ESGIgnite:Unlocking environmental,social andgovernancepotential
Part 5: Sparking momentum on ESG
ESGIgnite
ESG Ignite is a series of reports aimed at helping organisations to take a proactive and positive approach to environmental, social and governance issues. Rather than a regulatory burden, ESG is treated as being fundamental to building strong, future-proof foundations.
The series includes thematic insights highlighted during in-depth, face-to-face interviews with 60+ senior leaders across a diverse range of sectors. The aim was to gather insights and opinions about how they are responding to ESG challenges and opportunities.
To stay up to date on the latest ESG developments affecting clients across Mills & Reeve’s sectors, sign up to our blog, listen to our podcast or visit our dedicated ESG page.
Page 1 Introduction: Businesses as catalysts for change
Page 2 Insights: Fired up for the future
Page 8 Practical steps: Our approach
Page 15 Conclusion: Creating a culture with ESG at its core
Page 16 Get in touch
Introduction:Businessesascatalystsfor
er the coming into that allveals what d about and novation. It oming up lating their yday action and viate competing
That said, I do believe business can be an incredible force for good. Organisations are embracing this shift, recognising it as a reflection of the desires of both their customers and the emerging workforce. 80% of professional investors now have rigid ESG policies dictating how they invest (Deloitte), up from 20% five years ago. Businesses are even facing up to politicians on this, like Ford voicing its frustration over the UK government’s delay on banning new petrol and diesel cars (The Independent). So, there is real cause for optimism that businesses will do their bit to change the world.
organisations will ddressing the root o really make this he world of ESG nother regulatory dit. There could also be a political and societal backlash against ESG issues which will put a dampener on organisations making changes, as we’re seeing in certain parts of the US.
This momentum is what gives me huge amounts of hope for the future. I hope you find this final report in the ESG Ignite series useful as you envision what tomorrow looks like for your organisation.
Neil Pearson (he/him) Partner, Head of ESG and Social Value Mills & Reeve
Insights:Firedupforthefuture
The business case for ESG is well-known, and senior leaders in organisations across industries are getting behind the idea of doing the right thing. There’s no doubt that they’re setting strategies and talking the talk, but are they doing enough to accelerate change?
LeadersbelieveindrivingESG
The right governance structure ensures ESG efforts are enabled, and that decision-making prioritises doing the right thing. Our research reveals governance is being taken seriously by those at the very top of organisations.
Who’sdrivingthegovernanceagendainyourorganisation?
The board/executive team/trustees/governing body
Leaders told us that critical action is being taken, with strategies and teams having been put in place to transition towards a more responsible way of doing business. When commenting on how they were moving beyond policies and procedures to embed governance, leaders mentioned they were training employees and working to make good, effective governance a part of their culture.
"For us it is just doing the right thing; it is business as usual, and I hope that in the future we will not need to have chief sustainability officers because, it is just how we will behave.
“ESG is really high up the agenda for clients. It used to be a selling point to have an ESG strategy. But now it’s very much seen as core business. Companies stand out for not having a strategy."
A financial advisor
“It's top of the agenda along with how much is this going to cost and how much are we going to make.”
A property developer
Transformationisnotgaining tractionquicklyenough
Despite its apparent importance, our conversations with senior leaders reveal frustration that ESG adoption is not happening faster.
Keybarrierstoembeddinggovernance
The top-level ESG strategy does not feed into tactical and daily decision-making processes.
Responsibility is dispersed across different teams for environmental, social, and governance issues, affecting alignment and ownership.
Environmental, social, and governance issues often compete for importance during the decision-making process.
In the ever-evolving ESG landscape, skills and learning can lag behind best practice. The departure of passionate staff members risks reducing momentum, demonstrating the vulnerability of organisations to even small shifts.
“A weakness of ESG is that everyone wants to do great things on environmental and social action, but if you do not have the leadership, management system and understanding, you reinvent the wheel every time.”
“Wellbeing is our focus because that is critical. Sustainability sometimes feels like a ‘nice to have’.”
“We just don’t have the skills and knowledge in-house.”
“Without the right culture in place that empowers people to really make change, strategy is struggling.”
Creatingmomentumisapriority
No matter how advanced their organisation’s ESG approach, nearly all senior leaders want to make much more progress. In fact, only 5% of the people we interviewed expect to have the same ESG policy in place in five years’ time. Everybody else said they planned to make greater strides, from innovating on environmental matters (19%), to embedding ESG across the company (18%) and hitting net zero targets (16%), to improving their local communities (16%).
HowdoesyourorganisationaimtodevelopitsESGapproach overthenext1-3years?
"If you asked most organisations ten years ago if they were conscious of ESG requirements, they would probably have said ‘yes’. With the benefit of hindsight, you look back now and say, you weren't. I'm sure that in ten years’ time we will say that there is more we should have done, and more we should continue to do.”
David Pitt, Head of UK Operations, SilverRail
Innovationandcollaborationare keylevers
Leaders are keen to both innovate and look to each other for ideas to build upon.
