ESG and its rising importance

March 8, 2020

We recently interviewed Cornelia Grant, Investor Relations and External Communications Director at CG Communications. Cornelia spoke to us about the growing importance of Environmental, Social, and Governance (ESG) in today’s corporate world.

What are the first steps/priorities that a company should take if they are starting from a base of zero on ESG/Sustainability?

At the heart of all strong sustainability strategies, reporting and communications is the concept of materiality. There are various definitions of the term, but the key principle lies in defining the economic, environmental and social impacts that are most significant for your business as well as those which most influence your stakeholders. Companies go about defining their materials issues in different ways and this can include a full stakeholder engagement process, an assessment of broader societal expectations, a review of relevant international standards, regulations and laws as well as sector/industry-specific challenges. Once a company has determined its key issues, it can then look to ensure it has the systems and policies in place to ensure responsible management of each area, it can establish relevant indicators to measure performance, it can set targets and report on progress.

What are the minimum requirements companies should be disclosing/what is expected of them?

There are various regulatory requirements, which depend on a company’s listing jurisdiction, size etc. Thereafter, in my opinion, it comes back to materiality. With numerous reporting frameworks out there, it is often difficult for companies to decide which standards best suit their requirements and those of their stakeholders. My company, CG Communications Ltd, spends a lot of time carrying out gap assessments for businesses looking to enhance their reporting. This generally involves looking at all the relevant standards and frameworks, as well as any stakeholder requests for information (these might be from investors, suppliers, governments or communities) and working out what will best fit with the external requirements, whilst bearing in mind the practicalities from a company perspective.

Where does responsibility for ESG/Sustainability sit within an organisation?

I think everyone is now clear that ESG/sustainability needs to be fully integrated into a company’s strategy and business model. Therefore, it follows that oversight should be at board level, with may companies creating a board-committee for this purpose. At the executive level, I strongly feel that for a company to manage sustainability effectively and to contribute to meaningful change, the CEO needs to be a sustainability leader. The University of Cambridge definition of a sustainability leader is interesting and is simply: “someone who inspires and supports action towards a better world”. ESG issues should be a constant priority on the CEO’s agenda, with all senior executives actively embedding sustainability into their respective departments.

What seems to create the most focus/attention –  the “E”, the “S” or the “G”?

Many are of the opinion that by looking after the “G”, you are more likely to get the “E” and the “S” right – I think this makes sense. A company that does not have strong governance ethos, frameworks and policies is, in my opinion, less likely to take a responsible approach to environmental and social management. This is not to say that environmental and social aspects are secondary to governance; clearly, all three are key focuses for companies who wish to operate sustainably and ensure a long-term future.

Who would you highlight as a company who is exemplary in this field?

Unilever is an obvious choice and often cited as one of the leaders in the field. Other interesting companies to look at are Interface, Orsted, Marks & Spencer (Plan A programme) and Novo Nordisk.