ESG: The Broader Business Ecosystem

July 2020 — By Jonathan D. Hollis


It may feel like the world is rapidly transforming on a number of fronts. And well, it is. The Internet of Things … privacy … climate change … pandemics and associated medical policy debates … social justice … human rights. And it’s becoming increasingly difficult for company executives to compartmentalize the essentials of their day-to-day operations and concerns seemingly external to their core business.

The inclination may be to intensify your focus on your company and products and drown out any perceived noise. But, the fact of the matter is that none of what’s happening today is just noise. 2020 news headlines are being driven by issues coming to a boiling point because of their natural and merited momentum. Just as vital readings tell you something is off about the human body, social, economic, and healthcare unrest (especially simultaneously) can signal that meaningful change is due and necessary.

So, where does this leave you – the diligent and well-intentioned business owner? First and foremost, what’s important to realize is that, regardless of the size of your business or what corner of the market you play in, you’re not insulated from these evolutions. Second, a lot of what we’re witnessing isn’t novel and has been embodied in the corporate arena by ESG (Environmental, Social, and Governance) considerations for quite some time now. ESG really moved to the forefront of the conversation following the Great Recession, as legislators and investors demanded a higher degree of accountability and stricter governance controls for those at the helm of large corporations and financial institutions. Over the subsequent decade, corporate environmental and social positioning also began to receive heightened scrutiny (1). Nowadays, research reports on the topic abound, and a quick Internet search will yield a number of company and asset manager statements on ESG.

You must embrace that this trend is not poised or likely to continue but will continue and only strengthen going forward – with an ever-crystallizing message: Your bottom line is no longer the only issue of consequence – customers, vendors, partners, and shareholders care about how you are running your business and how you are generating your profits. In this new landscape that is taking shape around us, the S in ESG will rightly be of critical importance, and the G will undoubtedly be re-visited as Corporate America continues to grapple with matters of diversity and inclusion. 

Beyond classic notions of corporate responsibility and charitable donations, how are you prepared to respond? How is your company prepared to respond? As a founder or owner, you’re in charge of a workforce of individuals who have come together to bring your vision to life, and you’re part of a community that may look to you for responsible leadership and guidance on the challenges of our time. The era of executive and corporate isolationism is twilighting – you’re unmistakably part of larger, multi-faceted business ecosystem.

Even saying “responding” suggests the need for some kind of above-and-beyond campaign – when really the right approach is simply marked by a broader perspective and thoughtful decision-making. Consider incorporating an additional layer of introspection into your everyday processes. If ESG is a new priority for you, we’ve outlined some points to consider below: 

Increase Your Awareness

  • Get outside of your own personal experience.
  • Think through the implications of your actions and words. 
  • Truly understand your employees:
    • Who are they as people outside of their job function?
    • What motivates them?
    • What obstacles are they facing? 
    • Is there something you’re not seeing?

Promote a Culture of Fairness and Respect

  • How well do I know my team?
  • What are your hiring practices?
  • What are your internal promotion policies?
  • Have there been unseen consequences to how you’ve conducted your business?
  • Do your employees feel supported and have what they need?

Understand Your Community Impact

  • What is your environmental footprint?
  • How are you affecting the towns and cities where you conduct operations?
  • Are you getting behind the right causes?
  • What message are you sending with the way you do business?
  • How are you holding company accountable?

What’s the downside? The downside is a stagnant organization that lacks foresight and leaves itself susceptible to any number of disruptions. What’s the upside? Employees that feel appreciated and heard, favorable customer sentiment, strategic agility, and unlocked pockets of value. The cost is but a modest amount of time and energy, but the benefits are potentially unlimited and can take a variety of forms. Spend more time with your HR team. Establish an operational task force. Engage with outside consulting firms. Connect with your employees.

For more on the conversation about the broader business ecosystem see our article Diversity & Inclusion in the Funding Ecosystem.

Sources:

(1)   https://corpgov.law.harvard.edu/2020/03/02/top-10-esg-trends-for-the-new-decade/

 

 

DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.