Why ESG implementations are highly impactful on company performance: An interview with Susanne Horber

INTRODUCTION

Susannes Horbers’ ESG journey started with her family. She was always interested in issues around sustainability and made vigorous attempts to buy only ecological and biological food. She is a strategic planner and has always helped companies anchor sustainability into their business strategies.

Susanne elaborated on the differences between having a traditional vision for your company and an ESG vision –

An ESG vision focuses on sustainability, ethical practices, and responsible governance, while the company’s general vision could have financial gains, market expansion, or operational efficiencies as focal points.

An ESG Vision will extend these objectives to energy efficiency and managing waste, or within social considerations; you will focus on human rights and employee satisfaction. Considering governance aspects, as a company, you can shift your priorities to include transparency, ethical behaviors, and effective oversight. It is critical to integrate the topic of sustainability into the DNA of the brand. All of these elements can be focused on during ESG implementations.

This is the only way to give it the legitimacy and focus to be included in the overall business strategy. Once you have completed this integration, you must check the process by measuring and reporting. All of the above requires a broader perspective, and companies should focus on financial gains and their impact on the environment.

GENERAL CHALLENGES FACED DURING ESG IMPLEMENTATIONS

I asked Susanne about companies’ general challenges when implementing an ESG strategy. She immediately highlighted that it starts with the right mindset – rather than seeing ESG as a burden, it is best viewed as an opportunity to enhance success and competitiveness.

Initially, ESG can be expensive, and the cost factor can be challenging. Ensuring products are acquired from a sustainable source may require significant upfront costs. Companies may struggle with these costs, especially when they do not see an immediate return.

Another challenge that Susanne pointed out is stakeholder expectations. In certain instances, stakeholders may have different and, in some cases, even conflicting expectations regarding the implementation of ESG. Managing these expectations while still ensuring the company is profitable can be challenging.

Implementing ESG can also require a transformation in mindsets from being short-term and only profit-focused to being more long-term orientated, with sustainability at the forefront of their minds.

ESG EXPLAINED

Most companies and individuals would understand the context of the environment part of the acronym ESG, but the social and governance part of the equation often leaves people doubtful. She explained that the ‘S’ in ESG stands for Social, basically how you treat people, and that the ‘G’ is for governance and emphasizes how a company is run with a focus on sound and ethical leadership practices.

Good leadership in this context means that the company is making smart and fair decisions and includes a high degree of transparency in what they do and how they do it. Being open builds trust not only internally but also externally. While the issue of environmental impact often receives the most attention, the social and governance aspects are equally important.

Turning an ESG strategy into action first means planning for the environment, treating your people fairly, and honestly running your company. A second step to translating your ESG plan into action is creating clear goals that match your company’s values. These goals should represent an improvement in the environment, social aspects, and governance.

Thirdly, making ESG part of every decision is an important aspect that can lead to confident action. This helps all involved to keep ESG in mind at all times. Receiving feedback from both internal and external stakeholders can strengthen the ESG plan and greatly enhance the chances of execution.

Putting an ESG strategy into action takes time. It is effort well applied as, ultimately, the effective execution of an ESG strategy will ensure that you, as a company, have a positive impact on the environment, treat people well, and run your company in a trustworthy manner. When the foundation for decision-making, whether to choose suppliers or products, is ESG, you will likely execute your vision over time.

ESG METRICS

According to Susanne, measuring the success of an ESG implementation requires a mixture of qualitative and quantitative metrics. We must identify the proper measures for the three elements: environment, social, and governance. This may include famous metrics such as carbon emission reduction, waste diverted from landfills, diversity in leadership, employee satisfaction scores, and more.

These metrics guide us in establishing what our strengths are and what we need to improve upon. As a company, you can also be empowered by using existing and standardized reporting frameworks such as the global reporting initiative. This framework would then be both recognizable and accepted by external stakeholders.

You can gain insights that are not fully captured by the quantitive data sets available by including feedback loops.

FAQs on ESG Implementations and Company Performance

What is an ESG vision, and how does it differ from a traditional company vision?

An ESG (Environmental, Social, and Governance) vision emphasizes sustainability, ethical practices, and responsible governance. Unlike a traditional company vision that may focus primarily on financial gains, market expansion, or operational efficiencies, an ESG vision incorporates objectives like energy efficiency, waste management, human rights, employee satisfaction, transparency, and ethical behavior. Integrating ESG into the company’s DNA ensures these elements become part of the overall business strategy.

What are the main challenges companies face when implementing ESG strategies?

Implementing ESG strategies can be challenging due to several factors:

• Cost: Initial expenses for sustainable sourcing can be high without immediate returns.
• Stakeholder Expectations: Balancing diverse and sometimes conflicting stakeholder expectations can be complex.
• Mindset Transformation: Shifting from a short-term, profit-focused approach to a long-term, sustainability-oriented mindset requires significant effort and cultural change within the organization.

How do the ‘Social’ and ‘Governance’ aspects of ESG contribute to company performance?

The ‘Social’ aspect of ESG focuses on how companies treat people, including employees, customers, and communities, emphasizing fairness, diversity, and employee satisfaction. The ‘Governance’ aspect involves ethical leadership practices, transparency, and sound decision-making. Both aspects contribute to building trust internally and externally, enhancing the company’s reputation, and ultimately leading to better performance and sustainability.

What steps should a company take to effectively implement an ESG strategy?

To implement an ESG strategy effectively, companies should:

1. Plan for the Environment: Address environmental concerns and set clear, sustainable goals.
2. Treat People Fairly: Ensure ethical treatment and fair practices for all stakeholders.
3. Establish Clear Goals: Align ESG goals with the company’s values and create measurable targets.
4. Integrate ESG into Decision-Making: Make ESG considerations a part of every business decision.
5. Gather Feedback: Use feedback from internal and external stakeholders to refine and improve ESG initiatives.

How can companies measure the success of their ESG implementations?

Measuring the success of ESG implementations involves both qualitative and quantitative metrics. Key metrics might include:

• Environmental: Carbon emission reduction, waste management effectiveness.
• Social: Employee satisfaction scores, diversity in leadership.
• Governance: Transparency levels, ethical leadership practices. Using standardized reporting frameworks like the Global Reporting Initiative can help in gaining recognized and accepted insights. Including feedback loops from stakeholders ensures comprehensive evaluation beyond just numbers.

To understand more around ESG related OKRs contact the OKR Institute:

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