Go small or go home: Here’s how exec teams are getting ESG wrong
There’s a lot of pressure to do right when it comes to ESG (Environmental, Social & Governance). The UN’s 17 Sustainable Development Goals (SDGs) are a much-needed framework for the future of the planet and its people, but for boardrooms – especially as businesses emerge from the pandemic, and all the uncertainty it has brought – they can be overwhelming to say the least. One mistake too many boardrooms are making is this: trying to do it all, and in turn, achieving very little.
There is a huge amount of pressure and a sense of urgency around ESG, often a necessary response to regulatory or disclosure requirements. To alleviate this pressure, many organisations go too wide, aiming to achieve the unachievable. At best, it means they are only scratching the surface of what’s possible. At worst, it could be discredited as greenwashing, yet another example of corporates talking the talk but not walking the walk.
So, how can leaders ensure their organisation does what is necessary while achieving something meaningful?
Narrow your scope
Picking one or two SDGs, and focusing on helping to achieve their targets, is the way forward. Say you’re an education-tech company – focusing on anything more than SDG 4 (Quality Education) means you are reducing the impact you could have on helping to achieve that SDG. Ditto an engineering firm – your time should be spent on SDG 9 (Industry, Innovation and Infrastructure) if you want to see success at the end of your efforts.
This is because actually achieving the SDGs in a way that is profitable and sustainable for your business requires more than annual sustainability reports. It requires more than small-fry efforts to reduce carbon emissions or contribute charitable donations. It requires your business to pivot – and this is much more likely to succeed if you choose to pivot around one goal you’re trying to achieve.
This pivot starts by focusing on strategy (who are we, what is our purpose?) followed by focusing on sustainability (how can we contribute to achieving SDGs through this purpose?) and finally, technology and innovation (what solutions are needed to make this a reality, and how can we create them?)
This pivot could give you a stronger reason to adopt SDG-related targets in the first place: creating new lines of business to future-proof the bottom line. Say you’re a detergent company, and extracting water is critical in the production of your liquid detergents. Pivoting your business around the product – for example, shifting from water-intensive liquid production to technologies that produce eco-strips – will ensure you can contribute to SDG targets and create new, profitable lines of business too.
What’s more, focusing your efforts on one SDG isn’t only likely to yield greater results for that specific goal, in this case, SDG 6 (Clean Water and Sanitation). It could also have a knock-on effect on other areas of the overall ESG picture, from reducing packaging and plastic waste in the shift from bottles to boxes (helping SDG 14, Life Below Water) to creating more efficient and responsible supply chains by reducing the size of products (helping SDG 12, Sustainable Consumption and Production).
Australian start-up Water Source have a similar story, as a business focused on achieving one SDG – SDG 6 (Clean Water and Sanitation). Knowing that almost two billion people worldwide don’t have access to clean water, with our help, they created an innovative decentralised water treatment unit, using IoT technologies to clean water at a community level. This process could revolutionise how water is delivered to millions – all because the team were focused on solving one key issue, rather than spreading themselves too thin.
Look outside your four walls
It won’t be possible to achieve the SDGs as an island – that’s where SDG 17 (Partnerships for the Goals) comes in. For the parts of the strategy that are core to your business, you can pivot and innovate to make them happen. For the secondary parts, that may require the help of a partner.
Take the microchip industry. Worldwide, billions of microchips are produced every year, yet to make just one takes up to 30 litres of water. This means the average semiconductor factory uses as much water as a town of 50,000 people every year. As the world continues to digitally transform at pace, this trend will continue. This is just one contributing factor to the UN’s prediction that demand for water will grow by 55% by 2050.
But all this water goes to waste. At the same time, food and beverage companies are producing water all day, every day to make their products – as are many other industries. In non-competing supply chains like these, exec teams should be thinking about creating partnerships with other businesses where they can take advantage of each other’s waste – whether that be water or otherwise – to help the planet and its people. Say a microchip factory is located close to a bottled water factory – why shouldn’t waste water, used to cool equipment down during the microchip production process, then be filtered and bottled, rather than go to waste?
This is just one example of how partnerships could completely change the game for businesses in pursuit of ESG success.
Helping secure the future of our planet and its people should be reason enough to pivot and expand your ESG strategies. But that’s certainly not the only reason why now is the time for action. There is mounting pressure from governments, investors and charities for organisations to do more. Failure to act on ESG is almost certain to adversely impact sales and business success in the coming years.
If your organisation is working to achieve ESG goals but isn’t seeing the kind of results that really make a difference, now is the time to refine that strategy, distil it down to its most critical parts and do something meaningful. For those businesses who haven’t even really started, the good news is that starting small is the best way to see success – and to reap the rewards.