By: Richard Wall is the Founder and CEO of Emex, which provides ESG and EHS software solutions to businesses  

 

It is perhaps trite to note that any function or department is only as good as the people that make it up – individuals that, in the case of ESG, are far fewer than current demand dictates.

Businesses are now under significantly increased stakeholder pressure to improve sustainability performance and face increasing pressure to disclose regular data to stakeholders. ESG has definitively shifted from a nice-to-have to a need-to-have and from a marketing exercise to an existential one.

The talent war was only bound to heat up and organisations cannot be faulted for mobilising and seeking out the best people to lead their sustainability and wider governance initiatives. With the most qualified people on board, businesses will be on firmer ground in terms of ESG.

However this is a symptom of a bigger issue. Companies are still being caught on the back foot with regards to sustainability with the prevalent modus operandi being reactive rather than proactive.

Mapping and building a sustainability journey is not simple.  It requires organisations to fundamentally understand their position and relevance in society and put in place the right people, systems and processes to measure, manage and improve their ESG performance.  Difficult questions need to be answered or thought through.  For example, can we create value sustainably into the future for our stakeholders without altering our status quo? Are we measuring what really matters?

In the run up to COP26, with British business on the world stage, now is the time for organisations to begin – or ramp up – this exercise.

Shift into a proactive ESG mindset

Society is increasingly demanding sustainability commitments but as of now the rhetoric has not been matched with concrete action. If businesses don’t start to demonstrate they are “walking the walk”, pledges and promises will ring hollow. Commitments that won praise and recognition on announcement will be a burden unless a direction of travel can be demonstrated and will likely cost a company its most important asset: stakeholder trust.

Measuring and communicating ESG performance to stakeholders renders having systems, tools and people to manage ESG performance a must. The need to build this capability is driving the market for ESG talent with demand for expertise in sectors from assurance and advisory to fund management to industry.

Businesses will have to do more than just source the “right people” and let them get on with the job. They need to build robust and scalable ESG systems, processes and people to ensure that very complex sustainability decisions are made using reliable data. Best in class systems will assist and empower organisations to embed ESG right across their business and avoid it being managed in a silo.

The answer to building a sustainable future will be guided by all stakeholders but unlike financial crises – where governments have historically tended to respond by printing more money and implementing fiscal and monetary measures – we cannot “print” or “stimulate” our way out of this. This is genuinely new, unchartered territory – one that is defined by complex issues and challenges like climate change that do not have straightforward solutions but require an urgent response, all the same.

Approaches that solely focus on “getting the valuation right” will lead to short term wins and long run difficulties.  A key first step in the drive towards a sustainable future is putting the right systems, measurement tools and cultures in place that will enable organisations to understand where they are and plan out what needs to be done to manage and strengthen sustainability.

Beyond recruiting – the bigger ESG picture

While inevitable, the ESG talent war raises some red flags: companies are still approaching ESG from the perspective of annual reporting responsibilities rather than as a wider and long journey that needs serious investment.

So long as businesses are approaching ESG in a short-sighted and tokenistic way – a report to be prepared, a box to be checked, a position to be filled – they will be losing the opportunity to own their sustainability narratives, starting with the right infrastructure. Putting in place software systems to measure, manage and improve sustainability (ESG) performance is our core focus here at Emex – helping businesses along or at the start of their ESG journeys to deploy the systems needed to drive lasting change.

To recap, the companies that make the most ambitious pledges or source the best talent will not necessarily lead the charge. Those that view ESG as a journey will recognise that they have to go beyond the remit of specialists and distinct departments, and touch every corner of a business. To do otherwise would be limit its ability to influence and incentivise people that sit outside the department to implement genuine change. It would also render a business’s targets that much harder to attain, and steadily undermine its relationship with key stakeholders. In today’s world, that is a risk no business can afford to take.