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Why private businesses are uniquely placed to lead the way to a sustainable future
Private businesses are a unique type of organisation, set apart by their long-term focus and deeply-held values. Another differentiating factor – one that’s less widely known – is their position in the vanguard of the ESG (environmental, social and governance) agenda. It’s a leadership role that I believe will become increasingly evident in the coming years.
Why do I say this? Let me start my explanation by looking at how publicly listed companies address ESG issues. On top of the constant pressures of quarterly financial reporting, they’re facing increasing regulation about which non-financial information they must disclose and how. As a result, their efforts around ESG must disproportionately factor in compliance with a constantly increasing regulatory bar.
By contrast, private businesses have a relatively free hand when it comes to reporting on their ESG impact and performance. So rather than focusing on compliance, they have time to consider what actually matters to them: their impact on stakeholders. So they get to really understand what their clients, customers, financial stakeholders and employees care about, enabling them to identify both the risk and the positive growth opportunities arising from ESG.
Focusing on stakeholders…
This greater ability to focus on stakeholders can bring private businesses a significant competitive edge in various ways. For example, it helps them understand what their customers will pay a premium for or what might make them switch to a competitor. And with employees, it can provide insights that make the difference between retaining and losing vital talent.
Evidence? In our latest Global Workforce Hopes & Fears Survey of 52,000 employees worldwide, over one-third – 37% – told us they choose their employer based on its corporate values. Among employees under 35, that figure jumps to 46%. These findings underline the growing difficulty of attracting and retaining key employees amid today’s continuing talent shortage. It’s a challenge that private businesses are well-placed to meet, thanks to their close employee relationships founded on a shared purpose and values.
…and owning the ESG narrative
What’s more, these same assets help private businesses own the ESG narrative from a position of purpose, values and value.
In doing this, private businesses can build on a natural alignment with stakeholders around nurturing and safeguarding long-term value, generational wealth and sustainability – all encapsulated in the desire to create a legacy. Private businesses are extremely well positioned to align value and values. This is key to implementing ESG and sustainability well. Building a legacy is exactly what the private business or family owner is doing: understanding the risks and opportunities to make the company sustainable and build lasting value for future generations. The owning family’s NextGens can be a huge help in building this value, drawing on their heightened awareness of ESG issues.
Mapping out the route to your ESG ambition
Together, these inherent advantages add up to a major opportunity for private businesses to lead on ESG. But how to realize it? The first step is to work out the business’s current level of ESG maturity and its aspiration for where it wants to get to. Then it’s a question of planning and navigating the route.
To help, we’ve developed a framework of four ESG profiles for businesses to consider as they look to progress from their current maturity to their future ambition.
The four ESG maturity organisation profiles
- Minimalist – Views ESG as primarily a compliance issue or has just begun the ESG journey.
- Pragmatist – Oriented to risk rather than opportunity, with ESG activities segregated and siloed internally.
- Strategist – Sees opportunities as well as risks in ESG, while looking broadly beyond net zero and inclusion & diversity.
- Trailblazer – ESG is core to purpose, strategy and services/products, and embedded and integrated across the organisation.
Looking across these profiles, a couple of implications spring to mind. One is that regulatory reporting pressures can push listed companies towards the ‘minimalist’ end of the continuum. Another is that private businesses’ deeply-held values, purpose and long-term perspective can make it easier for them to move towards the ‘trailblazer’ end.
Having identified the target ESG profile, getting there requires more than authentic values. It also demands committed action. I’ve seen private businesses where the owner is passionate about ESG but progress remains patchy, because they haven’t actively embedded it into business-as-usual. To move the dial, what’s needed is a very senior influencer – whether family owner or professional executive – who visibly leads the ESG agenda, and ensures it’s incorporated into every decision and action across the business.
Join our webinar to find out more
Wherever you may be in your journey to ESG maturity, it’s valuable to learn from those who have trodden the path already. To learn more, register to join us for our ESG for private business webinar on 8 February.
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