Environmental, social and corporate governance (ESG) matters. It's not a matter of feel-good social responsibility. ESG has a tangible impact on reputation, employee retention and shareholder value.
Answering a 2019 McKinsey survey, 57% of executives and investment professionals believe ESG programmes create shareholder value. That is quite a swing from 10 years prior, when a quarter of executives were uncertain about this value-creation. By 2019, they had dropped to 14%.
But this shift is not a surprise to the market, says Edua Lena Dickerson, workflow platform ServiceNow's Vice-President of ESG and Finance Strategy: "ESG has become a front and centre topic for boards, perceivably for ministers, and even the talent that we all seek to attract and retain within our organisations."
A 2020 NAVEX Global survey reported that 81% of companies have a formal ESG programme, and research from Henley Business School and the University of Reading estimated around 64% of small and mid-sized companies have ESG elements in their strategy. ESG is certainly front of mind. It's particularly important for consumer-facing businesses – and has a clear link to talent retention, says Dickerson: "Professionals are making their employment choices based on organisations with a mission that connects with their own personal mission. They are looking for organisations that aren't choosing between profit or purpose, but are finding a way to really embrace them both."
ESG ambition vs reality
The problem is that performance does not match these ambitions. According to the same McKinsey survey above, less than half of companies believe their company performs effectively against ESG metrics.
Why? Dickerson says it’s because ESG efforts still occur in silos:
"We took stock across what was important to our business, what was important to society and to the environment, but also what was happening inside of our business. And we learned that a lot of the leaders already had aspects of ESG strategy, but everything was happening in silos. Little really connected."
Companies can amplify ESG by connecting its various incarnations across departments and operations. ServiceNow realised it had to make this happen, starting a multi-year quest for Dickerson and her team. They eventually established several key areas that, when addressed, closed those ESG gaps.
Connecting ESG silos
To tackle their ESG shortfalls, the ServiceNow team studied those separate projects and looked for common issues. They then created new capabilities on their business platform to help enable, combine and track ESG efforts. This approach highlighted five essential actions:
Define ESG: ESG can mean many different things to people and organisations. Don't assume everyone is on the same page, but don't just hand down a blanket definition. Look at the company's strategic mission for ESG and compare it to how different parts of the business implement ESG according to their capabilities. The full definition combines all these areas.
Include more stakeholders: ESG is not limited to the ESG team. It impacts all parts of the business: finance, risk management, audits, branding, recruitment and even supply chains and external partners. Look at their ESG activities, how to support these and make them part of the bigger ESG picture. But don't boil the ocean: start with key groups such as risk, finance and the board.
Encourage employee involvement: Employee volunteer programmes and ESG events may seem popular, but are they? How much of your workforce actually participates? Often, employees are not aware or informed about ESG events or how ESG relates to their role. Better access to ESG considerations related to their jobs will help them integrate ESG more.
Use a workflow platform: If your business already has an integrated workflow platform connecting various activities and departments, use its ESG services to connect processes and data across the organisation. Use the same platform to help capture and report ESG information, catering to the stakeholders you identified in steps one and two.
Governance, controls and monitoring: You likely already have some ESG governance and controls in place. Integrate these through the workflow platform alongside ESG data processes. Then, use the platform to monitor ESG performance. Make the relevant monitoring parts available to the different ESG areas in your business.
"The platform's strategic portfolio management solution allows us to really think about what all of our initiatives are against each of our strategic priorities," says Dickerson. "We can document them, we can understand what the return on investment is, and then we can make those decisions. Our ultimate goal is that every person within our organisation understands their role as part of ESG regardless of where they sit."
Don't choose between profit or purpose. Your organisation likely already has ESG ambitions. Connect those silos, involve stakeholders and you'll close the gap between ambition and a sustainable business that retains talent and keeps shareholders happy.
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