How brands can utilise ESG imperative for sustainable success

 Chief Client Officer at Ipsos Kenya Enock Wandera. [Courtesy]

Since the mid-2000s, Environment, Social and Governance (ESG) considerations have increasingly become a strategic business imperative for organisations.

ESG focuses on a company’s commitment to sustainable practices, social responsibility, and corporate governance.

Once seen merely as a moral and ethical responsibility, the dynamics of a globalised, interconnected, and competitive world have moved ESG to the centre of corporate strategy and investment decision-making.

The ESG acronym first came to the fore in the 2006 United Nations report, “Who Cares Wins.” This was a joint initiative of financial institutions which were invited by UN to develop guidelines and recommendations on how to better integrate environmental, social, and corporate governance issues in asset management, securities brokerage services and associated research functions.

In the report, facilitated by impact investment expert, Ivo Knoepfel, it was argued that ESG factors are a key pillar for business strategy that can drive financial performance, mitigate risks, and create long-term value for both companies and society as a whole.

That argument is more relevant today than ever as ESG considerations are no longer niche concerns but essential business drivers for long-term value creation and risk management. Indeed, the long-term future for business, in any recognisable form, can only be a sustainable one.

The imperative for organisations to act quickly, efficiently, and transparently on sustainability is majorly because of increasing regulatory pressures, competitor initiatives, stakeholder demands, and people’s expectations.

A February 2024 dipstick study by Ipsos on ESG dissects the Kenyan public’s understanding and attitudes towards ESG factors, based on a nationwide survey. Main findings showed that 28 per cent have limited understanding of ESG and these are primarily among the upper class and more educated individuals, suggesting a need for broader conversations. 

There was high concern across all demographics, particularly among the 25-34 age group and the AB and C1 social grades regarding climate change attitudes and closely, public belief in shared responsibility among government, businesses, and individuals concerning collective Climate Action. 

The urgency for climate change saw 79 per cent of respondents warn of an environmental disaster unless habits change swiftly, while businesses’ role in sustainability still mirrors mixed views on investing in renewable energy, with activists and discerning realists showing strong belief in corporate ESG responsibilities.

Further, there was a strong desire for businesses to improve working conditions whilst contributing positively to communities and increasing women’s representation. Eighty-three per cent demanded transparency, accountability, and ethical practices, with less agreement on ESG accountability, indicating a need for further education.

Overall, the report highlights the need for ESG awareness, shared climate action, and increased corporate social responsibility.

Ipsos’ Earth Day research carried out in 2023 found out that that 68 per cent of people globally say that if government does not act now to combat climate change specifically, it will be failing the people. A further 68 per cent agree that if businesses do not act now, they will be failing their employees and customers.

The study further shows the public believe there is a shared responsibility among government, businesses, and individuals to tackle climate change, while some business sectors are seen as having a greater responsibility for reducing their impact.

Although the scale of the ESG challenges differ by organisation, market, and industry sector, the days when ESG was being implement as part of Corporate Social Responsibility (CSR) campaigns is well and truly over. ESG is the new CSR!

The focus has in fact broadened from ‘giving back’ to reengineering the way businesses operate along the entire value chain, and establishing the requisite governance processes, to ensure they are operating sustainably.

Businesses, therefore, have no option but to put effort to excel in environmental management, create a positive social impact, and maintain robust corporate governance throughout their operations.

But what do businesses stand to gain by embracing ESG? A robust ESG programme can help brands to protect their reputation and financial stability by proactively identifying and mitigating risks related to environmental and social issues, such as climate change, supply chain disruptions, labor disputes, and regulatory compliance.

Brands that make the ESG considerations as part of their strategy and decision-making enjoy competitive advantage in their industries as they can win customers’ trust and confidence, attract, and retain talent, and foster innovation through sustainable practices.

With the growing concern for climate change, social justice and equality, sustainability is no longer just something desirable for brands. Governments are implementing stricter regulations around these issues and embracing ESG can help companies to remain compliant to current and future regulations in any market, hence shielding them from penalties and legal costs.

Consumers are also increasingly becoming aware of the environmental and social impact of the products and services they purchase. When people are making purchase decisions, they evaluate these decisions through three lenses: their immediate need, their families and immediate community, and lastly, about how they are benefiting the broader world.

By aligning with the three lenses, brands can demonstrate a commitment to social responsibility, build stronger customer loyalty and increase market share.

According to ESG Outlook 2022: The Future of ESG Investing by JP Morgan, there has been a sharp growth in investor demand for sustainable investment funds that the ESG factors. Brands that prioritise ESG are at a better position to access capital and lower financing costs.

Delivering on the ESG factors that shareholders demand can help brands to become more innovative in product development and adopt more efficient and sustainable business practices. This can lead to cost savings through resource optimisation, waste reduction, and energy efficiency improvements.

Implementing an ESG strategy can also help companies build brand trust with customers and investors, attract top talent, and ultimately position themselves for long-term success.

In overall, embracing the ESG imperative is a business management quality that is necessary for brands to compete successfully.

The benefits are numerous. The challenge for brands is, however, how to utilise the ESG imperative to create long-term success.

Getting started on ESG does not have to be difficult. Regardless of a company’s size or industry, businesses should start by identifying their ESG goals and engaging stakeholders in decision-making. A materiality assessment will help you build the road map and ensure that you have the right people along for the ESG journey.

Having identified and set the goals, brands can then evaluate their current operations to identify areas where they could improve regarding sustainability, social responsibility, and corporate governance. ESG encompasses so many areas and it can be difficult to know what to start measuring first, especially when you are just starting out.

You should be able to identify short term targets and long-term goals that will make significant impact on your business. This could involve setting emission reduction targets, establishing diversity and inclusion initiatives, strengthening financial transparency processes, creating ethical supply chain guidelines, or any number of other activities.

Once these steps have been completed, companies should then establish clear performance metrics for evaluating their progress toward achieving their ESG goals and track those metrics regularly. Additionally, businesses should consider hiring an independent third party to audit their ESG performance and provide further recommendations for improvement.

At Ipsos our ambition is to use our evidence, expertise, and teams to create a more sustainable and prosperous future for people and the planet.

We give businesses, governments, and public bodies the confidence they need to take the right actions for the benefit of people and the planet, to drive long-term prosperity for all.

[The writer is the Chief Client Officer at Ipsos Kenya]

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