How exec teams are getting ESG wrong

This article was first published in Management Today

Go small or go home, says PA Consulting's head of sustainability.

There’s a lot of pressure on leadership teams to get sustainability right and the range of requirements can seem overwhelming. There are 17 UN Sustainable Development Goals (SDGs) but no successful business is delivering against all of them today.

All too often companies respond to these pressures by trying to do everything and end up only scratching the surface. 

What leaders should do instead is pick one or two goals and really focus on making sure they can meet them. That starts by understanding that achieving SDGs or environmental, social and governance requirements in a way that is profitable and sustainable for your business has to go beyond producing annual sustainability reports.

It cannot just be about some limited efforts to reduce carbon emissions or making a few charitable donations. It needs your business to pivot to doing things differently and this is much more likely to succeed if you choose to pivot around a limited number of goals.

This pivot should start by focusing on brand strategy (who are we, what is our purpose?), followed by focusing on sustainability, and finally, technology and innovation (what solutions are needed to make this a reality, and how can we create them?)

This could then give you a stronger reason to adopt SDG-related targets by revealing ways to create 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 by shifting from water-intensive liquid production to technologies that produce eco-strips, will ensure you can contribute to SDG targets and generate new market share. However, that will only be achieved if senior leaders are committed to the goal and the business transformation needed to make it happen.

LOOK OUTSIDE YOUR FOUR WALLS

Achieving sustainability goals requires a sharp internal focus and the ability to lead and inspire the organisation. That, though, is not enough. The transformation required will often require the help of a third-party and a willingness to enter into partnerships with others. This means leaders need to be willing to adopt a more outward looking perspective and to embrace very different ways of operating.

Take the microchip industry, which produces billions of microchips every year. To make just one microchip 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, 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.

Where there are non-competing supply chains like these, executive teams should be thinking about creating partnerships where they can take use of each other’s waste products.

Say the microchip factory is near 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? Yet it requires real leadership to prompt organisations to think differently and engage with partners outside their usual networks.

Helping to secure the future of our planet and its people should be reason enough to pivot and focus on the SDGs. But that’s certainly not the only reason why now is the time for action. Customer priorities have changed, especially since the start of the pandemic. Leaders must adapt and either improve and expand their sustainability initiatives to secure a new part of the market or they stand still and lose both their competitive edge and existing customers in the process.

None of this is easy, and if your organisation is working to achieve its sustainability goals but isn’t seeing the kind of results that really make a difference, now is the time for leaders to refine the strategy and approach.

That means distilling it down to its most critical parts, and focusing on where you can achieve something meaningful but accepting that you cannot do everything. For those businesses who haven’t even really started, the good news is that starting small is the best way to be successful and a focused approach on a limited number of targets will bring real rewards.