All companies can benefit from having an Environment, Social and Governance or ESG policy. Although many companies do have one, the degree to which these policies are actually used still varies. It is worth noting though that if a company does create and operate by an ESG package it can be a significant draw for potential employees and investors alike.
As a B Corp operation whose business is ethical recruiting, we have our own robust ESG policy in place, and we know that it is one of the most sought-after features that our client base looks for. We know that when it comes to financial professionals, they are some of the best-placed people with the skillset to ensure that companies make and create achievable ESG policy goals. An important aspect of our brand of ethical recruiting is to encourage finance professionals to be the catalyst for change in their companies, helping directors to adopt a more ethical approach without having to sweat too much over it.
Entrepreneurs and investors use the ESG factor to see if a company is worth participating in. The ESG policy score enables the investors to consider whether this will be both a philanthropic venture and a chance to make serious money in the long run. The financial figures are the first thing they will consider of course, but increasingly, the way people approach investments and ongoing concerns, and potential employment, takes ESG into account.
So how can finance professionals help embed ESG into their business?
The finance team has more influence that it gives itself credit for. Firstly, they have a respected seat at the table in the boardroom. Secondly, they are the scorecard for the business, so they are well equipped to measure impact. Finally, they have the analytical ability to find meaning from data and bring it to life for the business.
So, where do we begin? The first aspect to consider is the company’s impact on the environment. A potential investor/partner/employee will look at the company’s green record and attempt to understand what the company has done to reduce a potentially negative impact on the environment. Naturally, the first thing they will look at is the carbon emission that the company is putting out. If it is too high, and there are no discernible attempts to offset the emissions, then the investor/partner/employee is less likely to become involved. Then, in addition to assessing the carbon emissions, other standards on which the company’s environmental programme’s performance is based are the degree of pollution contribution and the company’s energy usage. Any prospective partner will want to know that the company uses renewable energy as much as possible, along with the amount of water used and how waste is minimised or recycled. Ultimately, reducing the degree of environmental damage limitation is the key to success.
Then there’s the social aspect, the ‘S’ in ESG which is often forgotten. The aim here is to provide something that can be returned to society. This is similar to the social projects that Victorian entrepreneurs instigated to offset the abject poverty that many found themselves in as they left the land for better paid roles in the towns and cities. Reformers within Parliament joined forces with campaigners outside in pressing for reform to improve the lives of men, women and children in the poorer sections of society. The new measures established the principle of government involvement in welfare provision, and in regulating conditions of work in factories, workshops and mines.
In order that we do not return to those dark, pre-reform days, those seeking to invest in or become a part of a company are interested in knowing that it is not involved in poor employment practices or with investing in foreign exploitative employment partners. Promoting equality in the workplace and a fair progression process are also requirements. Outside the company’s offices, investors want to see what the organisation intends to do to forge more significant links with the community and provide meaningful projects. This also includes ensuring that the product’s quality is safe or, in the case of financial products, that they are fair and accessible and subject to a reasonable judgment.
The final factor is governance or how the company is set up to be governed. A strict set of rules and regulations should be created and adhered to. This is to ensure there is no chance of corruption or any misuse of the company funds and no investments are made into antisocial or environmentally unsound entities. There should also be clearly demarcated rules for the shareholders and executives to have guidance in running the company. Governance also means increased accountability.
What does this mean for finance professionals? Thanks to their knowledge, they are some of the best people to be involved in setting up a company’s ESG policy. Finance professionals not only have a working knowledge of the company’s capacity but also the natural analytic skills to map out the necessary pathways to ensure that the three elements of the ESG policy are set up and adhered to. Furthermore, if a company is serious about obtaining a B Corp status rating, then with ethical recruiting of financial professionals who have experience of the rigorous application process, they can start to achieve this.
Formulating an ESG policy can be a difficult journey for the company to make and it needs to have guardians and creators to ensure that it is applied. Financial professionals are the people who can help ensure that the decisions made stay within the boundaries of the company’s ESG vision. Many people within the company will be counting on the finance professionals to make sure that the right choices are made. Carbon creation levels, for example, can be regulated and the correct goals can be set and met. In effect, you’ll have a carbon accountant! Then, once everything is in place, the auditing of an ESG policy will be something that your finance professional can conduct so that both sides can be sure that they are going to achieve the right outcome.
Making the decision to take on a ESG policy is one of the most positive things a company can do. It is one of the most responsible ways in which a business can help and act in an empowering way for its employees by involving them in the process. With buy in from employees and business owners, ethical practices throughout all industries may start to take shape and even become mainstream as a significant future recruitment point.
