Sustainable growth. Sustainable finance. Sustainable development. We hear the term ‘sustainability’ so much these days, that it’s at risk of losing its importance. Our goal at LittPark is to ensure sustainability isn’t a buzzword, and instead continues to influence positive change for our planet, our community, and your business.

To do that, let’s strip back the jargon and go back to basics. What is sustainability? We define it like this:

Corporate sustainability means businesses working to meet the needs of the present generation without compromising the ability of future generations to meet their own needs.

We adopt this definition because it frames sustainability as an approach that embraces growth. That’s because we believe -we know- that adopting sustainability strategy isn’t just ticking the box of being a corporate ‘do-gooder’; it makes sound, long-term financial sense.

We’ll explore that shortly, but first, let’s clear up some confusion about the sustainability terminology you’ve probably come across. There are lots of ways of referring to organizational sustainable practices. You’ve no doubt heard of Corporate Social Responsibility (CSR), and Triple Bottom Line Reporting (also known as TBL or 3BL), and just plain old ‘sustainability’. While these terms remain in use, they risk falling out of favour because they are either too narrow (TBL), or so broad that it’s hard to clearly define and quantify your organization’s impact (CSR).

Environment, Social & Governance (ESG) is our preferred approach to the creation, maintenance and measurement of sustainability strategies. Why? Because ESG is a holistic, rigorous, measurable approach that supports the creation of a truly sustainable business.

ESG has its origins in the investor space, established as a way for investors to assess a company’s upside and downside risk beyond the profit and loss statement. Businesses soon recognized the value of tracking and communicating ESG themselves.

By adopting an ESG framework, businesses can embed sustainable practices into everything from board-level governance, stakeholder engagement, consumer demands, talent management and financial performance, across each of the key pillars:

Environment: Every business uses resources like energy and water, emits waste, and generally has an environmental impact. Arguably, businesses have a responsibility not just to limit this impact, but to proactively advocate for more sustainable environmental solutions, too.

Social: Business take from, and contribute to, the prosperity of communities they operate in, by paying taxes, creating jobs, using community infrastructure and purchasing goods and services. How you approach your social impact drives your social sustainability outcomes.

Governance: Good decision-making is a core component of a sustainable business. Accountability, transparency and seeking out diverse views are key indicators of sustainable governance practices.

So, what does that mean for you?

Here’s how ESG matters for your business

ESG is more than supporting a charity or holding an annual tree planting day for staff. It’s about adopting values and practices that are integrated across all operations, inform management decisions, and become a core part of who your business is and what it stands for.

Investors, employees, consumers, donors and other significant stakeholders now expect to see sustainability performance assimilated across the business and transparently tracked and reported.

While this can seem like a daunting effort and expense in the short term, it’s easier than you may think, and has measurable business benefit. The below are just a few examples of how an ESG strategy can propel your growth.

Market & Stakeholder Expectations

In a recent report, consulting firm McKinsey & Company noted that global sustainable investment now tops $30 trillion—up 68 percent since 2014 and tenfold since 2004. In addition to increasing public scrutiny of corporate behaviour, the report’s authors noted that the significant movement in global money is a vote with the wallet by “investors and executives who realize that a strong ESG proposition can safeguard a company’s long-term success.”

In fact, multiple studies have shown that a strong ESG strategy correlates with higher return on equity, lower overheads and a reduction in downside risk.

Recruitment and Talent Management

Attracting and retaining top talent has become a major concern for organizations globally, and it’s clear that the competition for the best and brightest comes down to more than salary. According to global advisory firm Willis Towers Watson, 58% of employees consider a company’s social and environmental commitments when deciding where to work, and 55% of employees would choose to work for a socially responsible company, even if the salary offered was lower.

These figures spike when you consider emerging demographics. A Governance and Accountability Institute survey found that 75% of millennials would take a pay cut to work at a company that was more in line with their values. Before you roll your eyes, remember that the oldest millennials are now 40 years of age, and this generation will make up three quarters of the workforce in the next six years.

A strong ESG proposition has also been shown to enhance the engagement and productivity of existing employees, with organizations rated highly on “best companies to work for” lists generating up to 3.8% higher returns over a greater than 25-year period (McKinsey, 2019).

Innovation

Embedding sustainability across an organization can be a surprisingly powerful driver of innovation. Research published in the Harvard Business Review found that “sustainability is a mother lode of organizational and technological innovations that yield both bottom-line and top-line returns.” A focus on ESG leads not only to internal cost reduction, but also new and better product development and additional revenue streams.

For example, FedEx’s investments in sustainable operations, from new aircraft and software systems to solar-powered distribution hubs, have been so successful that the company has now established a sustainability consulting service as a stand-alone profit centre.

Reputation & Brand

Willis Towers Watson reports that 92% of consumers are more likely to trust a company that supports social or environmental issues. The 2020 Edelman Trust Barometer found that ethical drivers are three times more important to perceptions of a company’s trustworthiness than competence.

With trust being a key influence for consumer spending, voting choices and brand loyalty, it’s clear that organizations with a strong focus on sustainability perform far better on brand value and reputation measures than their peers.

So, where do you start?

The case for introducing an ESG strategy is strong. We know, though, that it can seem daunting at first. Where do you begin? Where should responsibility sit for ESG within your organization, and how do you prioritize sustainability when there is so much work just leading the day-to-day challenges of a business? We hear you. Our clients raise similar concerns. Our role at LittPark is to help you respond to these questions and devise an ESG strategy that will build your organization’s future resilience, while working with your current reality.

To learn more, contact us to find out how ESG can be not only doable, but profitable, for your business.

What is ESG and why does it matter for your business?