ESG - IT PAYS TO START

ESG - IT PAYS TO START

By Tom Marsicano, CEO of ‘and Change’

E nvironmental, social, and corporate governance (ESG) isn’t just a buzzword for large corporations. Decades before it entered the current business lexicon, ESG was already a key investment factor for many, whether you called it ‘ethical investing’ or ‘corporate social responsibility ‘.

But more conscious strategies are a massive trend right now, with ESG becoming intertwined in financial decisions, brand identities, and organisational mission statements. But this isn’t just a fad – and it’s making its way to markets around the world. Across Africa, we are seeing a rise in ethical investment. South Africa was the second country (after the United Kingdom) to formally introduce the Code for Responsible Investing in South Africa as far back as 2011.

Organisations are becoming more socially and environmentally conscious, and you can see it from the top down. The Johannesburg Stock Exchange recently delivered draft climate and sustainability disclosure guidelines,. South Africa’s own ESG disclosure rate (for rating purposes) has been lauded by The Responsible Investment and Ownership Guide. So yes, ESG is here to stay.

South Africa has always been a forerunner in implementing radically transformative business policies. I would argue that BEE (Black Economic Empowerment) and its current iterations are a brilliant example of how legislation can affect social change, and I suspect it has laid the framework for many transformative ESG strategies.

However, putting more conscious strategies in place is far from easy for even the largest organisations. Hence, it makes sense that change management skills would be crucial in developing and implementing them. KPMG recognises that at the centre of every ESG program is change management.

“Businesses now have the opportunity to design strategic change agility into their operating model, develop new products, expand into new markets, forge new alliances, and transform the organisation’s performance. To be successful in this new paradigm, it is necessary to not only manage change but also improve the organisational structure, how people are developed, and how the culture is curated,” a recent report read.

These various developments are at the centre of what we do as change agents.

With global research revealing that 78% of board members and senior executives acknowledge the value of solid ESG performance and business transformation, change management can assist business leaders in becoming more purposeful entities.

All sustainability and social impact work are effectively change-management because managers have to be able to take care of both the technical and people side of these major changes. I mean, suitable technology must be in place to implement a change (structured process, toolsets, assessments and measurements).

However, equally important are the leaders in an organisation who establish why these transitions are necessary so that the change is adopted with minimal resistance. When it comes to something as relevant as ESG, the best leaders will work with their teams to create their strategies, determining what is important to them and how the organisation can build towards these goals (part of what we change managers call sponsorship). Perhaps it’s reducing carbon footprints, being more financially transparent, and more diversity and inclusion across the company’s teams and processes.

By asking what the team values and keeping them informed of these new processes, they’re less likely to resist even the most significant changes. In essence, change managers across all units in an organisation should have the skill sets to engage in these conversations and build these strategies.

It sounds like a costly investment, but it’s been proven that ESG thinking effectively improves efficiency and profitability for organisations of any size. ESG isn’t just for large corporate entities. Even smaller organisations should be aware that they can participate in effecting change. It’s understandable that SMMEs (small, micro, and medium enterprises) are already seeing lower profits during an economic recession and may not be keen on implementing more conscious business strategies. But more conscious companies attract and retain more talent, improve their reputation, attract more investor interest, and lower risk overall in terms of health, safety and even litigation.

It pays to start – even if you must start small. At and Change , we’ve already noted a substantial reduction in our carbon footprint after switching from in-person training to online. It’s fundamentally changed the way we work, but we’re recognising the benefits and helping those we advise implement similar changes.

Smaller organisations may soon see more reasons for being socially and environmentally conscious. Experts believe that tax incentives will play a major role in driving ESG investment. Other fiscal policy measures will ultimately affect market prices and make sustainable business more affordable – and profitable.

When these incentives become a reality, there will be no excuse. As leaders, organisations, and society, there is an opportunity to become more sustainable and socially aware. Let’s seize it.