Effective ESG Strategy: Mastering the Art of Doing Well by Doing Good

Introduction

These days, where concerns about the environment, social responsibility, and ethical governance are at the forefront of public discourse, businesses face the question: How can we succeed while contributing positively to our world?

In this dynamic landscape, the concept of doing well by doing good has emerged as a powerful and sustainable approach. This paradigm shift goes beyond traditional profit-centric models, emphasising the integration of environmental, social, and governance (ESG) strategies into the core fabric and strategy of a business.

The primary goal of this article is to explore the integration between doing well and doing good to the future of businesses. Therefore, here are some effective ESG strategies for building a purpose-driven business that thrives by making a positive impact.

Effective ESG Strategies

The concept of sustainability emerged in the 1970s, when society began to become more aware (Dresner, 2012). Since then, sustainability has been considered fundamental for good business management. In these times, incorporating sustainability into your business strategy is no longer a choice, but a necessity, and is vital for long-term success, a vision for the future of companies (Ecoskills, 2023).

Economic growth is traditionally linked to increased production, consumption and use of resources and has harmful effects on the environment and human health. It is necessary to rethink the meaning of growth and progress and their impact on sustainability (Wunderlich, 2023).

Effective ESG strategies provide that path. The evidence is clear: embracing ESG is not just about doing good, it’s also about driving economic growth and ensuring long-term sustainability.

ESG indicators measure a company's sustainability practices. The essence of any business involves three pillars: making a profit conscientiously (G), in addition to having social (S) and environmental (E) adherence and concern (Cauduro, 2023). A strong ESG proposition can truly create value and safeguard a company’s long-term success (Mckinsey, 2019).

ESG issues are driving corporate strategy and performance. Considering the critical role that corporate ESG information will play in evaluating a company's long-term performance, companies must ensure that they provide more information, but also that the information is relevant and of high quality (Arvidsson et al., 2021).

An effective ESG strategy, supported by solid management processes, is increasingly important for long-term business success. ESG initiatives can ensure that there is accountability for responsible practices in companies, in addition to being able to pay dividends in the long term (Setdman, 2023).

The integration between doing well and doing well is at the heart of successful business strategies. Companies that invest in sustainability also invest in their longevity and profitability (Ecoskills, 2023). Also, when companies effectively implement ESG strategies, they create a win-win scenario. They prosper financially, while fostering a sustainable future for the planet and society.

Advantages of ESG strategies

The adoption of ESG strategies offers a multitude of advantages that go beyond merely fulfilling corporate social responsibility. These strategies have become an essential driver of success for modern businesses.

According to Ecoskills (2023), companies with an ESG rating typically outperform the market in the medium and long term. There is therefore a relationship between sustainability and financial success.

According to Mckinsey (2019), a strong ESG proposal is linked to the creation of value in five essential ways: revenue growth, cost reduction, regulatory and legal interventions, increased productivity, and optimisation of investments and assets.

According to Cauduro (2023), adopting these sustainability practices brings important benefits to companies, which include reducing risks, improving the management system, better connection with customers, optimising resources, attracting investors and creating long-term value.

ESG strategies can provide competitive advantages over business rivals, attract investors, improve financial performance, increase customer loyalty as well as create more sustainable and adaptable business operations (Setdman, 2023).

A strong ESG strategy can enhance reputation and brand value, improve risk management, attract investment and capital, assure long-term financial performance, help innovation and efficiency, attract, and retain talent, get access to new markets and customers, assure regulatory compliance and licence to operate, as well as make positive societal impact.

In summary, ESG strategies are not just a moral obligation, but a strategic imperative for businesses.

How to start?

Regardless of the size of your company, these initial actions are crucial to get you started on the path toward effective ESG strategies:

1.Leadership commitment

In the intricate dance of organisational dynamics, leadership commitment stands as the linchpin that propels a company toward success and sustainable growth. Beyond merely steering the ship, a committed leadership team serves as the driving force behind a thriving corporate culture, innovation, and employee engagement.

2. Setting a Compelling Vision

Leadership commitment begins with setting a compelling vision that transcends short-term goals. A visionary leadership team not only articulates a clear destination but also inspires others to embark on the journey. This shared vision becomes the guiding star that aligns every facet of the organisation toward a common purpose.

3. Identify your business ESG goals

Specific ESG goals should align with your business's industry, size, and impact areas. Regularly assess and adjust these goals based on your business's evolving needs, societal changes, and emerging sustainability trends.

When identifying business’s ESG goals, consider the following examples:

Environmental Goals (E): 

• Reduce carbon footprint: Set targets to decrease greenhouse gas emissions and increase energy efficiency.

• Resource conservation: Implement measures to reduce water usage, waste generation, and overall resource consumption.

• Renewable energy adoption: Increase the use of renewable energy sources to power operations.

Social Goals (S):

• Diversity and inclusion: Establish goals for improving diversity and inclusion within the workforce, leadership, and decision-making processes.

• Employee well-being: Prioritize employee health, safety, and overall well-being through initiatives such as mental health support and work-life balance.

• Community engagement: Set targets for community outreach and positive impact through social initiatives, volunteer programs, or partnerships.

