mere compensation and include a more profound need for purpose in their work.
Training and development have an important role to play in helping to retain and nurture talent, as does provide the right support. In addition to finding ways for employees to maintain the work-life balance they choose, there’s also a need to provide suitable systems to assist them in their roles. Skilled employees soon tire of tedious tasks, so a good way for organizations to show these people they are valued is to invest in critical technology.
For example, tools like Utility Bill Management can automate and remove the essential—yet mundane repetitive data entry away from accounts payable staff and give them more time to focus on delivering against ESG commitments.
Delivering against ESG commitments requires a whole-of-organization effort. It means having the right strategies, culture, systems, and people in place to make the right choices.
There are countless places to start the journey, but firstly understanding and controlling your utility data is recommended. It delivers across all three standards, presents an opportunity to reduce energy usage, frees employees to engage in more meaningful work, and provides control and governance over usage and spending.
