With grim headlines dominating the news every day — from the war in Ukraine to persistent affordability challenges — you might be forgiven for thinking there are more important issues than upstanding corporate conduct. But there are signs that is changing.

As of the beginning of May 2022, the province of British Columbia has started to act on its ambitious agenda. When passed, these reforms — from the plan to implement the UN Declaration of the Rights of Indigenous Peoples, to card check union certification, to pay transparency — will provide a structural advantage to organizations that behave responsibly.

BC’s moves are part of a broader trend. Governments are increasingly moving to make poor corporate conduct have consequences. Organizations with poor climate, social and governance records face increased reputational, regulatory, and ultimately financial risk.

In this new business reality, environmental, social and governance (ESG) concerns now have new relevance across the entire economy.

Forward-thinking organizations, who recognize that the right thing to do is also the smart thing to do, have acted fast. They have implemented ESG plans, positioning themselves to succeed in this environment.

Organizations with a poor ESG record will be at a competitive disadvantage — and, having put off action, have now discovered that government is acting for them.

Does your organization have a plan to act?

In this environment, words alone won’t cut it — you need substance. Therefore, you must:

Ensure executive buy-in and leadership

  • ESG cannot live in the public relations department. Messages without proof points are hollow and easily — and rightfully — dismissed. Even though ESG requires participation across the organization, a C-level champion of your organization’s ESG program at every level is critical for credibility. This does not just mean participation in strategy development — this champion must also be the force behind internal capacity building, goal setting, and implementation to ensure that ESG efforts are highly impactful.

Center the experience of marginalized groups when setting goals and crafting policies

  • Top-down policies and ways of doing business — even when well-intentioned — created the inequities that ESG policies seek to remedy. Even as your organization identifies and promotes its executive champion or engages stakeholders as part of a rigorous materiality analysis, it must center the policies of the marginalized people affected by its policies. Only then will it be able to effectively reform them. This can include engaging external consultations to understand best practices. It also includes taking the pulse of your own organization — creating safe spaces where you can understand how your employees from marginalized identity groups experience their workplace, if they feel like they are fairly treated, and if they feel like they belong.

Build ESG considerations into your business operations

  • An ESG plan must be built into the way the organization lives and breathes. This means thinking beyond volunteer days and going paperless. What is your organization’s true carbon footprint — and what are the actionable steps you will take to achieve net zero? Have you done the work to understand your organization’s issues with diversity, equity and inclusion — and made solving them a priority? Have you read the calls to action for the Truth and Reconciliation Commission, and planned to implement them? By answering those questions and by ensuring that ESG considerations are built into the way you do business every day, you will be able to connect ESG to your organization’s performance, and ultimately your bottom line.

Set measurable targets, ensure you meet them and avoid greenwashing and rainbow washing

  • What is measured is managed because it allows for accountability. ESG goals must be treated like any other business goal. Your executive champion must be responsible for progress against their targets, and report on them regularly — and when targets are missed, this must be treated like any other business goal against which an executive has fallen short.

BC has acted most recently — but other jurisdictions are sure to follow. The business environment has changed — and businesses must change with it or be left behind.

If you’d like to discuss what an ESG strategy might look like for your organization, please contact:

  • Emrul Hasan, Vice-President, Citizenship and Sustainability — emrul.hasan@hkstratgies.ca
  • Michael O’Shaughnessy, Director, Corporate Advisory —michael.oshaughnessy@hkstrategies.ca