Governance Goals (S):

• Ethical business practices: Establish and uphold a code of ethics that guides decision-making processes and business conduct.

• Board diversity: Aim for a diverse and inclusive board of directors to bring varied perspectives to governance.

• Transparency and disclosure: Enhance transparency in reporting, providing stakeholders with clear information on financial performance, ESG initiatives, and risks.

4. Engage stakeholders

Engaging stakeholders is a critical aspect of building a sustainable and successful business. By actively engaging stakeholders and incorporating their perspectives into your business strategy, you build stronger relationships, enhance your reputation, and create a more resilient and sustainable organisation.

5. Assess current practices

Assessing current practices is a crucial step in understanding where your business stands in terms of sustainability and identifying areas for improvement. By conducting a thorough assessment of current practices, you lay the groundwork for creating a sustainable business strategy. This process not only highlights areas for enhancement but also demonstrates a commitment to continuous improvement and responsible business practices.

6. Develop an ESG framework

Developing an ESG framework involves establishing a structured approach to integrating sustainability and ethical considerations into your business operations. Remember that an effective ESG framework is not static but evolves with your business and the external landscape. Regularly review and adapt your framework to ensure it remains aligned with your business goals and societal expectations.

7. ESG reporting and transparency

ESG reporting and transparency are critical components of demonstrating a company's commitment to environmental, social, and governance principles. Enhancing ESG reporting and transparency is an ongoing process that requires commitment and engagement. By following these principles, your organisation can build trust, demonstrate accountability, and contribute to a more sustainable and responsible business environment.

8. Implement and monitor

Implementing and monitoring your ESG (Environmental, Social, and Governance) initiatives involves putting your sustainability strategies into action and continuously tracking progress. By implementing and monitoring your ESG initiatives with diligence and commitment, your organisation can contribute to positive environmental, social, and governance outcomes while building trust among stakeholders.

9. Seek inspiration from leaders

Absolutely, seeking inspiration from leaders who have successfully integrated ESG principles into their organisations can provide valuable insights. Here are a few leaders known for their commitment to sustainability and ethical business practices:

• Tim Cook (CEO of Apple): Tim Cook has continued Apple's commitment to sustainability and ethical sourcing. Apple aims to have its entire supply chain and product life cycle be carbon-neutral by 2030.

• Emmanuel Faber (Former CEO of Danone): Emmanuel Faber emphasized the importance of social and environmental responsibility during his tenure at Danone. The company committed to becoming a B Corp and focused on regenerative agriculture and circular economy practices

• Paul Polman (Former CEO of Unilever): Known for his leadership at Unilever, Paul Polman championed sustainable business practices. Under his tenure, Unilever embraced the Sustainable Living Plan, focusing on environmental impact, social responsibility, and economic growth.

• Indra Nooyi (Former CEO of PepsiCo): Indra Nooyi focused on sustainability during her leadership at PepsiCo. The company made strides in reducing its environmental impact, promoting healthier products, and fostering diversity and inclusion.

But remember, as you begin your ESG journey, this is a continuous process of improvement. By taking these initial steps, you’ll set your company on a path to doing well by doing good.

Time for action

Now is the time to act and integrate sustainability. This will not only bring social and environmental benefits, it simply makes sense from a business point of view (Milanese et al., 2022). ESG is not a distant destination, it’s a journey that businesses must embark upon.

According to Ecoskills (2023), integrating sustainability into corporate strategy is a fundamental shift towards a more responsible and resilient future, which can drive financial success, while creating a positive impact on society and the environment.

Now is the time to act, not only because it’s the right thing to do, but because it’s the smart thing to do. By embracing ESG into you business strategy, you can do well by doing good.

Are you adopting effective ESG strategies in your business? What are the specific ESG strategies that you incorporate in your business or industry? Have you engaged your stakeholders to gather their insights on your ESG journey?

References and Further Reading

Dresner, S. (2012). The principles of sustainability. London: Earthscan.

Wunderlich, P. (2023). Sustainability challenges. European Environment Agency. Available in: https://www.eea.europa.eu/en/topics/in-depth/sustainability-challenges

Milanese, S., Eikelenboom, M., Stella, C. & Decadri, S. (2022). Overcoming the challenges to sustainability: exploring the state of sustainability & the challenges to adoption. ArthurDLittle. Available in: https://www.adlittle.com/en/insights/report/overcoming-challenges-sustainability

Cauduro, C. (2023). Indicadores ESG (Environmental, Social and Governance). LinkedIn. Available in: https://www.linkedin.com/pulse/indicadores-esg-environmental-social-governance-carlos-cauduro/?originalSubdomain=pt

Arvidsson, S. & Dumay, J. (2021). Corporate ESG reporting quantity, quality and performance: Where to now for environmental policy and practice? Wiley.

Ecoskills (2023). The role of ESG in corporate strategy: Integrating sustainability for long-term success. Ecoskills. Available in: https://ecoskills.academy/esg-and-strategy-sustainability-for-success/

Setdman, C. (2023). ESG strategy and management: Complete guide for businesses. TechTarget. Available in: https://www.techtarget.com/sustainability/feature/ESG-strategy-and-management-Complete-guide-for-businesses

Mckinsey (2019). Five ways that ESG creates value. Mckinsey.