Rethinking ESG: can a unified value approach bring more coherence and better results?

If you’ve attended any ESG seminars or conferences lately you might agree that the discussions present a fragmented understanding. Some view ESG predominantly as a risk mitigation tool for investors, while others politicize it, branding it as a ‘woke’ mechanism aimed at pressurizing fossil fuel-dependent industries. Meanwhile, others use ‘ESG’ and ‘sustainability’ interchangeably, diluting the distinct nuances each term holds. The consequence? Overwhelmed ESG practitioners and executives who struggle to deliver coherent strategies within their organizations.

The industry lacks a unified structural approach to ESG integration within organizational frameworks. This lack of standardization leads to a multiplicity of approaches that, while diverse, contribute to the overarching confusion and inefficiency. The key to overcoming this is to establish a common understanding and operational framework that aligns individual company actions with broader sector and value chain advancements.

One of the critical issues is the lack of a standardized organizational structure for ESG. There’s no consensus on where ESG should fit within a company’s framework, given its cross-cutting nature. This ambiguity contributes to the internal and external dissonance, leaving companies struggling to move forward coherently.

A concerning sentiment expressed at a recent conference was that sustainability represents a step beyond ESG in organizational maturity. While this notion reflects a more nuanced understanding of the issues, it overlooks the extensive groundwork already laid by sectors like mining. In South Africa, for instance, the mining industry has long been addressing ESG-related concerns such as employee health, safety, and environmental compliance. The public, however, often fails to recognize these efforts, still perceiving mining as inherently harmful.

Businesses must reframe their approach to ESG, viewing it not just as a compliance necessity but as an integral part of business strategy that encompasses a broader concept of value creation. This approach should be reflective of a reconceptualized capitalism that extends beyond mere profit to include social and environmental responsibilities.

For ESG practitioners and executives, the path forward involves embracing a more holistic and nuanced perspective. This means moving beyond the siloed data and operational approaches that currently dominate corporate strategies to a more integrated model that aligns with both stakeholder expectations and legislative requirements.

Here are some practical recommendations for executives and practitioners as they guide their orgnisations forward in the journey:

1. Unified Definitions:Establish a clear, agreed-upon definition of ESG across all functions to ensure coherence and uniformity in approach – tailor the definition of ESG to fit your organization’s unique context and industry requirements, but please make sure this is accommodating of a variety of inputs and perspectives, because you don’t know what you don’t know.

2. Establish Clear Organizational Structures:Develop organizational roles and structures that incorporate ESG holistically across all functional areas of the business. This is fundametally an organisational design and development opportunity.

Rope in the industrial pyshologists, org design and development professionals and wake them up from the culture change focused navel-gazing and use their skills and perspective to unlock genuine organisational value and performance that has real impact.

3. Embrace Holistic Value Creation:Look beyond profit to integrate environmental, social, and economic considerations in your value creation model. Foster collaboration across departments to achieve a unified approach to ESG.

4. Stakeholder Engagement: Regularly engage with all stakeholders to align ESG initiatives with broader business objectives and stakeholder expectations.

5. Continuous Learning:Encourage ongoing education and discussion within the ESG community to adapt to evolving standards and expectations.

While ESG offers a framework for responsible business practices, it requires a unified approach to truly harness its potential. By fostering a common understanding and integrating ESG principles deeply into corporate strategy, businesses can not only meet regulatory demands but also drive genuine, sustainable growth.

About Unifi

At Unifi , we bring together diverse skills sets, ranging from data management, industrial psychology, economics and analytics to partner with our clients as they navigate the challenge of shaping sutinable futures profitably.

We engage in a platform-enabled consulting model that streamlines the process for your clients and provides a set of data workflows, interactive dashboard sets and reports that help translate strategy into action and in turn provide the monitoring, reporting and decision-useful outputs that deliver on organisational intent to operate more responsibly.