Opinion: 5 ESG considerations when building better business
Sustainability is a fundamental component to revitalising organisations for the future. Most leaders had ESG concerns on their agenda before the pandemic hit. But as COVID-19 and subsequent economic crisis caused unprecedented disruption, environmental and social factors were thrust into the limelight, reinvigorating internal conversations about the benefits of implementing sustainable practices.
Now, sustainability is quickly becoming table-stakes for most, if not all, companies. So, what can we do, as leaders, to build better businesses for a greener future?
1. Embed ESG into your business core
Over the past 12 months, leaders discovered that responding to COVID-19 and addressing sustainability issues are not mutually exclusive efforts. But making ESG part of your corporate purpose isn’t just developing a mission statement and including it within reports and accounts, it is about embedding purpose into the very core of the business.
Without conviction and regular communication from the top, the programme will struggle to get traction. Many organisations are, understandably, still in the mindset of incremental change. However, just as we’ve seen a widening gap between the digital leaders and digital laggards during the pandemic, the companies that mapped their ESG agenda in years will need to start rapidly scaling their initiatives to remain ahead of the curve.
2. Consider foward-looking impact measures to report
There is a level of increased urgency around global sustainability that mean businesses can no longer 'greenwash'. Simply reporting on past performance will no longer be sufficient. Leaders should consider forward-looking impact measurements to report on the financial and non-financial ESG performance – not only because it is quickly becoming part of the standard reporting package, but because shareholders will expect it. Furthermore, consumers are demanding more traceability and to know the full lifecycle of product. Reporting on ESG KPIs can prove a differentiator amongst these customers, who look to do business with an organisation that has tangible green credentials.
3. Increase green investments
Many leaders are still focused on finding cost-cutting measures to offset declining revenues while remaining adaptable amid the changing business landscape. It will likely prove challenging for many to fund the investments needed to drive their ESG initiatives. Even so, according to HSBC’s Made for the Future report, almost half of UK companies plan to increase their environment-related spending between now and summer 2021. To drive a programme successfully, the CFO needs to understand the value and see ESG as a commercial agenda.
Indeed, smart investments in climate resilience and a lower carbon future can actually be cost effective in the long-term. For example, more efficient work practices and higher productivity will drive down working capital required per unit.
4. Weave digital transformation and sustainability
Sustainability and technology are not separate priorities. Most of the green revolution is powered by digital, including electric vehicles, renewable energy, carbon capture technology, advanced analytics, IoT and blockchain. As outlined in this year’s Davos Agenda, companies need to weave digital transformation and sustainability into their DNA in order to survive.
For instance, as vaccine programmes are rolled out, many organisations will be looking at a return to the office, sparking investments in smart and sustainable tech – particularly sophisticated systems and sensors for office space. For those looking to accelerate their cloud transformation programmes, improved sustainability is a natural outcome of switching from on-premise.
5. Empower and incentivise employees
A clear ESG purpose and agenda can unleash employee potential — helping CHROs win the war for talent, retain their best people, and boost employee motivation. Now, around two-thirds of millennials take a company’s social and environmental commitments into account when deciding where to work.
To reap the rewards, leaders must empower and nurture their people and provide the necessary resources to ensure that environmental, social and governance objectives are met, and policies, procedures and standards are appropriately implemented. However, unlike established corporate functions such as finance, ESG is in its infancy, and organisations are still developing their policies. A key part of the required cultural shift will include upskilling and reskilling employees, and changing how teams are incentivised, including the integration of societal-impact goals into compensation.
The pandemic has given leaders an opportunity to embed sustainability across their company and offerings, from supply chain to products and services. The coming year will see environmental and social factors continue to be front and centre on the global stage, and businesses must step up their game accordingly.
Four CPG giants to fund sustainable accelerator programme
Breakthrough ideas can come from anywhere and anyone. That’s the premise behind the coming together of The Coca-Cola Company, Unilever and Colgate-Palmolive in the funding and support of world-leading brewer AB InBev’s 100+ Accelerator program.
These four consumer packaged goods multinationals will leverage both their size and resources to fast-track a shift toward sustainable solutions by mobilising some of the world’s sharpest thinkers to solve some of the world’s most pressing sustainability challenges.
The aim of this collaboration is to “supercharge adoption of sustainable solutions by funding the accelerating fantastic innovations that will change the world by making all of our businesses more sustainable”, says Tony Milkin, chief procurement, sustainability and circular ventures officer at AB InBev.
“Sustainable business is smart business, and we are working to solve huge problems that no one company can handle alone. With our combined global reach, we can accelerate progress towards a more sustainable future.”
What is the 100+ Accelerator program?
Originally launched in 2018, 100+ Accelerator is a global incubator program that aims to solve key supply chain challenges across water stewardship, circular economy, sustainable agriculture and climate action.
It offers size and scale to passionate entrepreneurs to help bring their solutions to market faster, and the program’s first two cohorts have already piloted 36 innovations in 16 countries, with participating startups raising more than US$200m to help them scale globally.
Among the established innovators are those already creating huge impact on sustainability, with projects including the first solar thermal plant in Africa, recycled electric vehicle batteries that store renewable electricity in China, and upcycling saved grains from the brewing process to produce nutritious foods in the US.
- The implementation of green cleaning solutions to reduce water and energy use in brewing operations in Colombia
- Solutions delivering traceability and insurance for smallholder farmers in Africa and South America
- The collection of more than 1,000 tons of glass waste in Brazil
- Piloting returnable packaging in the United States
- Recycled electric vehicle batteries that store renewable electricity in China
- The ability to upcycle saved grains from the brewing process to produce nutritious foods in the United States
- The first solar thermal system to be installed at an AB InBev plant
How will the new program work?
So, how does it work? Applications are invited from entrepreneurs or small businesses (deadline for cohort 3 is May 31 2021) and the partners will choose 20-25 ideas which are then provided with funding.
Project aligned with goals of the CPG multinationals
The participation by all three consumer packaged goods giants is in line with each of their own sustainability goals, with each passionate about transforming global supply chains towards a greener future, and knowledgeable that “we can achieve our purpose faster and more effectively with equally committed partners”, says Patricia Verduin, CTO of Colgate.
Since launching its World Without Waste sustainable packaging platform, Coca-Cola has actively engaged the startup community for inspiration and innovation and is an inaugural investor in Circulate Capital, a fund launched in 2019 focused on ventures, infrastructure and innovations preventing the flow of plastic into oceans.
The program’s social inequality component is also aligned with Unilever’s values. “This year, we made commitments to ensure that everyone who directly provides us with goods and services receives a living wage by 2030,” says Marc Engel, chief supply chain officer of Unilever. But that’s not all. “We’re increasing our spend with suppliers from underrepresented groups and committed to train 10 million young people.”