Sustainability for businesses means integrating environmental en societal impact in business decisions. Impact that is measurable with the right data. Data that is already available within companies. Data that can be used to produce the required sustainability metric and create insight into non-financial KPI’s.
When these non-financial KPI’s are aligned with the business objectives, value is created for businesses and society as a whole. Integrating impact in business decisions finds foundation in strong governance. And enables companies to contribute to the #GlobalGoals!
“The goal of a sustainable business is to make a positive impact on the environment and society as a whole. When companies fail to assume responsibility, the opposite can happen, leading to issues like environmental degradation, inequality, and social injustice. By using environmental, social, and governance (ESG) metrics to analyze an organization’s ethical impact and sustainability practices, you can help improve financial performance while fostering public support.” (1)
Using ESG metrics in business means:
- Achieving excellence in strategic- and operational planning & risk management
- Adapting to changing markets & global events
- Attracting financial resources
- Creating a reliable brand
- Increasing customer satisfaction
- Improving company culture
- Attracting & retaining talent
Stakeholders – shareholders, suppliers, customers and employees – are more than ever looking for sustainable businesses. Not just in word, but in concrete data and measurements. The trend is moving from preference to demand.
Corporate responsibility needs to be more than a marketing hype. Promoting intensions and making statements are commendable, but publicly reporting ESG metrics shows stakeholders which elements have the highest attention and are actively managed by an organisation. Providing transparency with concrete data elements demonstrates an organisations true responsibility and accountability.
Environment
The impact of businesses on the planet is apparent. We all see and experience the consequences;
- intense droughts
- water scarcity
- severe fires
- rising sea levels
- flooding
- melting polar ice
- catastrophic storms
- declining biodiversity
Failing to demonstrate a good understanding of and response to environmental impacts equals high business risks. Corporate responsibility needs to extend along the total value chain.
In-depth supply and demand analysis steer towards improved strategic- and operational planning. With this the opportunity is created to identify and measure the organisational environmental impact. To reduce the environmental impact, re-use, re-cycle, re-wear, re-share need to become the standard.
Climate change presents financial risk to the global economy. Measuring CO2 emissions and managing waste guides organisations towards optimization and reduction.
Social
People are crucial for every organization: they represent employees, workers, customers, suppliers, distributors, retailers and contractors. Their growth – in knowledge, prosperity and well-being – is central to the success of all organizations and societies.
Employment and job creation are key drivers of economic growth, dignity and prosperity. They provide a basic indication of a company’s capacity to attract diverse talent. Talent that is key to innovate new products and services.
Obtaining a quality education is the foundation to improving people’s lives and sustainable development. Training and development involve improving the effectiveness of organizations and the individuals and teams within them.
A sustainable Learning & Development Program will not only bring knowledge, but foster acceptance and understanding creating a culture of equality and integrity.
Reporting Learning & Development figures informs stakeholders that long term value is created while adapting to evolving employee motivational indicators.
Absenteeism and employee turnover is common data that is found in each organisation. Metrics that are already available to include in your sustainability report.
Absenteeism affects organisations bottom lines. Absent employees impact productivity, revenue, and costs. Pro-actively managing absenteeism will give organisations the tools to improve health and well-being of staff, making them feel safe and secure.
Employee turnover is a symptom of deeper issues that have not been resolved, which may include low employee morale, absence of a clear career path, lack of recognition, poor employee-manager relationships or many other issues. Too much employee turnover is not only costly, but it can also give an organization a bad reputation.
Sharing Health & Well-being metrics demonstrates how employees are being protected within the company, boosting an organisations position as ‘preferred employer’.
Governance
A key principle for good governance is the effective oversight of corporate decision-making to ensure compliance with relevant laws and regulations. As well as meeting stakeholder expectations for ethical behaviour.
To connect with society, organizations need to reflect society, on all levels and at all times. This enhances recognition and improves engagement with all stakeholders – shareholders, suppliers, customers and employees.
Measuring ethics form the foundation for a respected governance, a unified company culture and stakeholder trust. A foundation that is further strengthened by reporting on elements as board composition and equal reward.
The principle of equal pay is enshrined in the European Treaties (article 157 TFEU) since 1957. Equal pay for equal work is the concept of labour rights that individuals in the same workplace be given equal pay. Equal pay relates to the full range of payments and benefits, including basic pay, non-salary payments, bonuses and allowances.
Undervaluing your employees not only makes your organisation less attractive, it also has long term effects in terms of retirement, social plans and remuneration packages. This puts employees at a disadvantage, increases inequalities and reduces economic output.
Reporting your board composition will portray what your organisation stands for at the highest level. Evaluating board composition means thinking about what the board has, and what it needs.
Diversity is a key element of any discussion of board composition. It should cover the range of skills, backgrounds, personalities and experiences on the board.
Long serving directors can become complacent over time making it less likely that they will challenge management. This can result in a lack of identifying opportunities that promote long-term growth.
The top-down effect will be detrimental for the organisation; complacent directors equal complacent management equal complacent employees. The lack of growth will make any organisation less attractive for new talent. The risks for absenteeism and employee turnover increase.
Ethics and equality reinforce the social licence of businesses to operate, strengthen workforce (talent) pools, enlarge the customer base and enhance its buying power and supplier relationships. The risk of penalties and fines are mitigated, negative long-lasting effects for an organization are avoided and stakeholder reliability remains intact.
Conclusion
In a recent LinkedIn-post we briefly highlighted what sustainability means in business;
- Sustainable businesses consider a wide array of environmental, economic, and social factors when making business decisions.
- Sustainable businesses monitor the impact of their operations to ensure that short-term profits don’t turn into long-term liabilities.
By aligning sustainability initiatives with business objectives, value is created for businesses and society as a whole. This is referred to as the shared value opportunity. In other words, “doing good” can have a direct impact on your company’s ability to “do well.”
To initiate real change towards sustainability and long term value, organisations need to collect clean and uncorrupted data, measure indicators, value them against core values and results, report findings and initiatives, take responsibility, accept accountability and start the transformation process. Only then is long term value and a sustainable business achieved.
Be bold! Take a critical look at your organisation and the issues at hand. Create an ‘open book’ environment, provide transparency and foster a culture of acceptance towards discussion and challenge; not just in word, but in measurable actions. Be the better business.
Are you thinking about initiating or improving your client’s sustainability journey?
Our solutions align sustainability initiatives with business objectives for the benefit of risk management and strategic planning. We produce ESG metrics and build decisive reports that support businesses in their sustainability challenges.
ESG is the abbreviation for Environment Social Governance. It is a generic term used to determine how far advanced a company is with sustainability.
Our (white label) platform is thé solution for (financial) service providers (accountancy, consultants, banks, insurance companies) who want to actively support their SME customers in their sustainability process.
(1) More about: What Is Sustainability in Business? | HBS Online