Why ESG Means Changes for Company Culture

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Why ESG Means Changes for Company Culture | FutureBusiness

Environmental, Social, and Governance – ESG, is a huge trend for businesses across every sector of every industry, and by its very nature, the process is all about change. This change isn’t just limited to how a business processes their products, or how they create their goods – the impact of ESG reaches to the core of the company and influences the culture of the business as well.

For longer established businesses and organisations, changes to the core of the company and the fundamental vision and values can be difficult to implement, and it requires a concerted effort with CEOs and C-Suite executives leading from the top down, in order to really make a long-lasting and effective change.

But as times change, and people – customers, investors, and other business owners alike – become more aware of environmental issues and involved in actions to protect the world around them, change has to happen – and it needs to be more than just lip-service, it has to be implemented and embraced at the very heart of the business, and reflect a genuine desire to do, and be, better.

Company Culture and Behaviour

The culture of a company is all about the shared vision and ethos – it’s about what is done, how it is done, and why it is done; and this is both on formal and informal levels.

Formal changes brought about by ESG are going to largely impact policies, strategies, and development. Some of these changes may be mandatory, such as new standards, legislation, and directions brought about by third parties and government initiatives; others may be voluntary in the sense that a business isn’t required to undertake them – but still be necessary due to the pressures of industry leaders and consumer expectations.

The environmental element of ESG is perhaps where most attention is initially drawn, with initiatives and directives, legislation and new industry standards being created to combat wastage, reduce the use of fossil fuels and non-sustainable products, and to reduce the emission of harmful gases and toxins.

Many businesses are adopting ESG reporting to assess their current standing, develop strategies and goals, and monitor their progress; and although it is not currently required by law, the number of companies making use of these reports and the standards offered by different frameworks and initiatives (such as the United Nations Sustainable Development Goals) is increasing year on year.

When it comes to the company culture, changes in environmental practices are being looked at by customers, employees, potential employees, and investors. The desire to support a business that has ethical and environmentally sound practices is appealing to all these groups, as is involvement with a culture that supports it.

But ESG is more than just the environmental impact – the social element is crucial. This is about how employees and people are treated, whether the company respects their team and position in the market, and what they’re doing to make the business a better place to work.

Changes to the social structure of the business can have a large impact on the business culture. When people feel protected, respected, and listened to, this can improve morale, reduce staff turnover, increase the business’s corporate reputation, and enable better access to capital and investment opportunities.

The Governance element of the process will also have an effect on company culture – as new legislations and practices are developed, or specific qualifications are aimed for (such as becoming ISO accredited), changes have to be made to fit these frameworks, and this will of course affect the way in which a business operates.

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Building ESG into a Company Culture

Change takes time, effort, and resources – but with the way modern businesses are progressing, and the continued focus on sustainable, ethical, and moral activities, a focus on ESG is somewhat inevitable for future businesses.

In order to integrate ESG principles into the DNA of a company, a strategic approach is often most suitable, especially if a company has previously had ethical or moral issues or has developed a poor reputation. Handling ESG appropriately means that it needs to be sincere, consistent, and company wide.

There should be a clearly defined ESG strategy, that has been created after an in-depth review of the company, and an open, honest look at the current culture. This strategy needs to be powerful, actionable, and have clearly defined goals. Once this is in place, frameworks and key performance indicators need to be established, in order to monitor both implementation of the strategy, and the actual running process.

Leading change must come from the top – people look to CEOs and Executives, and these individuals need to be seen supporting the business and championing the process as a core value. It will take time and effort to change a company culture, but as future business continues to focus on ESG issues, the process needs to happen.

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