The growing movement of businesses prioritizing corporate purpose and sustainability continues to gather momentum. A sustainable business is one that integrates environmental, social, and governance (known as “ESG”) factors into its values, culture, decision-making, strategy and operations in a transparent and accountable way. This allows the business to not only create profit, but contribute to creating a better society.
Companies are considering their ESG commitments not simply because it is the “right” thing to do, but because it also makes good business sense.
Increasingly, investors are calling out "financially material" social and environmental issues and requesting better transparency. They are turning their attention (and capital) to companies that actively develop policies, set targets, manage, measure and report on these factors.
Sustainable business practices can open up many additional opportunities beyond access to capital. Research from Accenture shows a strong positive correlation between a company’s ESG performance and its financial performance, and highlights that organizations that invest in sustainability and digital transformation are 2.5x more likely to be among tomorrow’s strongest-performing businesses. A recent Harvard Law study found that highly-rated ESG firms tend to show higher profitability, valuations, and corporate performance while exhibiting lower volatility.
Although ESG or sustainability reporting is usually voluntary, companies are finding that—in addition to investors—consumers, employees, suppliers, and other stakeholders are also demanding better ESG transparency. The COVID-19 pandemic, along with significant climate events and social reckoning, have only accelerated this demand.
What is ESG and why is it important?
While there is no single definition of ESG, it is generally accepted that ESG describes the measurement and reporting of a company’s sustainability and ethical business practices.
Companies usually prioritize the ESG policies and practices that align best with their business strategy and corporate values, and make the most sense for their organization.
In economics, the “triple bottom line” (TBL) theory maintains that businesses should pay attention to not one, but three, bottom lines: profits, people and planet. ESG is a concrete way to measure the impact of a business in these areas:
- Environmental: The environmental impact and sustainability of an organization. Considerations could include the contribution a company makes to climate action through emissions reduction, waste or water management practices, or energy efficiency initiatives.
- Social: How a company interacts with employees, customers, suppliers, and the community at large. Considerations could include diversity, equity and inclusion (DE&I) practices, human rights policies and labor standards throughout the supply chain, or workplace health and safety initiatives.
- Governance: How a company is governed from the top down; the rules or principles defining rights, responsibilities and expectations of different stakeholders. This includes a company's policies, standards, information disclosure, auditing and compliance.
Companies of every size can benefit from ESG reporting. In some sectors, new regulations mandate adherence to ESG-related standards, such as carbon emissions or gender representation.
While there is no single definition of what ESG means to a company, there is also no single, universally agreed-upon ESG reporting framework. Popular ESG frameworks include Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), and UN Principles for Responsible Investing (PRI).
At the recent COP26 summit, the formation of the International Sustainability Standards Board (ISSB) was announced by the International Financial Reporting Standards (IFRS) foundation. With an office in Canada, the intention is to “deliver a comprehensive global baseline of sustainability-related disclosure standards.”
Companies have long struggled with multiple standards, frameworks and metrics. Having a consistent, globally recognized standard will help businesses better report on ESG factors, and provide investors and other stakeholders improved understanding of a company’s performance and value creation opportunities.
But compliance requirements are just one facet of a cultural shift that has seen ESG become central to companies’ identities. Organizations that proactively demonstrate ESG stewardship can be rewarded beyond access to capital. Operational improvement and the ability to attract new partnerships, opportunities and talent is also on the table.
It is estimated that Millennials will make up 75% of the workforce by 2025, and they are driving demand for socially responsible employers. Reportedly, 64% of Millennials would not work for a company without a strong CSR policy, and 83% would be more loyal to a company that helps them contribute to social and environmental issues (vs. 70% U.S. average).
An Alberta Success Story - HelpSeeker Technologies
HelpSeeker Technologies is a social technology Certified B Corp that connects Canadians with community, health and social services and resources. A recent winner of Start Alberta’s 2021 Impact Award, HelpSeeker was recognized for their outstanding corporate social leadership, particularly in the area of diversity, equity and inclusion.
HelpSeeker was born when the founders recognized the need for social change and equity in the social services sector. They were compelled to create a solution to address difficult challenges, such as domestic violence and community safety. They established a niche position between both social and technological innovation and, to start, created an app to better connect people with social services in Medicine Hat and Lethbridge.
Corporate social purpose is at the heart of HelpSeeker. Intentional action on Reconciliation, inclusion, diversity, equity and sovereignty is built into every aspect of the company. They tackle questions on the cutting edge of purpose and ESG practices, like “How do you do Reconciliation in machine learning?”
HelpSeeker has leaned into purpose - and it’s paying off. In just three years, the app has grown from its original implementation in Alberta to connecting users with over 300,000 social services located in all ten Canadian provinces. They have built a hub of online resources and digital solutions. Expansion into Europe is being planned for as early as next year. HelpSeeker has successfully harnessed tech innovation for the greater social good.