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On the minds of business leaders every day is ESG (Environmental, Social & Governance). Most of us are convinced that ESG is the future - the more ESG-compliant a business is, the more it attracts investors, complies with changing legislation and increases the value of businesses, however, the infancy of ESG adds complexities that are difficult for business leaders to navigate.

Wait - what is this ESG you speak of and why would I think it is hard?

OK, so a quick 101. ESG can be seen as an evolution from Corporate Social Responsibility (CSR). The key difference though is that ESG is measurable which should mean we reduce greenwashing and deliver metrics that stakeholders, customers, government etc can be confident in the decisions they make with respect to the businesses they have interactions with. At least that is how it is meant to be, but because ESG is still in its infancy there is a lack of standardised measurements. That is not to say no one is out there trying to develop them. On the contrary there are many agencies and consultancies developing measurement models and new rating scales, akin to financial ratings from the likes of Standard & Poor’s and Moody’s. But there are two key hurdles:

1. With so many agencies vying to become THE leader, which is the right model to follow for your business?
2. ESG is massively complex, affecting every part of your business. With so many ESG needs, knowing what to focus on that will deliver the greatest impact on your business is one thing, ensuring that your supply chain is compliant is another.

Further, governments are rapidly passing legislation that businesses need to find a way to comply with else risk tax increases, or worse, going out of business. In April this year the UK government mandated that all packaging should contain at least 30% recycled material whilst in the ACT in Australia the government banned the sale of new petrol and diesel vehicles from 2035. Businesses know they have to act now to avoid becoming a relic alongside some of their current business practices.

How you can simplify what you are doing in ESG now and have a greater impact

It may sound ironic given that for most brands the main source of revenue comes from consumers, but few companies are consulting with customers to get to the bottom of what ESG means for them. Many of the ESG decisions are being made in-house based on Investor and Government legislation, the same legislation that is often dictated on what consumers expect.

Measuring the impact of ESG is a huge advantage, but only if you know what measurements are important. To make your ESG initiative successful, it’s important that you are measuring what is important to your customer - now and in the future -or you risk losing their business.

Talking to the customer ensures that you are not playing catchup but instead are leading your competitors. Shell are doing exactly that, knowing that fossil fuels have a finite timespan, and new legislation will forbid the sale of combustion engines, they has set up a community of EV drivers. Their aim is to better understand the customer’s needs and values, to guide the future direction of their business.

As with Customer Experience (CX) programs, measuring the impact you have is a massive advantage, but like CX it is knowing what to measure that is important. There are plenty of CX programs that fail to garner much response from customers because it is not relevant to them. To make your ESG initiative successful, it is also important that you are measuring what is important to your customer.