Why people, not compliance, will set the course for the future of ESG and responsible business Business News

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It’s no secret that regulatory compliance plays an important role in changing the behavior of large companies. The threat of fines, the risk of reputational damage and, in extreme cases, the need to stop operations, are major deterrents for most. However, when it comes to ESG – environmental, social and governance – to date in the UK, there is no single, overarching law or regulation to mandate its management within companies.

Legal, financial, moral?

Most ESG policies aim to avoid reputational risk, such as avoiding “big oil companies”. Beyond that, while many industry leaders and consultants attempt to create a framework around ESG, there is still much to interpret. Yet there is clear evidence that a large majority of companies are looking to address this area in their operations. A theory that is gaining traction is that of the culture of compliance – rather than complying for the sake of regulation, companies are beginning to be increasingly driven by their culture and values.

While this is promising, it is of course important not to overlook the widely reported financial potential of a more sustainable business. However, this underestimates a large and growing portion of brands moving beyond the perception of ESG as a savvy way to improve profitability. They see the big picture: by protecting the health of the world, they enable society to continue to thrive, at home and at work. And right now, it’s this focus on people that’s driving much of the ESG consideration of business leaders.

Top to bottom and bottom to top

Looking at the disparity between the attitudes of leaders and employees is revealing. Studies have shown that employees appreciate purpose-driven companies to bring meaning to work and build a sense of community. Meanwhile, leaders recognize that the primary benefit of purpose is to sustain a reputation for growth and innovation, as well as providing a point of differentiation. On paper, this may seem like two sides of the same coin. Although the incentives to focus on the goal may differ, the bottom line is largely the same. What’s good for you is good for me. Focus on purpose makes a company happier, inside and out.

But it’s also clear that creating a successful team isn’t as simple as being seen to be doing the right thing. The C-suite is under pressure to bridge the gap between climatic aspiration, action and achievement. If they fail to understand the issues within their own organizations before introducing new initiatives, the risk of greenwashing is high. There have been a number of significant influences in recent years that have pushed this topic into the limelight. From the Black Lives Matter movement to the Great Resignation, the potential of ESG to not only protect people at work, but to help them thrive, is recognized.

In and out of the office, people drive change, holding companies and leaders accountable. By canceling brands, stepping out of roles and boycotting entire nations in an effort to choose ‘better’. Leaders who recognize the opportunity to work with — rather than fight against — those who seek to challenge their operations have the best chance of succeeding in the future.

The main role of accurate data

Having established that a sustainable business is influenced by more than the bottom line, regulatory compliance and even CSR commitments to employees, the biggest challenge for many is measuring what “good” looks like. Securing and processing accurate data is absolutely essential to ensure that companies can achieve their ESG objectives. Putting garbage data will get garbage information.

The challenge for the vast majority of companies is that ESG and sustainability are either brand new strategies trying to be mainstreamed, or there simply aren’t enough resources committed. This can mean that there is a lack of know-how, people, technologies, systems, processes or – above all – culture to call upon, both to set objectives and then to measure progress. towards these.

The data companies choose to collect and how they collect it will only be meaningful if all functions and individuals are engaged and aligned. Accountability can’t just sit down with one or two people to tick a box. Partnerships that allow companies to leverage ESG and sustainability expertise will save a lot of time, pain and money: firstly by putting the right systems in place and secondly by ensuring information, impacts and risks are reported in a clear format. As external ESG audits become more common, ensuring the accuracy and quality of data, it will become easier to meet the demands of regulators, investors and the community at large.

Success is about ensuring the quality of the data a business collects and maintains, and then properly preparing that data for regular reporting cycles.

In conclusion

Greenwashing accusations afflict…