Customers, employees, investors and suppliers each have reason to question where a business, irrespective of size, stands on sustainability. New research by Investec reveals how mid-market companies plan to make their case.
The research shows that, while more than two-thirds of mid-market companies are developing or implementing an ESG strategy — a set of governing policies and practices — many are still in the earlier stages of implementation.
Many of these businesses are privately owned or small enough to be beyond the scope of current ESG regulation, which targets larger, listed companies. While EU regulatory reach will extend to these companies in the coming years, they face several day-to-day challenges, not least how to pursue growth in difficult economic conditions. ESG may seem a distraction, rather than a driver of commercial value.
Among the biggest barriers for businesses that don’t currently have an ESG strategy reflect these multiple demands: a lack of resources (31 per cent); difficulties around implementation (26 per cent); and limited expertise (22 per cent). Those struggling to advance their ESG strategies cite competing strategic priorities (36 per cent), and the lack of clear data and metrics with which to monitor ESG performance (35 per cent).
Ruth Leas, CEO of Investec Bank plc, suggests a combination of collaboration and networking. “We can share our own journey and experiences”, she says. “By fostering connections between businesses in similar sectors, we create a collaborative environment where valuable insights can be exchanged, enabling everyone to learn and adapt based on their individual and collective experience.”
Finding a way around the problems
How, then, to get past these roadblocks? ESG specialists and businesses that have already made progress show the paths that could lead to success.
One approach that can help, suggests Concepción Galdón, vice-dean for business with purpose at IE Business School, is to recognise that you don’t need to start from scratch. “Use the processes already in place that you and your team are familiar with — around budgets and timelines, for example,” Galdón suggests. “And connect whatever you do to your business model; that is how you will find solutions that scale.”
Should businesses want help, there is plenty of advice and support available from a wide range of organisations. In August, for example, the Government launched the UK Business Climate Hub, a free resource aimed at businesses looking to improve their sustainability. Business groups offering support on different aspects of ESG include the Federation of Small Businesses. From academia, the University of Cambridge’s Institute for Sustainable Leadership also offers help.
Jo Hunter, founder of food producer Piglets Pantry, suggests reaching out to similar local businesses to share experiences. “One of the biggest things in our favour is we have a very good local network,” says Hunter of the changes she has introduced at her business. “We all talk to each other to share best practice in our local community; for example, in how to install solar panelling.”
Specialist advice can then help businesses to tailor their own ESG strategies, argues James Amar, strategy and CSR director of third-generation family business RH Amar. His business, a food distributor, worked with The Sustainability Group, a consultant that runs the FuturePlus platform. As a starting point, Amar was asked to chart where the company currently stood on a whole range of ESG issues.
“You have the opportunity to explain what you’ve already done, but also what you intend to do, and when,” Amar explains. “It helps you to create a roadmap for the short and the long terms. It’s really helped us to understand what we can do immediately, and where we will need more of a slow-burn approach.”
The search for sustainability need not be solitary
Business leaders also don’t need to go it alone, suggests Ian Webb, CFO of school-wear retailer Banner. He recommends that businesses identify and support their internal advocates of good practice. “We have a team whom we call the ‘CSR Stars’, who help deliver our initiatives,” Webb explains. “We think this is how [better ESG] permeates through the organisation.”
There is no substitute for simply trying things, adds Steve Cunningham, the CEO of Geo, which specialises in smart energy solutions. “We were setting our business objectives for the year and I just felt there was nothing in any of them about figuring out how much good we were actually doing,” he recalls.
"I thought, how can we make millions of products a year and not know if they're really doing their job?” That prompted Geo to create a baseline against which all future progress could be measured. “We [had to] move from thinking we're doing a good thing to measuring and knowing we’re doing a good thing.”
It's a point that Rishi Madlani, UK head of sustainability at Investec, echoes: “You learn by doing. The last thing you want is to miss out on that big, transformational contract because you haven’t started,” he says.
Leas emphasises the importance of shared experience. “Everyone is looking for help; we are learning together,” she says. “No one company or person can solve this on their own. The network should come together to support each other, learn from each other, and then decide which steps to take.”
