With consumers’ increasing awareness and demands for sustainability, the adoption of environmental, social and governance (ESG) practices has become important for companies’ success. Society expects more of companies and values more those that are conscientious in the present and preparing for a future that promises to be challenging.
In response to this increased awareness, companies are working hard to improve their image with consumers around the world. A significant part of this effort focuses on developing statements, sustainable plans, and actions to mitigate impacts on excluded groups and the environment.
The ESG rating system has gained notoriety since it first appeared in 2006 in the United Nation’s Principles for Responsible Investment (PRI) report.[1] ESG’s corporate policies, practices, and commitments have captured the interest of people and, consequently, the corporate world, because buyers are no longer looking to hire only the lowest-cost supplier, but now seek the one with the least impact on the environment and the best social justice and anti-discrimination practices and policies, and that pledges to continue to improve its efforts towards a better, more just world.
In addition, corporate investments are also increasingly driven by ESG pillars. To develop ESG strategies companies must engage in certain fundamental actions, among them:
- Incorporate sustainability into their purpose and corporate statements,
- Understand the impact of their business model on the world,
- Align objectives and goals with UN guidelines,
- Involve all executives in the development of strategies aligned with ESG best practice,
- Demonstrate a commitment to employee diversity, and
- Train teams of professionals to meet the challenge of sustainability.
The first step is to align the purpose and corporate statements with the principles of sustainability. Next, it is essential to understand the nature of the business in relation to its impact on the environment and society. Currently, some companies have already awakened to the importance of having a positive impact and do so through their business models. These companies may be banks providing credit to underserved communities, those investing in reforestation, or others working to strengthen the connection between the community and consumers in large urban centers.
Next, it is important to evaluate the diversity of employees and teams and make sure it is part of the recruitment, selection and hiring process. In addition, it is crucial for leadership to engineer sustainability into the strategy realignment process, via the definition of assumptions, objectives and goals in which sustainability is central. Finally, and no less important, it is essential to develop teams throughout the company that internalize the importance of the adoption and dissemination of good sustainability practices by all units of the company to suppliers and partners.
It will be up to the company’s senior management to monitor indicators and achieve ESG goals in critical performance analysis meetings. Without proactive leadership, companies should not expect to make the impact needed across the industry. Forward-looking executives should focus on sustainability and make decisions for the greater good, if they want to see solid results from their strategic business decisions. A strong ESG proposal helps the company explore new markets and expand its business to existing ones.
Boeing is an example of a company that aligns business strategy with the pillars of ESG.
The company declares that it is committed to protecting, connecting, and exploring the world safely and sustainably. The company’s values are rooted in sustainability and the expectations of its stakeholders; sustainability is present in the elaboration of strategy, in the focus on environmental management, progress, social inclusion, and transparency of governance. This is made clear in the company’s Sustainability Report, which provides a comprehensive view of its sustainability efforts.
The company also declares its commitment to developing partnerships to decarbonize the aerospace sector by 2050. The projected future requires a set of solutions that of necessity will involve diverse stakeholders.
As an example of good practice, we can also mention that Boeing is a pioneer in the development of innovative technologies and solutions to ensure that the aerospace sector is sustainable for future generations.
Boeing understands—and communicates its understanding—that sustainability is an integral part of its business model now and will be in the future. That is why the company seeks to make its processes and actions transparent, while integrating sustainability into the company and in the industry, showing total alignment with the company’s mission, vision and values.
Professor Annibal 