Time to get up to speed on ESG for the good of business - and society
THERE was time when CSR was virtually unheard of, but it's now firmly ingrained in business strategy the world over. Cue the arrival of ESG, the newest hot topic around boardroom tables that organisations simply cannot ignore.
More than just the latest buzz word or phrase, understanding your business' ESG (or Environmental, Societal and Governance) responsibilities is a matter of urgency for organisations seeking to grow and prosper in a world where sustainability is king.
Considerations on ESG matters are clearly of great importance, increasingly as a means of building trust amount stakeholders or potential investors – but also reflect strong leadership and effective management.
If we a business leaders are not cognisant of our need to be committed to clear, environmental, societal and governance values, our customers, those in our supply chains and increasingly our staff, will soon remind us.
There is a growing expectation, particularly from younger generations, that companies should stand for something and make a positive impact on the world around them.
It is the right thing to do, but it's also good for business.
A policy paper published by the IoD at the beginning of the year set out what we see as the main priorities from an ESG perspective for companies and organisations across the UK.
Among them of course, good corporate governance, alongside a need to operate sustainably, promote inclusion and diversity and have a purpose.
It includes a rethink on corporate decision making which traditionally – certainly in the latter part of the 20th century - was dominated by maximising value for shareholders.
While this is clearly important, it can foster short-term or knee jerk plans that do not take due consideration of the external impact on the environment or society.
It is critical also that our leadership has the requisite tools to tackle the challenge of a phased transition to net zero economy.
Meanwhile, there is a growing acceptance that diverse boardrooms garner better business results. This spirit of inclusivity should permeate every level of our organisations.
And reflecting a key priority for the IoD, the need for directors to deliver good governance, promoting accountability, thereby sustaining the trust of stakeholders.
It's important because adhering to strong ESG criteria is attractive to potential investors, customers and staff.
The flip side meanwhile will act as a red flag, suggesting the company's purpose is not aligned with the interests of wider society.
It's not a fad and we will continue to work with members and others, to help us all embed ESG into the leadership and culture of our businesses, ensuring their sustainability is secured and enhanced.
:: Gordon Milligan is chair of the Institute of Directors (IoD) Northern Ireland