Environment, Sustainability and Governance expert Dr Sandy Chong on what companies can do to get on the right track
Interest in environmental, social and governance (ESG) is thriving – according to data from Morningstar, sustainable assets have reached nearly US$4 trillion as of 2021.
There are many reasons why companies are motivated to adopt ESG standards and goals. Making a positive impact on the world is a key reason, according to data from MSCI Research.
Climate change, reducing plastic waste, empowering local communities and encouraging inclusion and diversity within their workforce are some examples of positive impact.
Companies are also adopting ESG strategies, in an effort to retain their socially conscious millennial talent.
While ESG is an emerging concern for corporations, many businesses don’t know where to start, or are not seeing the desired results from their investment into ESG.
These are just some of the points Dr Sandy Chong, founder of business and communication strategist Verity Consulting, addressed at ESG Strategy for Sustainability, a Greater Club event held on 23 June.
Chong has an illustrious track record as an academic and advisor. A Harvard Alumna, she is the winner of the 2020 Stevie® International Business Awards for Executive of the Year, 2019 Asia’s Top Sustainability Women of the Year, and 2016 Singapore Management Consultant of the Year.
She is the President of the UN Association in Western Australia, and the founder of the Chair of Sustainable Development Goals (SDG) forum series. Ms Chong is also an adjunct professor at Curtin University of Technology’s Science and Engineering faculty.
The event was moderated by Teymoor Nabili, CEO and publisher of Tech for Impact Asia, a portal that gathers the latest news and trends, thought leaders and investors to assist Asia Pacific countries in planning their economic strategies around innovation and sustainability.
How does one go about their ESG plans?
“ESG should be viewed as a continuum that can’t be achieved overnight, rather than a one-size-fits-all solution”, says Chong.
Furthermore, it’s a complex and confusing space to explore. There are at least a dozen ESG reporting frameworks, with the popular ones being Global Reporting Initiative and the Sustainability Accounting Standards Board.
“There’s a huge lack of know-how on which ratings to go for, which frameworks and which standards. It is quite a mess. And there’s this perception of greenwashing. You’re damned if you do, damned if you don’t,” says Chong.
“The most important question companies should ask themselves is are they serious about ESG at all. Then, reflect on where they are on the ESG continuum, before deciding on the next plan of action”, she says.
“Are you doing it for compliance? Or is it a nice-to-have public relations strategy? Or are you looking at risk management, to reduce negative impact on communities?” asks Chong.
Sustainability reporting doesn’t necessarily translate to impact
While sustainability reporting is a positive step in recognising one’s impact on the world, it doesn’t mean that real change is taking place.
A report by the Harvard Business Review noted that while ESG reporting has increased over the years, it has done nothing to curb carbon emissions.
Chong advises companies not to confuse impact with reporting. She adds that companies need to look at their quality of data and their sustainability metrics, and how these pieces of information are demonstrating real impact or change.
Align strategy with investors and stakeholders
There are so many different takes on ESG, which makes nailing an ESG strategy difficult as it is. Add to that the many different layers of management, which complicates things further.
To prove her point, Chong encouraged the event’s attendees to form groups to answer three questions – which part of ESG appeals most to you, what is your biggest obstacle in implementing ESG strategy, and what are your stakeholders’ priorities in ESG.
Some attendees listed governance as the most important part of ESG, while others are more concerned about sustainability goals.
Financial constraints, meeting financial targets, and rallying employees towards ESG goals are just some of the obstacles attendees faced.
Stakeholders in smaller firms are also more concerned about growing the company or achieving stability, as inflation and other market forces come into play.
Chong empathises with this conundrum. For those who want to embark on ESG strategies, an important first step is to ask stakeholders, shareholders, employees and clients in the company’s ESG assessment, and to align their ESG strategy with their responses.
“If they prioritise social causes higher than environmental causes and so on, you need to be able to communicate that effectively,” she says.
Chong advises companies to check in with their stakeholders on whether ESG initiatives are relevant to the target audience and appropriate, or risk criticisms and public relations faux pas.
On that note, she advises business leaders to keep their eyes on the prize, and not be everything to everyone.
“It’s impossible to get everyone to love you. So you need to make sure that there’s always something that needs to be prioritised, and something that needs to go,” she says.
ESG needs to be central to company culture
Renowned management consultant Peter Drucker once said that culture eats strategy for breakfast.
“Culture is important to ensure proper execution of ESG strategy”, says Chong.
“If you have not set up culture properly, or if you’ve appointed a chief sustainability officer to be the sole executor of ESG strategy, you’re going to be blindsided,” she says.
She adds that the ESG goals have to really matter to employees for them to go along, which goes back to her point about aligning strategy with stakeholders.
“Because it’s an added thing to their everyday operations. So unless something that really matters to them, they’re not going to care,” she says.
ESG is a long game
Chong agrees with Nabili’s view that most companies prioritise financial stability over ESG. But clients who invest in ESG will see tangible returns over the long-run.
She recounts a story about some clients who were initially sceptical about ESG’s benefits, only to reap them a few years later.
“Every time I ask my clients where their sustainability budget is coming from, they say it should come from marketing and public relations,” she says.
“No one has ever said it should come from procurement,” she continues.
The cocoa industry is an example of how unethical trade practices harm communities, instead of elevating them.
Oftentimes, food manufacturers want the cheapest ingredients available, and don’t want to pay farmers fair prices for their products.
As such, West African countries such as the Ivory Coast and Malawi, which are major producers of cocoa, are unable to break out of poverty.
Chong’s clients didn’t have great budgets for their ESG plans, but it was a step in the right direction.
Two years later, her clients won awards for their sustainability practices. They discovered that customers were willing to pay premiums for sustainably-produced products.
As demand for such products took off, production costs also decreased.
It took a while for Chong’s clients to “see the light”. She cautions those who want to pursue ESG strategies to commit for the long-term, and to take it one step at a time.
“ESG is a long game – it’s not going to be sexy. And it’s not going to be instantaneous,” she says.
Sustainability is one of the Greater cClub’s key tenets. Find out more about similar future our ESG events by emailing us at firstname.lastname@example.org.