Sustainable business: a guide to getting started
We’re all keen on doing the right thing but it’s got to make commercial sense too. So, why should you make your business sustainable and what are the benefits?
The McKinsey Report published in 2019 Five Ways that ESG creates value cited “When it comes to Ethical, Social and Governance factors (ESG), a do-nothing approach is usually an eroding line, not a straight line”.
In this blog we break down some of the buzz words and acronyms around sustainability and running a sustainable business so you can really get going with some practical tips and inspiration.
Sustainable buzzword buster
ESG: Environmental, Social and Governance
These are factors used as a means to measure the sustainability of a company. They include:
- The Environmental includes the energy taken in and waste discharged, the resources your business needs to function and the impact this has on all of us.
- The Social is how your business operates in your community, how you build and manage relationships with people and other businesses. This includes how you treat your employees, including your policy on diversity and inclusion.
- The Governance is the internal systems your business has in order to operate efficiently and within the law.
CSR: Corporate Social Responsibility
This is the idea that a company should be socially involved with its environment, including its employees.
Many companies use the terms ‘Sustainability’, ‘Corporate responsibility’ or ‘Responsible Business’ to refer to strategies or programmes related to ESG activities. In simple terms CSR refers to your company’s ethical behaviours and ESG is a means of measuring your approach to sustainability in a wider context.
- CO2 – Carbon Dioxide: Not harmful in itself. But it absorbs radiation and prevents heat from escaping from the atmosphere which disrupts weather patterns, increases climate change and global warming.
- CO2e – A unit of carbon dioxide emission: A phrase coined to help us understand how damaging certain human activities are on the environment. The lower the CO2e, the lower the impact. Sending a text message = 0.01g of CO2e. Flying London to Hong Kong return = 3.4 tonnes of CO2e.
- Carbon Footprint: The sum of all emissions of CO2 induced by your business’ activities in a given timeframe – usually a year.
- Carbon Neutral: Balancing carbon emissions by ‘offsetting’ (or removing from the atmosphere) an equivalent amount of carbon for the amount produced. This can be achieved by buying ‘carbon credits’.
- Net-Zero Carbon: A business reaches this when the amount of CO2 emitted is matched by the quantity of CO2e removed. You can’t achieve this by offsetting.
- Zero Carbon: This means that no CO2 is emitted at all for a business – this isn’t really possible yet!
Why opt for ESG?
ESG credentials can help your business
The COVID-19 pandemic saw many companies struggle and those with strong ESG credentials were more likely to survive. They are typically better run, more resilient and better equipped to manage in a downturn and get back up to speed as things improve. This is evidenced by a survey carried out by BlackRock that found ‘losses of companies during COVID with low ESG scores were 50% higher than those of highly ESG scoring companies’.
The pandemic has highlighted the role of business in society. It matters more now how companies operate within their locale and more broadly. A recent survey of UK Independent Financial Advisers found that over 75% believe investors would move away from companies that failed to support their employees during the crisis. If you want to attract investors then a firm commitment to improving ESG factors will help.
Businesses that focus on ESG perform better
Despite the recent economic downturn, ESG investment is not slowing down. More importantly organisations who prioritise ESG activities perform better, with higher financial growth, employee retention, productivity and related costs.
Better prepared for future regulation
As ESG becomes standard practice larger businesses will have various regulatory requirements. For those who don’t (yet) getting ahead of legislation means less risk and makes you better prepared for any changes in law that may include your sector.
Build your company’s trust
Ethical drivers are three times more important to company trust than competence. 66% of consumers consider transparency is one of the most attractive qualities in an organisation. This pays dividends on a company’s bottom line, reputation and long-term stability.
Attract and retain staff
A positive ESG approach can help companies attract and retain quality employees, enhance employee motivation (by instilling a sense of purpose and belonging) and increase productivity. Recent studies show that positive social impact correlates with higher job satisfaction. When companies give back (eg charitable donations to something close to an employee’s heart), employees react with enthusiasm.
Top tips to get you started on your journey to being a sustainable business
There are simple things you can do to create a more sustainable business practice such as going paperless and recycling. But what more can you do to decrease your carbon footprint while also saving money? We recommend the following:
- Create an ESG lead with support from the board. Give them authority, confidence and pride to make a difference.
- Work with like-minded companies, making sure their approach to ESG aligns with yours.
- Let your customers know what you’re doing and how you’re doing it. Share your journey and learn from your community.
- Ask your employees which local organisations they care about and look for sponsorship opportunities.
- Be creative! Use your skills in a way that helps causes you and your customers care about.
- Consider offering time off to your employees to volunteer for local causes and organisations.
- Consider how your business can add value to your community – both within and without the confines of your company.
- Could you create a programme to increase access to your industry for those who are currently under represented?
- Turn off office equipment: make sure that laptops, printers, and copiers are only consuming the power they deserve. Turn them off overnight and enable the power saving features to turn off when not in use.
- Reduce computer usage: An email sent uses carbon, only send emails which are important.
- Energy-efficient light bulbs and motion-sensitive lighting: LED lighting uses 75% less power compared to incandescent lighting, meaning less C02 produced.
- Fit a smart meter: This enables you to see how much energy your business is using.