ESG: Boards to Brands

The pandemic and other world movements such as Black Live Matter and Residential Schools, have and heightened levels of conversations and coverage on the topic of ESG (Environmental, Social and Governance). Consumers are overwhelmingly saying that they are caring more about what the organizations that they patronize represent, stand for, and believe in than they did in the past.  This is partly why ESG has made its way into the Board room as well as many, many more strategic discussions and strategic plans.

First, we need to understand why ESG is on the top of everyone’s to do list.  One reason is that around the world, citizens feel business and brands have done a better job than governments helping with pandemic recovery.  Another is that falling social cohesion[1] means that individuals are looking closer to home and closer to self for what they care about.  Individuals believe that they are doing their part and the vast majority say that they tend to buy brands that reflect their personal values, and that they are more likely to choose Canadian brands and products – so the next responsibility falls to industry. To capitalize on that, businesses need to be open about what they stand for and what is their contribution to the greater good.

Many boards of directors are reflecting on ESG and trying to understand how ESG may impact the long-term success of their organizations. As mentioned above, customers and stakeholders alike are demanding more and considering a Boards Duty of Loyalty to act honestly and in the best interest of the business, not reflecting on the impact of ESG in today’s society may be considered be disregarding their duty. The Board’s role is one of oversight and may consider including new metrics to measure ESG in future reports and dashboards, to have ESG on agendas for discussion and/or have a committee mandate include ESG.

What can management do?

In this confusing and evolving space, we are seeing client organizations either:

  1. Choose a cause which is important to the organization, its purpose, and employees, and focus support on that cause.
  2. Choose initiatives which appeal to a wide proportion of the customer base and which “fit” the business purpose and model or,
  3. Create product features or programs of support which allow clients to self-direct the cause, rather than piggyback on what the organization chooses
  4. Look at investing policies to prioritize the needs of people and the environment.

Recognizing the myriad constituencies and increasingly diverse priorities that have been accelerated by the pandemic, the two latter methods seems to be gaining a larger share of the conversational pie.

However you do this, authenticity is key.  It is not the best strategy to go chasing what is the latest cause of the moment in the public sphere.  As a starting point, bring forward the causes and beliefs that you have as individuals and as an organization and link the business that you have to a ‘noble cause’ whether it is directly associated with your core business and value proposition, or as a program of support. Then decide what, as an organization are the boundaries of support – how far are you willing to go to live these values.  Then decide where you want to participate versus what you wish to ‘own’ and build programs and tactics from there.

The long and short of it all is that Boards and Management should be incorporating ESG into conversations. Companies are increasingly making disclosures in their annual report or in a standalone sustainability report on their efforts related to ESG and the public is expecting more from their organizations they currently deal with or when looking to make a change.

[1] “Social cohesion involves building shared values and communities of interpretation, reducing disparities in wealth and income, and generally enabling people to have a sense that they are engaged in a common enterprise, facing shared challenges, and that they are members of the same community.” Judith Maxwell