Engaging with ESG together

Alex Bexon, ESG Director at LDC, offers advice to management teams as they embed environmental, social and governance principles into their operating models.

There’s a misperception among some that only large corporates are truly engaging with ESG, as their stakeholders and regulation push them to better measure and evaluate their performance on environmental, social and governance issues.

But my experience suggests something different: that Britain’s medium-sized businesses are getting to grips with – and in many cases excelling at – ESG. While each of LDC’s 90-strong portfolio operate in different sectors of the UK economy and face different challenges and opportunities, I’ve seen a number of common themes emerge.

Let’s start with some reassurance. ESG is a wide-ranging concept. Engaging with it credibly means focusing on the areas that are most relevant to the business. Of course, for an energy company the ‘E’ in ESG – environmental – is going to be key. But for a tech firm, focusing on social performance, such as the positive impact their services can have or the diversity of the workforce, might be a more appropriate place to start. While all elements of ESG are important, it’s not possible to do everything at once, it’s about generating momentum and building towards your goals, step by step.

Second, the reality is that many businesses are already doing lots of great things in isolation – from using renewable energy and seeking ways to increase resource efficiency, to unlocking the benefits of a diverse workforce, to giving back to their local communities – because it makes good business sense. Taking a step back and bringing these positive actions together creates a strong foundation on which to develop a more holistic strategy.

Then a company can begin to really identify where it can deliver the greatest impact. This could fall into any of the ESG buckets, or all three, and there are ways to help bring this into focus. One is for senior leaders to speak to stakeholders – from employees to customers and suppliers – to understand their priorities. Another is to consult frameworks that lay out the different components of ESG.

The International Sustainability Standards Board is leading the way in identifying global standards relevant for all businesses. Others have decided to report against a selection of the UN’s 17 Sustainable Development Goals. Aligning with these respected frameworks demonstrates a commitment to ESG and an ambition to contribute to the creation of a more sustainable, just and responsible world.

Finally, while ESG is incredibly broad and everyone has a role to play in transitioning to a more sustainable future, it’s important to ensure accountability.