An ESG consultant assists companies through analysis of the impact their operations and products have upon on society. These impacts are measured across the three metrics of environment, social, and governance. The objective is to help the company demonstrate its honesty, integrity, and transparency.
In contrast to ESG consultants, ESG analysts are focussed on the investment potentials and risks of a company. Their findings influence strongly the decisions made by investment funds to add such businesses to their portfolios.
At ESG PRO, we concentrate on ESG consultancy. Our mission is to benefit not only the publicly traded corporation, but also the small and medium-sized business as well as organisations which are in the not-for-profit sector, public bodies (such as schools), and other institutions who recognise the importance of ESG in the conduct of their own organisation.
Commercially, our work identifies both value and impact. From this, the organisation can develop programmes which exceed stakeholder expectations and drive quantifiable returns, no matter whether this is through enhanced reputation or customer acquisition.
Using our comprehensive ESG toolkits, our large commercial clients can explore corporations, funds, or zoom into specific companies and a business unit level. This adds value at all stages of the investment cycle, with each approach tailored to individual commercial needs and value actions.
In the Spring of 2022, we saw many major corporations acknowledge their ethical duties, and others which prioritised their balance sheets. So it is with the smaller business: is a carbon neutral supplier an optimum choice if they treat their employees badly?
Whether Net Zero is achieved or not, the climate emergency has become more complex with the inevitable emergence of the worst energy crisis since the 1970’s. Carbon, emissions of every type, and a new moral awakening will bring a long-overdue examination of who we choose as suppliers.
Just as a retail store must prove its environmental claims to a sceptical public, or a law firm must demonstrate how its ethics reflect those of potential clients, we are all facing examination.
Across Europe and the United Kingdom, we see this particularly in the construction sector where tenders are carrying an ESG weighting of 10-20%. This means even the smaller firms – with excellent pricing, ability, and financial stability – can lose clients simply for not having an ESG report!
From a commercial standpoint, since 2005 ESG has evolved to become an essential component of how a business can secure capital during fundraising, whether via banks, Angel investors, or venture capital markets. The reporting process will identify risks during due diligence, highlight opportunities for post-acquisition growth, and pave the way for a smooth exit.
No longer is ESG merely a ‘nice-to-have’ proposition: it’s become fundamental to any well-run enterprise. We have seen the impact of ESG through the lens of the Covid pandemic as well as the invasion of the Ukraine: corporate ethics have never been under so much scrutiny. As these events followed the Volkswagen emissions scandal, it has become clear to all that those corporations with a stronger ESG position are outperforming those without a clear strategy.
The challenge of ESG is that the very concept began with the wholesome concept of impact investing – think before you invest – and became corrupted by financial institutions motivated only by money. The result has been that the largest corporations are advised on ESG matters by lawyers and accountants, hardly the ideal backgrounds.
The result has been the creation of an industry dominated by the major consultancy corporations. With astronomical fees and no compulsion to be succinct, these corporate procurement departments are battling a supply chain which has always lacked access to the guidance required.
Once the request for ESG data hits the desk of many a small enterprise or even a large SME, the sheer effort to complete a bid becomes fraught with cost and a reluctance to compete. With one’s ESG status comprising 10-20% of a bid’s chance of success, not having begun the reporting journey means innumerable firms are out of contention.
An ESG report must be clearly written, devoid of ‘management-speak’. Indeed, this is a core requirement of the leading ESG Framework, the Global Reporting Initiative (GRI). Instead, we see corporate reports which omit answers to multiple questions without explanation, or unacceptable statements justifying the omissions. Reports are often many hundreds of pages long, riddled with opaque language and thoroughly baffling to all but the most experienced reader.
Transparency in ESG reporting is a fundamental. An ESG report should be a statement of fact. It’s acceptable if the preface is somewhat marketing orientated, even if that preface itself is quite considerable, but everything must be justifiable, substantiated, and clear.
Within the body of the report, the responses to the specific points addressed must be complete, clear, and non-evasive. Nor is it acceptable to present a report with hundreds of hyperlinks, as if those hyperlinks themselves answer the question. By all means, offer a link for further reading, but never permit the report to be any less than a self-contained statement.
Irrespective of whether your organisation has sophisticated ESG reporting experience or none at all – the so-called ESG maturity curve – your objectives must be to identify value and impact, followed by the development of programmes which both exceed stakeholder expectations and drive quantifiable returns.
For the more sophisticated client, ESG commences with the refinement of its Corporate Social Responsibility (CSR) best practices. From there, your ESG consultant will assist with identifying key ESG ‘value drivers’ to mitigate investment risk and thereby add value to the organisation.
Defining your strategy encompasses how you aim to address environmental concerns to create a sustainable business model, and the focus must be shared across the people within your organisation, your customers, and the communities both where you operate and where your products and services will be utilised.
Success with ESG reporting requires board level commitment. Only with the board’s commitment will its management teams at all levels devote the necessary time and attention.
At the company level, it is best to be methodical: better to lay a strong foundation and get your own house in order before making demands upon your supply chain. For this reason, your ESG consultant will begin with stakeholder engagement, so all efforts will be orientated to generating the biggest impact.
Carbon reporting is a core component of ESG reporting, and it deserves a special mention because the organisation’s approach will vary according to both their objectives and why they’re undertaking a carbon analysis.
At ESG PRO, we urge our clients to look at environment, social, and governance as an opportunity to add value to the enterprise, whether it’s public or private. Adding value to a business encompasses cost reduction and client acquisition, while a school adds value through achieving improved educational outcomes.
Transparency, as noted above, is the key to ESG reporting. Unlike algebraic equations, your organisation’s approach to ESG resolves to two fundamental questions: what you are doing now, and what you will do to improve?
As your ESG reporting journey begins, you’ll need a lot of guidance. Thereafter, your consultants will transition you to self-sufficiency, with the consultant focussed on auditing and guiding as required.
With our outsourced service, many of our clients commence with no software required at the client, and once the data is assembled, it’s a logical transition to a SaaS solution they can maintain.
Just remember the goal: to enable our organisations to have a positive impact upon the people we employ, the environment, and upon society as a whole,
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.
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