Say It, Mean It, Be It

Michel Doolin, Group Managing Director, Clover HR, explains why paying lip service to ESG will have consequences for your business.

Far from an empty administrative process, ESG – or environmental, social and governance reporting – can bring a myriad of benefits to your business. By making your sustainability, wellbeing and diversity initiatives known to the public, for example, you could boost profits by encouraging consumers to engage with your brand. Indeed, research conducted by New Harris Poll in collaboration with Google Cloud revealed that 82% of people are more likely to purchase from and remain loyal to companies whose values align with their own. ESG is also becoming increasingly relevant when it comes to securing investor support.

So, what exactly is ESG?

As the name suggests, companies engaging in ESG should report on three major branches: environmental, social and governance.

Whilst environmental reporting might focus on anything from recycling more to reaching net zero, social reporting could cover your relationships with consumers, employees and suppliers. It could also touch upon the impact you have on the wider community, through initiatives that drive greater access to your products and services among underprivileged groups, for example. Finally, governance encompasses anything related to leadership, be it audits and internal controls or shareholder rights, board diversity and anti-corruption practices.

The exact ESG issues that each company reports on will differ depending on the scope and nature of activity undertaken. The important thing is to ensure that you are honest in your reporting, touching on both positive initiatives and any risks that your endeavours might entail.

The flip side of ESG reporting

When the UN coined the term ‘ESG’ back in 2004, the aim was to demonstrate how concern for environmental, social and governance issues could give companies tangible benefit over their competitors. Since then, reporting has taken on increasing importance, with the successes and targets that companies share coming to play a fundamental role in curating a strong brand image worthy of ongoing backing and support.

However, as we enter an era of peak threats – with the war on Ukraine destabilising supply chains and concern for the planet at an all-time high – there’s a risk of companies exaggerating claims to win favour, without necessarily having the evidence to back these claims up. Even if the intention is not to be misleading, this can prove incredibly detrimental to business survival.

Far from protecting company finances, failure to live up to promises will only result in increased scrutiny from regulators, in addition to potential litigations and sanctions. Moreover, when risks and impacts remain under-reported and triumphs are glorified in a thinly veiled attempt to safeguard business performance, ESG practices could even be branded as ‘greenwashing’, ‘social washing’ or ‘wellbeing washing’, resulting in irreparable reputational damage when discovered. And with consumers, contributors and collaborators growing wiser, it’s all the more necessary to replace any empty promises, hypocrisy and insincerity encountered with authenticity, accountability and meaningful action.

Progress, not perfection

According to a recent NAVEX survey, just half of companies feel they perform effectively against their environmental goals, whilst just 39% feel their real-world actions align with their promises of positive governance. More worryingly still, just 37% feel they are actually meeting their reported social targets.

Rather than people-pleasing by offering up all the promises you can think of, only to find you’re paying lip service to a practice that should be based around honesty instead, it would therefore be best to limit your initiatives to what truly matters most to your business. This way, the drive to actually accomplish your goals will be much higher and, because they are relevant, you are likely to inspire greater trust from your supporters than through a range of generic promises.

Make sure that any goals you set are measurable, too. Being able to demonstrate progress and commitment is worth much more than mountains of hollow words and honing in on issues pertinent to your industry and core company values should result in a more coherent, relatable brand image, as well.

Whatever your corporate responsibility aims, make sure you have the support and resources in place to achieve them. This means securing adequate support from your internal team by putting in the effort to get everyone on board, as well as investing in the tools, resources and infrastructure required to make your ambitions a success. In fact, almost a quarter (25%) of companies feel that corporate silos constitute a significant barrier to ESG success, so securing involvement through effective communication and HR policies from the start will go a long way to ensuring you don’t involuntarily join the ranks of businesses that break their promises.

Ultimately, it’s about the quality of your actions, rather than the quantity. Whilst ESG should be approached as a holistic, comprehensive mission, with issues and goals that are interconnected, authenticity and a demonstrable translation of ambitions into tangible outcomes should remain paramount to any public announcements.