Purposeful leaders can create benefits for their companies and stakeholders by linking ESG reporting and company purpose and values. Let’s take a look at why.
Much has been written about ‘sustainability reporting fatigue’ in recent years. There is no denying the toll Environmental, Social and Governance (ESG) framework proliferation and the absence of generally accepted standards take on leaders in reporting companies, investment and asset management organizations. Cynics could say that only ESG industry players benefit. Regardless, investors continue to care about ESG scores despite the current confusion and the remaining flaws and pitfalls of ESG scoring.
ESG reporting will continue simply because societies are demanding more transparency from economic actors on their use / conservation of natural resources and the environment, the social impact of operations on employees / consumers / local communities, and the relationship between governance structure and strategic decisions.
Standardization may be coming in the long-term. Corporate leaders are likely to continue to face the challenges arising from lack of convergence and occasional questionable-quality ESG reporting frameworks for some time.
What is a purposeful leader to do in this confusing time?
Connect ESG Reporting and Company Purpose & Values
Purposeful leaders recognize that the rise and proliferation of ESG frameworks is linked to spreading societal beliefs about the relationship between current capitalism practices and the multiple social and environmental challenges we are facing collectively.
The purpose of business isn’t just to make money. Making money is the result of creating value, and the definition of creating value is morphing in the eye of the general public. Customers will make purchase decisions based on the benefits they experience – in the world of Simon Sinek, that is the “what” that a company does / offer.
Society and investors increasingly care about a company’s “why” – its purpose – the difference a company seeks to make in the world. They also care increasingly about the “how”, such as organizational policies and practices.
However messy ESG reporting can be, making links between ESG scoring and corporate purpose and values helps elevate the field and seeing the strategic picture.
“When You Know Better, Do Better”
Without denying the efforts required to report on ESG, a purposeful leader will accept that current state isn’t perfect and serve as a conduit to frame the sustainability reporting effort as an opportunity to gain insight into a company’s impacts and alter or adjust course in the spirit of continuous improvement.
Failing to do so is to continue to serve oneself at the potential detriment of customer benefits where the customer is understood to be more than a purchaser. Every real or potential customer is in reality an actor in and representative of society at large.
A purposeful leader’s role in the context of sustainability reporting is therefore to create a safe space where teams can bring forward information that supports learning and betterment. The truth may not always shed a favorable light into corporate impact and doing what is right will not necessarily be easy but ignoring it will be detrimental in the short or long run. Purposeful leaders recognize that ESG reporting goes beyond securing investor’s money.
The ESG industry is a work in progress, a new(ish) game with evolving rules. Part of being a purposeful leader is to accept the volatility and uncertainty and commit to continue to play the game increasingly well.