Moving from compliance to competitive advantage starts with narrative.
Enhancing environmental and social performance are enormous business opportunities to create shareholder value.
However, despite new sustainability reporting mandates kicking in, 90% of the top 1000 listed companies are unprepared for ESG.
Most companies see ESG as a box-ticking exercise in compliance. Yet it's also an opportunity to innovate. Improve operational efficiency. Mitigate risk. Attract and retain the best talent. And improve brand differentiation and reputation.
For those starting on the journey, key is to define a compelling narrative which can emerge only as companies find their best-fitting strategic stance on ESG and tie it explicitly to long-term value creation.
Narrative helps investors and other stakeholders understand the boundaries or guardrails of their company—what they’ll do with regard to ESG, where they’ll play, and which capabilities they’ll develop themselves (versus looking to ecosystem partners to provide), while clarifying decisions and resource allocation.
Here are three ways in which some of the best companies are doing exactly this:
- Make it substantial not sustainable
Most sustainability strategies are designed around reduction, compensation or some level of siloed offsetting - trying to do "less harm".
Usually, this is because when your business model is built on extraction, no amount of future-facing carbon offsetting will have a positive impact.
The best brands consider their entire value chain - from design, sourcing, production and distribution to usage and post-usage - seeking always to leverage network effects to create substantial change.
IKEA’s purpose "To inspire and enable the many people to live a better everyday life within the boundaries of the planet" is embedded in its ambition to be circular and climate positive by 2030.
From rental furniture to modular couches, the company is finding more and more ways to limit its use of raw materials through assessed products, design roadmaps, standardisation, renewable materials and circular services.
2. Make it positive -- and possible
Sustainability messaging has typically relied on notions of guilt, duty and sacrifice; the idea that a diminished experience - decreased quality, higher prices, more inconvenience - is the cost of doing the right thing.
Deliver a better experience without expecting people to pay more for the privilege. This is not about giving people more choices, but helping them live more intentionally. Not every choice has to be a conflict.
Brands must make earth positive purchasing decisions as easy to opt into as the "less sustainable" options. Focus on desire and happiness. Not guilt and guidelines.
The Mahindra Group is pushing the industry's shift to the use of electric vehicles with the launch of XUV 400 - its first eSUV. It is already the largest electric three wheeler company in India with 70% marketshare and is accelerating the transition to clean mobility by supporting a net zero supply chain. Moreover, through the Group's various business activities, it is enabling all its stakeholders to "Rise".
3. Lastly, make it yours.
Every brand's contribution to climate solutions is unique. Explain what you're doing and why you're doing it. Draw attention to your innovations within this space. Show how your business is serving the environment and the communities it inhabits.
Be outspoken, be intentional and see your ESG journey as one of the most important ways you can stand out from your competitors. And while your actions may be unique, they can be universally inspirational. Every net positive company out there is a challenge to others to act too.
Long before ESG was even conceived, Unilever's Sustainable Living Plan (USLP) 2010 translated the company's purpose of "making sustainable living common place" into a core aim: double the size of the business through strong performance, while decoupling environmental impact from that growth and optimising Unilever's positive social impact.
Covid notwithstanding, by the end of 2020, Unilever had grown its turnover from 44 bn to 51 bn euros while making significant progress on its impact goals.
Our Sprints can help you make a practical start
Explore what the ESG Opportunity means for your business. With the right inspiration and reframing of the problem, your team will start brimming with ideas.
Make a personal commitment to action. We ask people to consider: what does this mean for our stakeholders, the communities in which we operate, and for me/ my job?
This is just the start.
The workstreams that emerge take investment of personal energy, money and time. But it will make you feel empowered, give you a sense of pride and move you into action.
