To deliver an ESG strategy, a company must build an ESG culture

The United Nations first coined the phrase “environmental, social, and governance” (ESG) in the early 2000s to urge more ethical investment practices.

Today, ESG is so much more than that. Now, it is a reputational necessity –a transparent business plan to help the environment, support diversity and equal opportunities, and ensure responsible corporate decisions. With global ESG assets expected to reach $53 trillion by 2025 , businesses are urged to rise to the occasion and treat ESG as a key competitive advantage, not just a tick box exercise. This is especially true as investors –both major investment banks and individual investors like you and me - demand more transparency on ESG commitments from the businesses they invest their money into.

However, most companies need help executing their ESG strategy. The current confusion is wider than a single industry or sector and is undeniably exacerbated by the fact that there are currently over 600 ESG reporting standards. The uncertainty around ESG impacts business in a myriad of ways. It affects reporting frameworks, verifiable ratings, external communications, growth strategies, stakeholder expectations, and more.

To make sustainability sustainable and deliver a successful ESG strategy, businesses must first build an ESG culture through smart employee relations, savvy hiring, and responsible business partnerships. And the time to act is now.

ESG must be all pervasive

While the acceleration of ESG practices is a high priority for those in the C-suite, that cannot be the only place or role that cares. ESG must be a mindset that permeates the entire business – from graduates to longterm senior executives.

Employees are eager to join and work for a company that is not focused on profits alone, but also on building a better world. This is particularly true of younger generations who are widely seen as the most ethical. A recent Bupa study found one in three (31%) Gen Zs “would turn down roles in companies with poor ESG credentials, and over half (54%) would take a pay cut to work for a business that reflects their ethics.”

People leaders must collaborate with executives across all functions to develop a solid governance framework and build programmes that demonstrate the company’s values and positively impact the planet. Investing heavily in reskilling programmes will boost employees’ learning, curiosity, and passion. Corporate initiatives and projects that allow employees to take their skills and expertise to social businesses help tackle some of the world’s biggest challenges – like food cultivation and healthcare improvements – as well as reaffirm a company's ownership of impact.

Recruitment as the catalyst for change

Reports already show that the demand for ESG skills is outpacing supply. A Funds Europe study found that 72 percent of asset manager respondents believe there is a potential shortage of climate-risk specialists. With a recession looming, some short-sighted leaders may be pulling back on their ESG initiatives. But ESG must remain a focus when searching for talent.

Business and people leaders can highlight desired ESG skills and the company purpose in job postings as well as recruit from universities prioritising ESG within their curriculum. In the UK, universities have spotted a niche and now offer degrees in data science for ESG specifically, which highlights the eagerness of young students to incorporate aspects of ESG into their careers from the outset.

LinkedIn’s Global Green Skills 2022 report found that 10% of job postings explicitly required at least one green skill in the past year. Take this recent chief financial officer posting: “The candidate should be a qualified accountant (CPA, ACA, ACCA) with deep technical knowledge of accounting and with a desire to drive forward the company's sustainability agenda. He or she should have a good understanding of the landscape of sustainability and climate-related global initiatives such as net-zero targets, climate risk, and impact assessment.”

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The planet and profits go hand in hand

While ESG considerations for supplier selection, hiring, and building brand reputation have been in play for a while, the shift toward more sustainable practices has skyrocketed over the past couple of years.

Companies will only meet sustainability goals with responsible sourcing, and the actions of a single chief procurement officer can have a positive ripple effect on millions of suppliers across the world.

One way this happens is through consumer goods companies’ creation of deforestation-free supply chains - those that take social and environmental considerations into account as they manage their supplier relationships. This type of commitment means products will come from estates and factories that are verified as deforestationand conversion-free, which benefits the health of consumers, livelihood of suppliers, and protection of the planet. A strong ESG proposition with more sustainable products can attract B2B and B2C customers and attain better access to resources through stronger community and government relationships.

Organisations across industries are rethinking their definition of success – shifting from a singular focus on financial goals to ethical and sustainable outcomes too.

There is no doubt that ESG can be a key transformation lever for businesses to attract investors and positive partnerships as well as unlock competitive value. But without building an ESG culture today –supported by all individuals across the organisation – a cohesive ESG strategy will remain but a dream.

Shibu Nambiar COO, Europe, Africa, and the UK Genpact