A note to companies: some sustainability goals come at zero cost
While many ESG efforts will incur short-term costs for firms, there are some that don’t, explains Jacopo Schettini Gherardini
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Being sustainable is a linear process. It’s not necessary for a company to have any special creative dexterity to identify the way forward, nor are excellent relational skills required to involve stakeholders. But a company that wants to be sustainable should adopt the international guidelines and indicators established by supranational organisations, since they contain the appropriate strategies and recommendations. Ultimately, the degree of sustainability achieved will be the result of the company’s organisational and technological capabilities, and any investment made will accrue to the planet, and to current or future generations.
Investing in sustainability, however, does not necessarily mean taking on exorbitant costs. From an operational point of view, a company that focuses on the basic cornerstones of sustainability already puts itself at an advantage. These cornerstones include adequate knowledge of international strategies and positioning; identification of how to implement them; and reporting, performance measurement and good communication.
Moreover, at little or no extra cost, it’s possible to make further progress on sustainability through simple adjustments to the three individual areas of ESG.
With regards to environmental issues, adopting renewable energy sources and moving from paper to electronic documents are just two steps that would impact positively on a company’s sustainable position. Not only would these reduce overall costs and improve efficiency, they would encourage industry operators to increase their investments in this area and reduce physical materials such as paper, printers and plastic.
Achieving gender parity on the Board of Directors and within top management, as well as making long-term plans to reduce the gender pay gap, are actions that have no negative economic impact. Indeed, numerous studies show that merely reaching balanced gender representation can have major positive social and economic effects, demonstrating full compliance with sustainability principles and addressing the wellbeing of future generations, in this case, women.
While it is true that some reforms have obvious costs, such as corporate welfare, there are others that do not represent an economic weight, such as the opening up of company share capital to workers. The subject of the financial participation of workers is widely discussed within international organisations and is one of the durable, social sustainability instruments to aim for. Other actions may concern the internal organisation of the company: it is possible to significantly improve the internal company culture by facilitating, where possible, notice periods in case of job changes or (worse) employment termination. More attention could be given to smart working, flexible working hours, and job or workplace flexibility. These are all aspects that can increase job satisfaction where the biggest effort lies solely in better and more effective structuring.
Where governance is concerned, the protection of minority shareholders is a crucial point in the evaluation of a company’s sustainability. There is no additional cost in having a significant number of independent directors to protect the market, or in separating roles within the Board of Directors, thereby avoiding duplication and centralisation of functions and powers that could present substantial risks to company transparency and management.
Another way of being sustainable at zero cost is by applying corporate codes of ethics. These are considered formal governance documents and should clearly refer to the recommendations and principles on sustainability proposed by the EU, the OECD and the UN. In addition to improving the company's strategy, such a choice would clarify its position both internally and externally. Reference, for example, to the Universal Declaration of Human Rights, in the Code of Conduct and other governance documents would produce a clear, corporate goal with long-term effects on the entire supply chain and the countries in which the company operates.
The evaluation of company ESG strategies should consider all areas of sustainability, not just those areas which are more demanding economically. Returning, for instance, to the issue of gender equality, an uncomfortable but obvious question arises: many men, women and cultures attribute a supposed superiority to the male gender, which dictates the living conditions of billions of females - even those who have yet to be born. Is it possible then to attribute the ‘license’ of sustainability to those companies that prefer to set themselves costly objectives, but ignore other more fundamental goals, even at zero cost, just because these would go against their prejudices?
Jacopo Schettini Gherardini is Director of Research at Standard Ethics