Discussions about sustainability in corporate boards around the world are at the ‘talk’ stage. As awareness and understanding of environmental, social and governance (ESG) mandates continues, many brands have deployed well-defined Key Performance Indicators (KPIs) to measure their position on their sustainability commitments. This shift has prompted many organizations to take bold steps to create a model that will deliver lasting business advantage and measurable value.
The benefits of proactively monitoring and addressing ESG issues go beyond simply satisfying institutional shareholders; the main one is overall growth. This is accomplished in two ways: by fostering trust between governments, making them more willing to grant access, permissions and licenses to new prospects, and, second, strong engagement with ethical customers and partners. According to a McKinsey study, more than 70% of buyers are willing to pay 5% more for a green product that meets the same requirements as a non-green alternative. With the younger generation expected to grow into a larger consumer cohort, ethical customers are expected to impact the bottom line.
One such brand that immediately comes to mind is Starbucks. The company puts its purpose into action by consistently committing to a resource-positive future, halving its carbon, water and waste footprints. As a step forward, the company recently pledged to produce carbon-neutral green coffee by 2030 and to reduce water consumption in green coffee making by 50%.
However, the variety of ESG frameworks can be overwhelming, and setting up a reporting system that includes the KPIs most important to your business can be daunting. Therefore, it is crucial to define clear and universally accepted ESG standards.
Although each country has its own ESG objectives, these standards are typically written with global frameworks in mind, which are then modified to meet the requirements of specific geographies. It is advisable to choose ESG criteria that are measurable and relevant to your company and all stakeholders. In addition, these criteria must be in line with the objectives of your company. For example, a materiality assessment analysis is an excellent tool for measuring sustainability concerns and challenges through the lens of stakeholders.
To align corporate objectives with ESG objectives, companies can seek industry reports in a major sustainability index to benchmark their company’s ESG framework against their peers. Some indices are more investor oriented and provide the framework for risk mitigation processes in the future; others focus on providing an overall annual review for multiple stakeholders. Global Initiative for Sustainability Rankings (GISR), Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) are some of the global nonprofit advocacy organizations that identify and rank companies’ ESG programs.
In a nutshell, ESG programs guided by measurable goals will help organizations cultivate strong brand affection and emerge as a responsible contributor to government visions and the SDGs and expectations of all its stakeholders. Sustainable business practices combined with proactivity are the basis of good ESG reporting. Business leaders should engage with regulators and continue to push global harmonization efforts to implement ESG practices smoothly across all geographies.
The opinions of the author are personal and do not necessarily represent the opinions of the website.
Dr. Elena Primikiri is the very first Head of ESG (Environmental, Social and Governance) function of VFS Global, and is responsible for increasing the sustainability components and ESG initiatives of VFS Global – from formulation and implementation of strategy to operational control. Of Greek nationality, Elena did her doctorate. in Environmental Technology, University of Michigan, where she also obtained his Master of Science and a Master in Design Studies in Environmental Design, Harvard University, Cambridge MA, USA.
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The CSR journal team