Business leaders must decide how to translate ESG requirements into consistent practices that reach across the organisation and along the value chain to each partner and supplier for the optimum community impact says Cathy Mauzaize at ServiceNow.
The Middle East consumer base is increasingly dominated by a young, socially conscious subsection. According to PwC research, shoppers here base their buying decisions on environment, social and governance, ESG issues to a greater extent than the global average. Some 31% of those in the Middle East say they consider ESG when making a purchase compared with 18% globally.
ESG strategies have leapt up several places on the priority lists of regional boardrooms as regulators and employees join consumers in demanding more responsible business operations.
But calling for it is one thing. Navigating its challenges to deliver on ESG pledges is another. In a fragile global economy, how do we choose wisely from the many potential areas for investment? And how do we solve problems of measurement to demonstrate progress? The fog on the path forward starts to clear when considering central truths of ESG.
ESG journeys are not the same
ESG will mean something different for each enterprise, based on the nature, maturity, and scope of operations. Legal demands, values, and customer expectations will also come into play. The business leader must then decide how to translate these requirements into consistent practices that reach across the organisation itself and along the value chain to each partner and supplier for the optimum community impact.
Where Europe may be further along in sustainability and other ESG areas, the Middle East journey is admittedly more recent given governments’ prior focus on rapid growth. But in areas such as the Arab Gulf, sustainability clauses have found their way into the government guidelines that drive national economic programs.
The region’s decision makers must take care in timing their ESG forays. Invest too impulsively and the ability to deliver could be compromised. Conversely, the potential for partnerships with global organisations on ESG could be missed if enterprises wait too long.
Employees drive the change
The successful implementation of any great change rests on the shoulders of people. When it comes to ESG, not only will an organisation’s talent be part of the change process, but today, they will also be judges as to its success. The digital natives that make up the majority of modern workforces are more invested in sustainability issues than any generation that has preceded them.
Generation Z, while having only entered the workforce in the past decade or so, is having far-reaching influence on ESG. A third of them would turn down a job offer over ESG concerns, according to research from BUPA Health.
In an extraordinary shift, the current talent pool is brimming with passionate young professionals who expect their employer to align with their values.
This twist has likely been driven by the fact that today’s candidate does not need to compromise on this point because they find themselves in a seller’s labour market, especially if they have strong digital skills, which are in short supply in the region. And good ESG management requires these very skills.
This means companies must invest in talent. This will help them retain the talent they have and help to acquire more. It is a cycle. A mature, digital-skills talent pool, nurtured appropriately, is a sound foundation for implementing sustainable, socially responsible policies that give the organisation an advantage in hiring more people with digital skills.
ESG dashboards
Measuring success in ESG is difficult, to say the least. That is due in part to the problems faced by ESG managers in simply defining what success looks like to their organisation. ESG classically starts by listing commitments.
Perhaps an enterprise aims to be carbon neutral or net-zero by a given date, or to reduce its emissions by a certain amount per year. To deliver on these pledges is to examine all processes and determine which can be adjusted to contribute to the end goals. A control tower approach allows these investigations to bear fruit more readily.
With the right technology, the entire value chain from internal processes to those of suppliers and partners can be analysed to identify what emissions occur, Scope 1, 2 or 3. Only with complete visibility from the control tower can an organisation make meaningful progress.
With the right information, ESG managers and other stakeholders can collaborate on which areas can be targeted for effective improvement. And they can simultaneously lay the groundwork for enhanced governance and compliance.
This will be important in the face of escalating regulations around ESG, such as the requirement of the UAE Securities and Commodities Authority that companies submit regular sustainability reports. Gone are the days of CSR, which was largely an optional branding tool. ESG is branding necessity and compliance requirement rolled into one.
Agile ESG managers
Because ESG is now so much a part of the jurisdiction of regulators, there will continue to be rapid movement in the rulebooks. As goalposts continue to shift, the skill sets required to put the ball between them will also change.
ESG stakeholders must be agile, with a plan in place to reskill and reconfigure operations at a moment’s notice. Innovation will help, and that is where nurtured talent comes in. A staff that knows the inner workings of operations and the technology that serves it will be better placed to tweak the mix and come up with a way to keep pace with the latest introductions to legislation.
The environment and our society are waiting for us to innovate our way to remedies that can be deployed cost-effectively at scale. It is up to us to act on ESG and leave the world a little better than we found it.
Key takeaways
- With the right technology, the entire value chain from internal processes to those of suppliers and partners can be analysed.
- With complete visibility from the control tower an organisation can make meaningful progress.
- A mature, digital-skills talent pool, is a foundation for implementing sustainable, responsible policies.
- In a fragile global economy, how do we choose wisely from the many potential areas for investment? And how do we solve problems of measurement to demonstrate progress?
- ESG will mean something different for each enterprise, based on the nature, maturity, scope of operations.
- Digital natives that make up majority of modern workforces are more invested in sustainability issues than any generation that has preceded them.
- Measuring success in ESG is difficult, and that is due in part to the problems faced by ESG managers in simply defining what success looks like.
- The current talent pool is brimming with passionate young professionals who expect their employer to align with their values.
- Because ESG is now a part of the jurisdiction of regulators, there will continue to be rapid movement in the rulebooks.
- As goalposts continue to shift, the skill sets required to put the ball between them will also change.
- ESG stakeholders must be agile, with a plan in place to reskill and reconfigure operations.
- Innovation will help, and that is where nurtured talent comes in.
- A staff that knows inner workings of operations and the technology that serves it will be better placed to keep pace with legislation.
