ESG Experts event: five ways to become more sustainable
Discussions about making a business sustainable often end up in platitudes and nebulous statements.
We wanted to do something different at the launch of ESG Experts. Instead of just speaking about our services, we thought it would be more useful for you to hear from a business and an investor about how ESG can add value to your organisation.
That’s why we organised a panel discussion to illustrate five ways in which embracing ESG turbo-boosts a business and makes it more sustainable.
Freelance journalist Charlotte Moore hosted the panel consisting of Nick Stone, CFO of FTSE listed shipping broker Braemar, and Alina Gregory, Investment Director at Cazenove Capital, alongside Isabel Kelly of ESG Experts.
Guests were welcomed by ESG Experts’ Chair, Ryan Ward. And Co-Founder Jo Goddard shared the ESG Experts methodology and framework. We were delighted that our event was hosted and supported by Sapphire Systems at their office in The Shard in London.
1. Future proof your business
Nick Stone, from Braemar, said: “The first – and least important reason – to embrace ESG is because we have an obligation to report on these issues.” But more importantly, it is a way to make a business forward-looking. “Shipbroking was historically an ‘old boys club’ and we need to look at how the business structure and staff policies could change to keep our organisation vibrant and attractive to employees,” he said.
Alina Gregory, from Cazenove Capital, said: “When we consider the ESG credentials of a company, we think about how this impacts all the stakeholders not just the shareholders.” Isabel Kelly of ESG Experts added: “Potential employees want to work at company that takes environmental and social issues seriously. It can be a decider for where people want to work.”
2. Get to grips with the green transition
Focusing on ESG characteristics helps a business get to grips with the risks associated with moving to net zero and helps avoid harbouring stranded assets.
Nick said: “The ship owners we work with are trying to understand what the future energy source will be for the industry. By thinking about these issues now, we will be better able to help our clients plan for the future.” Investors now spend more time identifying which individual ESG characteristics are of particular importance to each company.
Alina said: “Forward-thinking companies put together a materiality matrix which identifies what is most important to the business, its stakeholders and its shareholders.” If there is an issue which has high priority to a stakeholder but lower priority to the business then investors can step in to create a dialogue to make positive change, she added.
3. Social factors matter to investors, consumers, and employees
Up until now social factors have been the neglected middle child of ESG with plenty of focus on the environmental impact of a business and how it is governed. Yet human rights are an important issue for both consumers and investors.
Isabel said: “Social issues are very broad – they encompass labour and human rights, people issues, diversity and inclusion agenda and they change rapidly.” But new reporting requirements are making business having to focus on these issues with an enhanced modern slavery statement as well as European businesses having to report on corporate sustainability. “Everyone will have to address all salient issues, not just climate change,” said Isabel.
As a practical action, Nick said: “Our employees have told us they want simple changes like us supporting local charities as well as matching donations.”
4. Investors want companies to embrace ESG concepts
Investors have long-time horizons so they will allocate capital to companies which also think in this way, said Alina.
Building a sustainable business is all about having good practice which can be consistently repeated for many years. Cazenove Capital uses Schroders Engagement Blueprint which sets the expectations for different companies of different sizes in different industries with different resources. It encompasses environmental themes such as climate change, biodiversity and natural capital. Social issues include human rights, human capital management as well as diversity and inclusion.
Alina said: “For example, we would expect a FTSE 100 company to have at least 33% female directors on its board and at least one non-white director.” If a company doesn’t meet these criteria, we will encourage the company to make changes, but divestment is a possibility if the dialogue doesn’t result in action, she added.
5. ESG builds better business resilience
Starting to think about different ESG characteristics gets a company thinking about the long-term and identifying risks which need to be addressed. For example, finding new energy sources for shipping or making your business appealing to new employees in a tight labour market. Identifying these types of risk will build the processes and strategies to make your business more resilient and better able to weather future storms.
Nick said: “We are at the beginning of our ESG journey but by tackling these issues we will be better equipped to face the future as well as creating a better place for people to work.” Alina said: “Companies should not see ESG as about embracing a particular set of values – it just makes good business sense.”