Establishing long-term ESG related objectives by different companies is essential to enable the transformation that the industry needs in order to achieve a sustainable future for all.
It is a fact that large companies include sustainable objectives in the development of their global strategies, but in many cases a high percentage of those objectives are not well defined or measurable, thus minimizing their capacity for the industry’s transformation.
Therefore, establishing ESG objectives must follow a long-term approach, considering that short-term objectives drive towards a short-term thinking process which prevents growth and real change; in fact, objectives must be ambitious and linked to a reference baseline in order to set improvements and specific dates to enable their achievement. Long-term objectives also promote innovation within companies.
A long-term ESG objectives approach will enable companies to differentiate themselves from competitors, and even set trends with innovative solutions. The traditional ESG objectives were set in order to reduce the negative impact of the companies’ activities, but only the transformational objectives seek to make changes to their entire value chain, as well as to society. These objectives have a gradual impact and seek to achieve a real internal progression at all levels.
Sustainability rankings in which many companies are involved, including GRESB, promote setting ambitious sustainable objectives, which will enable them to get a better position in an increasingly competitive market in ESG related issues. It is here that good governance objectives acquire a special relevance since they allow to incorporate ESG matters into investment processes and internal decision making for companies, and therefore, they transform work dynamics and strategies. Companies begin to be aware that addressing and mitigating their impact from now on and in a long-term basis is the most effective way to minimize future risks and improve their corporate image towards investors and society in general.
Addressing the implementation of ESG objectives from a long-term perspective allows companies not only to differentiate themselves from competitors with an innovative and strategic approach but also positively contributes to companies’ results. By originally incorporating responsible business practices, which respond to environmental, social and economic concerns, the cost of implementing the measures required to achieve these objectives can be reduced. For this reason, many companies are starting to incorporate this strategic approach in their annual investment plan, aligning the new ESG measures with their own business vision and with all their existing approaches and actions (action plan). In this way, the implementation and achievement of objectives in a gradual and evolving process is ensured, but with a dynamic and Iong-term approach, while companies reinforce their commitment and transparency, which are two of the fundamental aspects needed to achieve the necessary transformation.
In conclusion, ESG long-term objectives help companies to improve risk management, increase business profitability, renew and enhance their brand image and ensure these objectives are met. Likewise, these metrics encourage an approach towards the concept of positive net value to society (V2S or B2S), an approach which is beginning to be shared among companies and their stakeholders, as well as with society.
The essential objectives for the transformation of the industry are those of good governance, since they drive the transition process from the beginning, with new policies and internal procedures which enable establishing strategic action plans. The long-term objectives, as well as the ESG measures set must be measurable and gradually monitor their achievement, so that companies can publish the level of compliance of their commitments in an accurate and transparent way.
This article was written by Ruth Rózpide, Associate Director, Sustainability, at Mace Group