“Everything is about momentum…success and energy kind of breeds its own success and energy. I think it becomes easier as long as everybody is brought in and we see some success and stop treating it as a compliance thing and more of an innovation thing.
“The one thing I have seen is the amount of the positive feedback from people on the ground. One thing that they haven’t had before is a vehicle in which to communicate their aspirations and that’s really important for people to say I am interested in being part of a sustainable organisation, how do I put my assets into driving that?”
Professor William Swan, Director of Energy House Laboratories, University of Salford
“We have set up an advisory group to create a coalition so that we can partner with organisations to move the agenda forward. It’s an open invitation to work with others to develop ESG issues further.”
Alan Carter, CEO, Land Trust
“There's a lot of cross fertilisation of ideas between universities and increasingly colleges. There is a sectorwide trend to the way that these dimensions are considered, managed and reported.”
A university
“There's a company that I always look to for inspiration because I think they just do the best job of all of this.
They were one of the first B Corps in the country and are called Cook Food.”
A food business
Evidenceofimpactisseenas beingattheheartofsuccess
Leaders want to be able to prove the impact their organisation is having.
“The actionable detail and deliverability around sustainability is key. Sustainability is ultimately about preserving life on earth and, whilst that’s a big ticket item it creates challenges for motivation because actions are incremental and less immediately satisfying. You must explain the pathway to your goals and make each step a collective journey.”
James Scott, Group Director of Strategy & Planning, Urban & Civic
“I hope that within the next few years we know what percentage of companies measure emissions, their reductions and areas for improvement.”
A venture capital business
“We report our ESG accomplishments to our investors because, as a private equity backed business, ESG is an important reflection of value.
“Social value and sustainability are key elements in public sector tenders carrying significant marks. Given our customer base it’s imperative for the business that we are doing the right thing. At an executive level, but also engaging with employees, our communities and how we operate.”
Ruth Poole, CEO, Preventx
“In the short-term future, success for us is having a positive influence on a regional growth program which has some pace to it, with the maturity of governance and traction that it deserves. The universities will be performing a pivotal role, but in a support role to a whole system of change.”
A university
Practicalsteps:Ourapproach
As head of the ESG team at Mills & Reeve, I help to shape our strategy to embed and measure environmental, social and governance issues within the firm, making sure we're constantly improving. We're by no means perfect: this remains a work in progress but we're making a real, concerted effort, and this is what I have learnt. Even though we know we’ll make mistakes along the way, we’ll keep going!
Neil Pearson
Liveiteveryday Engageheartsandminds
It’s encouraging to see in our research that, in most organisations, leaders are strongly behind doing the right thing. But being vocal isn’t enough. It’s critical for leaders to behave in a way which is consistent with the strategy that they claim to support. If leadership doesn’t buy into ESG, take responsibility for it, and really live it, the strategy cannot succeed. Credibility plays a big part in any business strategy.
As an example of strong leadership at Mills & Reeve, we had a partners meeting on day two of the first Covid19 lockdown and our mantra was that whatever happens, there would be no redundancies: we had to make sure people knew what was happening during that stressful time.
So, it’s critical at key moments, but usually it's not bold. It's the day-today stuff, the small details, that make the difference–and those can really be quite boring. It s using the strategy every day to shape buying decisions. It’s the way you interact with others in the office. It’s treating people with dignity. It’s empowering everyone to call out actions which fall below the standards the strategy sets.
Every single person in the organisation has a role to play in ESG. Individual choices on a daily basis add up to big numbers. But a strategy is inevitably very high-level. Nobody can follow it unless they understand how they can personally help it be fulfilled and how their actions impact it.
So, break it down. Give examples. Create a clear narrative. Look at issues that affect everyone in the organisation, like travel, and enable people to make the best decisions on transport. For instance, we have a travel booking system so that people can see the best journeys to take and the most ecologically sound places to stay.
Look at key teams, like facilities, who are making decisions every day that affect our environmental footprint. Are they buying from ethical suppliers? Are they revamping, reusing and recycling everything possible? Is the IT team weighing up the commercial positives of AI with its impact on water supplies due to the amount of energy it requires?
Treat the strategy as if it's written in a foreign language and translate it into language that everyone understands, and enables everyone to figure out how their everyday actions can help achieve the strategy.
ConsideranESGteam
An ESG team can't solve every issue, but in my experience at Mills & Reeve, it can help provide the solution and create a culture and an environment in which people's behaviours can change. It can ensure governance structures and review systems make doing the right thing routine and rewarded. It can provoke new thinking with training and education.
As an example, we have put robust measures in place to support people and then introduced a training programme to empower everyone at all levels to call out behaviours that shouldn't be happening.
The ESG team can also provide people and teams with ideas on how to implement the overarching ESG strategy, making that bridge from the vision to the every-day. Having a team rather than individuals championing ESG means consistent messaging across the organisation and better outcomes. We all make better decisions by hearing different views and perspectives.
