Do you know how others perceive your ESG?

Sustainability is long past being a buzzword. It’s becoming a regulatory requirement, but what should be more important to leaders is that their approach to sustainable is solid. A report released by Accenture and the World Economic Forum found that companies that successfully embed effective ESG (environment, social, and governance) practices generate, on average, more than 20% higher profits. “Unfortunately, many companies appear to view reporting as an environmental strategy itself, rather than as a tool to measure progress towards environmental targets” (Ref: Herva, M., Franco, A., Carrasco, E. F. & Roca, E. (2011), Review of corporate environmental indicators, Journal of Cleaner Production, 19(15), Pages 1687–1699.

To some extent, we have all witnessed greenwashing. Sometimes it is hard to tell whether a company is serious or not, and that’s where executives need to pay attention to be sincere. For today’s exercise, consider these aspects of sustainability and how your own company would be perceived by investors or other stakeholders who were critically evaluating your ESG.

Where does your sustainability function exist?

Are the key sustainability responsibilities in your company within operations, procurement, or in marketing and communications? When the question is posed this way, it’s probably pretty clear to see how an outsider would perceive your level of seriousness based on this. While it is important to have communications professionals on your ESG team to write and communicate your emissions and strategies, if you want to really become more sustainable, your ESG professionals need to be deeply embedded into your operations.

Are you reporting Scope 3 emissions?

While this is not yet a requirement, Scope 3 emissions (those emissions your company isn’t directly responsible for but occur both upstream and downstream in the manufacturing process) account for the vast majority of GHG emissions. For this reason, you should not only be reporting scope 3 emissions, but you should be evaluating your suppliers for their sustainability commitments.

Are your purchases all new?

If you aren’t considering how to reuse materials in your operation, you need to be. Companies that are serious about sustainability are looking at ways to use material inputs that already exist, rather than taking more from nature. If your organization hasn’t considered this, it may be eclipsed by competitors who have.

Is there transparency in your supply chain?

Before companies can start improving the activities within their supply chain, there must be a clear picture of the situation faced by all parties involved in the production of goods. Better transparency allows partners to work together to create sustainable options at all aspects of production.

For executives it can be helpful to step back and view their organization as an outsider would to assess whether you will be taken seriously when you communicate your ESG goals. Of course, it’s far easier to be taken seriously when your commitment is real, so an important step is involving supply chain leaders and helping your partners to assist you in reaching your targets.