What do Environmental, Social, and Governance factors have to do with organizational culture? Everything! Culture influences how organizations respond to ESG obligations: whether they go for minimum compliance, diminish damage, or go further to deliver positive contributions to customers, society, and nature. Companies’ impacts range from negative to net zero to net positive. ESG can evolve from a legal obligation to an advantage for organizations that inspires their positive purpose and culture.
By now, you’ve probably heard the terminology ESG. It stands for Environmental, Social, Governance, and more and more investors apply these non-financial factors as part of their analysis to identify risk and growth opportunities. But it’s not just investors. The European Union’s Green Deal entails the Corporate Sustainability Reporting Directive (CSRD), effective 2024, that forces publicly owned companies to disclose the details of their ESG efforts and outcomes. The US Securities and Exchange Commission (SEC) follows in the same direction.
Against greenwashing
The CSRD goal is to prevent “greenwashing”. Corporations are held accountable for the damage or side effects that they currently externalize – and need to improve. You have to show how you’re going to do better, and how you’re making progress. You have to report and prove it to your employees, your suppliers, and other partners in the value chain, to investors, the public, the government – to all stakeholders.
This detailed reporting directive may weigh heavy on the workload of already overburdened professionals in large organizations. But the intention is good: the CSRD and comparable international standards as the Global Reporting Initiative (GRI) and those issued by the Sustainability accounting standards board (SASB) and the SEC aim for the same. Let’s not be fooled by greenwashing, PR, and marketing slogans. Let’s be clear that we expect organizations to make a positive difference. Businesses should prevent ESG-damage, and add positive value to all stakeholders now and in the future, not just their current shareholders.
Though I work as a culture consultant, I recently took a a sustainability course at Groningen University to combine my consulting work on positive organizational cultures with positive goals in the field of environmental, social, and governance challenges and opportunities. That’s because a positive purpose is one of the four elements of a positive culture. And the most positive purpose right now is improving the current global ESG situation.
A positive purpose
A shared positive purpose gives teams and organizations wings. It is not a goal, but a long-term, meaningful purpose that serves a greater whole than yourself. It is a higher mission – but not a mission statement on paper. Such a positive goal inspires everyone’s thinking and doing, all actions and interactions, decisions, and priorities. It is alive. A positive goal focuses on possibilities, not limitations. It positively formulates what you want to achieve (not what you want to avoid) and what you can do yourself (not what is beyond your control).
You may know the story of three masons who were cutting natural stone into large blocks. When a passerby asked what they were doing, the first mason said, “I’m cutting stones.” The second replied, “I’m building a wall.” The third beamed, “I’m building a cathedral!”
This story ties in with Lyubomirsky’s research that distinguishes three ways of thinking about work: people see work as a job, a career, or a vocation. If you have a job, you look at the clock because work is a way to make a living. With a career, you want to move up and look at the calendar to measure your progress. If you have a vocation, then you want to make a difference. You do what you love to do. You don’t look at the clock or the calendar, but you feel urgency: it’s time for positive change!
A quick exercise: We help people to
A start to enhance the positive purpose is this exercise. With your team, complete the sentence, “We help people to…” You can answer this for your organization (the people you help are customers) or for your team (the people you help are colleagues from other teams). Both are important, but what you can do for external customers and stakeholders is often extra motivating. How do you make their lives easier, and better – what needs are you fulfilling? What is your contribution?
Next, link your organization’s answers to the relevant UN Sustainable Development Goals (choose from 17 SDGs). Here’s where you’ll find the shared purpose, meaning, positive contributions, and tons of fresh energy!
By the way, in my book Developing a positive culture, you can find more practical ways to work on your company’s positive purpose.
Positive ESG contribution
Right now, we need to improve a lot of Environment, Social, and Governance challenges at the same time. It’s intense. Climate change, social inequality, and fair regulation are all affecting the playing field. A positive goal that contributes to improvements in these areas gives organizations and people energy and direction. Both customers and employees demand this of companies. Recent McKinsey research notes: ”Ninety-two percent want companies to speak up about ESG challenges, with 74 percent pointing out that CEOs need to take the lead.”
- You’ll lose your millennial and Gen Z customers if you don’t contribute to solving ESG issues. What if your proposal is not included because you can’t answer what you do about ESG? What if you can’t recruit and retain gen Z and millennial talent?
- Attracting funding might also become easier if you work on your ESG-rating. Larry Fink, CEO of BlackRock, the world’s largest investment firm, says that “companies need to earn their social license to operate every day.” He also declared that “value to stakeholders and purpose is now the new mantra.”
ESG assets may hit 53 trillion by 2025 (Bloomberg intelligence, Feb 2021). And almost 60% of Mutual Fund Assets will be ESG by 2025, PWC says (Bloomberg Green). - What if you lose government goodwill, which will impact your subsidies, applicable legislation, and taxation, licenses)?
- What if you can strengthen your stakeholder relations in the process of working on ESG?
- What if it improves innovation and agility?
- What if ESG differentiates your company from the competition?
- What if the positive purpose gives your people energy and everyone goes the extra mile?
- What if you see the bottom line improve? That may very well happen, as research on positive organizations indicates.
We must – we should – we want to!
Your corporate motivation may be negative (we must, so we comply) or neutral (we should, it’s the right thing to do) or positive (it inspires and it pays off!). Whether you work on ESG for what you want to avoid or for what you want to achieve, it’s a fact: Companies can do well while also doing good for the world.
Many publicly traded companies already issue annual ESG reports, but the ESG ripple effects will also impact private companies, including smaller organizations. If you have not begun your ESG journey, the risk of inactivity around your ESG non-financial risk factors can harm your business. ESG can help you gain a competitive advantage, generate new revenue opportunities, increase access to capital, protect your company reputation, amplify your client relations, and attract & retain young talent.
Lou Raiola, Founder of ESG Solutions Group, confirmed in a recent webinar that ESG can activate your organization’s purpose. ESG helps to move from aspiration to action and to connect the silos of DEI (diversity, equity, inclusivity), culture, and CSR (corporate social responsibility). It helps to develop the strategy and to build shared values and long-term trust in the value chain of organizations.
ESG is not just a legal reporting obligation – it’s an opportunity. Working on Environmental, Social, and Governance challenges can activate your organization’s purpose, improve the bottom line, and deliver easier subsidies, licenses, and funding. It helps to strengthen stakeholder relations, differentiate your company from the competition, and helps to attract millennials and Gen Z professionals and customers.
Where are you on the scale from must-should-want? Do you want to?
© Marcella Bremer, 2022
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