ThinkofESGasaTopTrump category
Your governance structure should ensure ESG is considered as one of the criteria when making decisions. It's never going to be the sole criteria. It can't be. It's always a balancing act between financial cost, carbon cost and, cost to people and business efficacy. Sometimes a positive decision can have a negative knock on effect. For instance, if a more responsible option is significantly more expensive, we can't bankrupt the business. We have a social responsibility to maintain financial stability.
Ourapproachinaction
To demonstrate how we’re embedding environmental, social and governance considerations into decision making, here we outline key questions we asked as we moved into our new Birmingham office.
Whatarethelongandshortterm environmentalimplications?
What are the most sustainable building options in the local area? How can we ensure the office is fitted out sustainably, remains sustainable and encourages sustainable behaviour?
EThe building we’ve moved into is purposeful, forwardthinking with a high BREEAM rating – an international construction standard providing a framework to deliver high performing, sustainable, newly built assets.
We've worked closely with our designers, Claremont, to achieve an SKA Silver rating – an accreditation scheme that sets out sustainable criteria to help assess fitout projects by looking at how to reduce waste, furniture sent to landfill and design for efficiency. For instance, nearly threequarters of furniture from our previous office has been reused and everything else has been donated to local schools and charities. Any new furniture has been assessed for carbon impact and recyclability. Stock carpet leftover from previous Mills & Reeve fitouts has been laid as well as new flooring that is recycled or recyclable.
The flooring, lighting and acoustic layouts are designed to be adaptable so that the space can evolve and expand without compromising functionality and aesthetics.
Whataretheopportunitiesandrisks forstaffandthelocalcommunity?
How can we ensure that the office space is accessible, inclusive and accommodating to the diverse needs of our staff and clients? How can we partner with our new community to create a positive social impact?
SEven before we moved in, we were collaborating with other tenants within the development on social impact projects.
Gender neutral toilets have been designed for colleagues and clients.
To support neurodivergent colleagues, spaces have different atmospheres thanks to clever use of lighting, colours, wall coverings and furniture. Even the angle of desks helps people who work better without noise or disruption.
Howdoenvironmentalandsocial measuresshapeourdecisions?
How can we ensure our suppliers and partners know our expectations, and are incentivised to deliver sustainable solutions? What advice can the ESG team provide throughout the process?
GESG was one of the factors determining who we appointed to work with us. All companies tendering for the fit-out work completed detailed ESG questionnaires. Responses were analysed and scored by the ESG team and included in our scoring process for the successful bidder.
The lease we signed includes clauses allowing us to ensure we monitor energy usage.
“This is just one example of how, to us, ESG isn’t just an acronym. It crosses everything we do. We aim to tie all three elements even closer together in the coming years.”
Neil Pearson, Mills & Reeve
Charles Staveley (he/him) Senior Partner Mills & Reeve
C lusion:CreatingaculturewithESGatitscore
ged to see that the leaders we ring our research are confident for f ESG in their respective ns. It is vital that ESG principles are otherwise sustainability measures ay be sacrificed at the first sign of rbulence.
d ethical decision-making are not mutually nesses are being challenged by their clients, talent, who will choose others if we do not dards and requirements.
e initial stages of our broader mission to cross every area of Mills & Reeve. The true amlessly intertwining the E, S and G within goal, ESG must permeate the of every senior leader in the firm. That’s Partner, I have taken on responsibility with ur Managing Partner, for driving the ESG vocate for it at board level, ensuring it is g the firm strategy, vision and values. It must serve as a constant reference point for us.
To maintain momentum, members of the ESG group share achievements and recommendations at the Board every quarter. This team is full of brilliant, passionate individuals, some of whom have featured in this ESG Ignite series. They are empowered to progress our environmental and social work and will tell me if and when more can be done!
That commitment needs to extend to everyone, and there is no magic wand. It will take time and we’re learning as we go. Recently, the whole partner group participated in training to recognise and address micro incivilities. It was a really powerful developmental programme which has prompted us to roll out training firmwide. The hope is that it equips people at every level with the language to speak up when they feel uncomfortable with behaviours or language and provides people with the ability and confidence to handle awkward situations appropriately.
At Mills & Reeve, we're not a panacea of perfection, but I am proud of our progress. I'm no crusader; I simply believe strongly in doing what's right. To those who share this sentiment, I extend an invitation to connect and explore how we can learn from each other and create a better future.
Getintouch
To discuss any of these issues in more detail or to sign up for the next report in the series, please get in touch. How can our ESG expertise support your business? Click here and visit our website
Judith Houston (she/her)
Senior Associate
judith.houston@mills-reeve.com 07765 014320
Surjit Deuer (she/her) Senior ESG Manager
surjit.deuer@mills-reeve.com 07967 755759
Neil Pearson (he/him) Partner, Head of ESG and Social Value
neil.pearson@mills-reeve.com 07769 994210