3 Steps for Making a Positive Environmental, Social and Governance (ESG) Impact Follow these three steps to truly make a difference for your business and your world.
By Brendan P. Keegan Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Now more than ever, companies are paying close attention to environmental, social, and governance (ESG) factors. They don't just want to operate – they want to operate sustainably. Some of this is based on a genuine sense of organizational accountability, but it is also due to the fact that customers are showing a preference for companies that help protect the planet.
If you haven't already brought ESG into your company vision, getting involved can transform your business and help you gain a significant competitive advantage with just three steps.
Related: 5 Big Mistakes Companies Make When Tackling ESG
1. Decide that you're ready to commit
It's very simple to say you are going to be an ESG company. But greenwashing – where you claim you'll do a bunch of great things for the environment and society but never really do – is common. People will hold you accountable if you greenwash. In fact, when I attended the COP26 sustainability conference, there were protestors pointing out how much greenwashing there has been and demanding an end to it.
So, dig in. Are you really ready in your heart and mind to do this? Are you willing to have it represented in your core values and bring it forward into your everyday operations? Move forward only when you are sure you can give 100%.
As you think about whether the commitment is worth it, don't underestimate how putting your company vision and operations under a new lens can influence someone's satisfaction with their work and your business. As a personal example, at my company, we put 50 of our top people through a sustainability program. Afterward, one of our remote sales leaders who'd participated stopped me in the hallway. He told me he feels like he's electrifying America and saving the planet, not just selling commercial vehicles. He said he now has a real sense of purpose in his work.
Ask yourself how you can connect your people to the vision and tap into their passions. If employees are passionate about what they do, they'll put in more time, try to be more efficient, advertise what they're doing to others, and take on more responsibility. They'll strive to come up with more new, transformative concepts and implement them. They'll do it all faster and better than if they didn't enjoy or see the influence of their work. And on the customer side, if you really understand how people connect and what excites them, you can rethink how you're attracting people to your business and expand your audience as a result.
Related: Why ESG Reporting Could Be Your Company's Next Winning Move
2. Break down the E, S, and G individually
Each of the three arms of ESG works together and connects to move your business forward with sustainability, but they're not synonymous. You have to be specific about what you're going to do in each area to ensure your approach is balanced. In the environmental category, you could say you're going to strive to be carbon neutral by 2030. In social, you could say you're going to donate 20% of your revenue to community programs. In governance, you could make specific company documents public to demonstrate regulatory transparency. Clearly defining your goals in each category will help you, your team, and the public hold your business accountable because everyone knows exactly what the targets are.
Ideally, you always want to be adding targets and moving through the categories. And there is a lot to work on. For example, have you done a gender equity review? How many people from diverse groups do you have on your team or board? Are you paying everyone based on performance? Mandates are now being created around these areas or already being enforced because more and more people are supporting them. In California, for example, SB 973 of the California Government Code now requires private employers with 100+ employees to submit a pay data report to help identify any pay discrepancies.
It's important to recognize here that your business isn't the same as others. There might only be so much you can realistically do in each category at a time. It's OK to go custom and find targets that make sense for who you are and where you're at, as long as you keep building and setting new goals over time. Doing so means you can show great integrity with the ESG promises you do make and avoid the greenwashing that hurts both trust and reputation.
Related: 5 Big (and Common) Mistakes ESG Investors Make — Are You Making Them?
3. Build-out clear, actionable, smaller steps to achieve your goals within each category
Once you have your category targets in place, you need practical ways to get to those targets and keep people motivated. Figure out what you have to do to reach your goals and break that down into smaller, feasible steps that are easy to understand. For example, if I look at my company and pair it with the goal of being carbon neutral in five years, I might say the first small step is to make just 20% of our 100 vehicles electric this year. The next step would be to convert another 20% the following year, and so on.
To stay competitive, make your ESG move now
The negative consequences of not crafting ESG into your vision will depend on what kind of expectations your company doesn't meet and the type of company it is. Customers might tune out your brand if you aren't transparent about where you get your supplies or labor from. They might buy from other, more progressive brands, causing your market share to shrink. But if you're more business-to-business, the big hit could come in the form of investment dollars. Investors want to see what you're doing for sustainability, so if you're behind, you might not get the funding you need.
As people's desire for transparency, ethics, and climate influence all grow, ESG will affect your ability to compete, and it isn't something you can do halfway. If you're going to walk this path, go all in and be incredibly clear about what you're going to do and deliver. Take a customized approach to set realistic goals, build on what you accomplish, and don't look back.
