Three Letters That Will Make Your Company More Successful and Sustainable
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In September 2022, Patagonia founder Yvon Chouinard gave away his entire $3 billion company to ensure all of its profits would be used to combat climate change. The bold and generous decision represents a corporate shift toward environmental, social, and governance, better known as ESG.
What’s ESG? ESG refers to a set of increasingly important company standards that decision-makers use to assess not only the company’s financial position but also its governance, environmental, and social policies.
ESG advocates say this approach helps safeguard the planet, paves the way for more diversity in the workplace, and protects fair wages. ESG is also a good business idea. According to PWC, 80% of consumers make sustainability-based purchase choices, while 83% of buyers believe companies should actively shape ESG best practices.
Because consumers are using their dollars to support responsible businesses, business leaders consider implementing an ESG strategy. Here are five ways.
1. Be intentional in pursuing ESG operations
Lots of companies do good things without explicitly aiming to be ESG-focused. ESG processes can be a framework to help your business’ legacy. Take a look at Patagonia. Chouinard decided to make sustainability central to the brand at the outset, mainly by focusing on renewable and recycled materials. Giving away the business to a climate-centered trust and non-profit organization is the capstone of that original purpose.
Intentionally embracing ESG in your vision and policies means you’ll have a compass to consistently direct your projects, strategies, materials, and goals, which will build employee and buyer trust.
2. Move to electric vehicles
Think about how you get your packages. You can usually get your stuff from the warehouse or store to your home using a fleet of vehicles. Other vehicles are responsible to transport materials through the supply chain, or get workers to work and other events.
All these vehicles on the road translate to a big chunk — 28% — of total greenhouse gas emissions. Using electric vehicles (EVs) is a simple way to reduce your carbon footprint, even when you can’t shift much else.
Light-duty vehicles are the worst offenders and account for 59% of vehicle emissions. If it makes sense for you, switch out your vehicles first.
Another bonus is that EVs can be used as mobile billboards to promote your business. The vehicle is able to pull extra weight for you every time an employee or you take it for a spin. That’s significantly more visible — not to mention easier to scale and reassign — than your office building certified in Leadership in Energy and Environmental Design (LEED) but doesn’t have any customers who visit.
3. Assess your supply chain
The supply chain connects everything from your raw materials to distribution. ESG is about taking control of as many links as you can and asking yourself how you can apply it at each point. Be transparent in how inventory moves from Point A to point B. Even though 81% of companies still need complete supply chain visibility, 75% of consumers consider transparency helpful in strengthening customer-business trust. When consumers feel that a business has violated their trust, they take legal action. In 2020, 38% of Americans boycotted at least one company. Communicate whatever you’re doing to keep your operations squeaky clean on your website, in your marketing emails, on your packaging, and anywhere else you can display your messages.
4. Clean up your power
Every business uses power to some degree, but the kind of energy you use can impact the environment. Because traditional fossil fuels like coal and petroleum contribute to global warming, companies are looking to transition to cleaner energy sources, such as solar and wind power. Yes, clean energy can be costly. But the costs of green energy were already at record lows in 2019. In 2021, almost two-thirds of new renewable power added was less expensive than the cheapest coal-fired power plants in G20 countries. Government assistance can also reduce the financial burden. Look into tax credits available through the Build Back Better bill. You may qualify at the local, state, and federal levels.
5. Bring your employees into the fold
Your team members are your best brand advocates. They can’t share what’s not theirs. Your first responsibility is to improve your culture so people feel comfortable asking you about ESG issues. Start conversations about where you’re at and where you’d like to be. Next, think about ways you can make ESG visible for your business in ways that are practical and beneficial to your business. At our company, to support diversity and gender equality within ESG, we partnered with an organization that features male and female drivers. We have female employees on panels and ensure that half of our leadership team is made up of women.
Customers have moved past the days when a good product or service was enough. Now more than ever, the marketing axiom that consumers buy from brands they trust rings true. Your purpose and values matter. ESG can help you make a lasting impact by bringing ESG into your business.
The author of 5 books, 3 of which are New York Times bestsellers. I’ve been published in more than 100 newspapers and magazines and am a frequent commentator on NPR.