Environmental, social, and governance responsibility – The case for a shift in corporate culture

For the first time in our history, up to two thirds of investors claim that they take the social responsibility of a company into account when considering their investment. This means that we are tending towards a world where doing the right thing is both morally essential as well as financially rewarding.

For too long, companies have considered their social responsibility as a bolt-on set of actions meant to offset their impact on the community and the environment – a fixed portion of profit was allocated to a set of activities that were there to distract audiences from the actual activity of the company.

Today we consider ESG – our Environmental, Social, and Governance behaviours – as a responsibility to do the right thing. This means that all decisions taken at board level, and the way these trickle down through the entire organisation, are based on a sound set of moral standards.

Of course, we see our obligations as a destination. We consider the ultimate state of a company as being one in which every action taken is based on these solid moral grounds. We also know that on the way there, we might take some actions that are misguided. We learn from these actions and move on in a better direction.

This brings us to a question with a very elusive answer. What is the right thing to do?

Let’s consider, as an example, the issue of littering. Take a stretch of our coastline and observe the quantity of litter. A simple approach would be to invest in many more bins so that these are within easy reach of anyone who enjoys the spot. A more expensive, but ultimately more sustainable route, would be to invest in educating the public about the matter.

Some destinations are indisputable. Our responsibility to grow into a zero emissions company is one that every company ought to be considering. There will be initial costs and the timeframes will vary depending on the activity of the company but the endgame remains the same.

This also applies to governance. A more robust, transparent and responsible leadership layer will always promote better behaviour across the board – on an individual employee level as well as the net effect of the behaviour of the company.

Generally speaking, ESG is more about a set of behaviours than the amount spent by the company on individual initiatives. The operative word is sustainability, and for ESG to leave a lasting impact, it must be the result of a fundamental shift in the way the company operates.

Let’s take FIL as an example of a company that is a net spender – we purchase goods and services from the market within which we operate. We choose where to spend our money based on our set of fundamental values – if a supplier is aligned to our values, then we will pick them instead of an alternative that may be cheaper but that violates our ESG principles. This behaviour encourages a trickle-down set of changes within the market.

While plenty has been said against publicising the activities of a company that are socially responsible, there are two good reasons to be publicly vocal about the actions you are proud of. The first is to be an example to other companies in your sector – those that claim that the right thing costs too much will quickly realise that they simply need to make more effort to find the balance between spend and sustainability.

The second is a more humbling reason. We have often spoken about an action we took and received a response from the public telling us that there is an even better way to do things. We are living in a world that is increasingly compassionate, inventive, and responsible. Speaking about our actions has opened invaluable dialogue with the community – we have listened, we have learned, and we have adopted better practices.

Finally, there is the issue of strong political guidance that is needed to repair what we have collectively broken. We cannot afford to wait. What we can do is take initiative and actions, large or small, that are within our reach. As the business world takes these actions, we lead by example. And as the business world acts in unison, we create a set of demands that can’t be ignored.