Why you need an optimal Organizational Culture for your ESG strategy to succeed

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According to a report released by the US Business Roundtable in August 2019 Global sustainable investment now tops $30 trillion—up 68 percent since 2014 and tenfold since 2004.The acceleration has been driven by heightened social, governmental, and consumer attention on the broader impact of corporations, as well as by the investors and executives who realise that a strong ESG proposition can ringfence a company’s long-term success. ESG is clearly more than a buzz word

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ESG defined:

According to Morningstar, sustainable equity funds finished with a significant performance advantage relative to traditional equity funds in 2020. Such funds emphasise the use of environmental, social and governance criteria to generate financial return and broader societal impact. In 2020, three out of four sustainable equity funds beat their Morningstar Category average Not long ago, ESG was just a buzzword, investors looked at it as a ‘good to have’. Not anymore. ESG is Environmental, Social and Governance (Corporate Governance). A growing number of Socially responsible investors are now looking at the ESG factor of their investments and no longer just the classic risk vs. return scenarios for future investments.

ESG components

ESG combines Environmental, Social and Governance factors. Environment includes everything from a company’s attitude towards climate change to the company’s use of renewable energy and how it manages waste. The key area under the Social part of ESG is employee relations. For e.g.: do you pay your employees a fair wage or do you provide employees amenities like a cafeteria or a childcare centre on site. A strong and vibrant organizational culture is critical for an ESG strategy to succeed.

What is organizational culture

Organizational culture is the way in which people in an organization relate to each other, their work and the outside world, in comparison with other organizations. Your Organizational Culture shows how your organization works: how things get done, the interactions between people, and employee relationships to their work and the outside world. The best organizations often place equal emphasis on strategy and culture. Such organizations create a culture that motivates their teams. Organizational Culture is what differentiates your business, so it is important to know the various factors that contribute to your company’s culture.

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A successful ESG strategy needs a strong Organizational culture .

In 2020, the then-Governor of the Bank of England Mark Carney outlined his vision for mainstream private finance by emphasising that every financial decision takes climate change into account.” Culture is established by the evolution of events and practices that occur within your organization. Knowing what influences this can help you develop a strong culture that will support your business strategy and can empower you to achieve excellent results. A strong ESG

Leadership Style

How is your company being managed? What is the degree of hierarchy? What are the decision-making methods and the ways in which policies are enforced in your organization? These reveal the prevalent leadership style in your organization that impacts your culture. The right cues from the leadership also underline your organization’s ESG commitment. This could include anything from avoiding large quantities of plastic bottles or unnecessary printing

Mission, Vision and Values

What is the purpose of your business? What do your products and services stand for? The business’ mission, vision and values mirror your intentions, and these are important factors that inspire your employees. It’s also important that your team understands this vision and uses this as a compass for their daily actions. This compass needs to seamlessly integrate your company’s ESG strategy rather than a ‘force fit’

Work Environment

The kind of workplace you have defines how employees undertake their tasks and interact with their colleagues. What are some of the social norms of the workplace. All this also has an impact on their concentration levels and mental health too.

Communications

ESG themes should be consistently woven into leadership communications The way everyone communicates can influence employee-to-employee, employee-to-management and employee-to-clients relationships. It also demonstrates how people share information and show transparency. Communications themselves must also be sustainable. Does your company use a lot of paper for reports.

Reach out to us to find out about our programs and solutions that can help you build an optimal organizational culture that can complement your ESG strategy.