What’s driving the increased level of conversation around Sustainability and ESG?
Before we answer, let’s set aside the Climate Change debate and focus on business outcomes. Whether or not you accept some or all of the pro Climate Change debate, what matters is what others think. Afterall, those on whom you rely to generate sales and provide your profit should be at the front of your mind when responding to this challenge.
Listening to what is said, and what isn’t, is part of today’s reality. And tomorrow it will be even more pronounced.
Listening to what is said is easy, but hearing what isn’t said is a little more challenging. One example illustrates this thread nicely.
In response to a master franchisor request that each of its franchisees adopt a particular level of sustainability certification, one franchisee claimed that certification was not necessary because their customers did not ask for it. And one particular, and extremely large international mining conglomerate (who was easily his largest customer) was cited as an example of customer disinterest.
This was particularly interesting as that company had been subject to media attention for a number of months, perhaps years, about their environmental and social impact. One of their stated aims was to closely monitor their supply chains, large and small, to ensure that as far as possible, sustainability and social responsibility was a driving factor in all purchases.
When challenged with this information, the franchisee reiterated that his principal contact at the mining company had not asked about the franchisee’s environmental and social policies.
The franchisee was ultimately surprised when the work started to dry up.
We can conjecture what part of the conversation came first. Societal expectations or Government Regulation.
Customers, employees, communities, and other stakeholders who vocalise the societal expectations are demanding more from companies when it comes to Sustainability and ESG. They want to see that companies are not only making profits, but also making a positive difference in the world. And yes, they are price sensitive. Equally they want to support and work for companies that share their values and vision for a better future.
Governments and regulators are also paying more attention to Sustainability and ESG, as they seek to address the global challenges, social inequality, and corporate governance. They are introducing new rules and standards that require companies to meet environmental, social and governance standards. For now, larger businesses are required to disclose their ESG performance and align with global frameworks such as the Paris Agreement and the UN Sustainable Development Goals.
In time we can expect measurement and disclosure regimes to be filtered down to SMEs and perhaps to micro-businesses.
We only need to casually observe mainstream media and social media channels to know that while opinions may vary, conversations are strident. We can also see that when these media channels “catch a wave”, significant damage to a company’s reputation can quickly be the result.
Evidence of that is demonstrated with the exit of any number of high-profile CEOs (QANTAS, Woolworths, Optus, Netball Australia).
And while large corporates have pockets deep enough to withstand a level of customer dissatisfaction, the small end of town does not.
Now we can revisit the franchise example that was cited earlier in this article. Unsurprisingly the franchisee in question had in all likelihood met or exceeded the standards required for the certification that he refused. And for the little time required and the small investment in the certification program, he could have forestalled any downturn in business.
Sustainability isn’t always what you think. Joining the conversation and meeting customer expectations will point you in the right direction.
Accross | Sustainable Ethical Services works with micro and small business owners to develop and implement simple, low-cost strategies to capitalise on the sustainable things they already have in place, and to identify and prioritise other easily achievable and affordable activities which can improve their standing with their customers and within their communities.
