As global concerns about the environment, social inequality, and governance intensify, business leaders continue to recognise the necessity of prioritising their ESG (environment, social and governance) strategies.
It’s clear that the focus on ESG is no longer seen as a fleeting trend. Leaders around the world are accepting that sustainable business practices are not only an avenue well worth exploring, but a crucial and compulsory component of the corporate agenda to ensure the long-term viability of businesses and their overall impact to the wellbeing of society.
During our recent event as part of the Executive Education Insight Series, Navigating ESG Challenges: Business Skills for Transition delivered by Ismail Ertürk, we brought together industry leaders, University of Manchester stakeholders, and members of the MBA Alumni and Executive Education community to delve into the critical shift businesses must take from shareholder value-driven strategies to stakeholder value-driven strategies when prioritising ESG.
This thought-provoking session amplified the transformative power of aligning business objectives with the broader interests of society and the wider environment, and today we’ll be discussing the key takeaways from the event.
Shifting priorities: Shareholder value driven to stakeholder value driven
Considering the broader interests of all business stakeholders, rather than solely focusing on maximising shareholder margins, is imperative for businesses trying to achieve their ESG and sustainability goals.
While a shareholder-centric approach prioritises profits for investors in the short term, a stakeholder-oriented mindset considers the broader impact of business decisions for all stakeholders, including employees, customers, suppliers, communities, and the environment.
By taking this approach, businesses can foster long-term sustainable growth, mitigate risks, and enhance their long-term resilience against social and environmental challenges on the horizon.
However, before making this transition, it is essential for investors to be on board with supporting this shift, as their backing provides the necessary financial stability and confidence needed to implement comprehensive ESG strategies.
Gaining investor endorsement also signals market validation of business’s commitment to ESG related issues, which in turn can encourage other stakeholders to engage and contribute positively.
Does the future workforce have a stronger morale compass?
As younger generations enter the workforce, one key observation is that their heightened awareness of social and environmental issues is having a significant impact on business practices.
This generational demand to focus on sustainability, inclusivity, ethical governance, social responsibility, and long-term value creation is not only proving to be beneficial to the planet and society, but also can help businesses remain relevant and competitive in a changing market landscape.
With environmental concerns not likely to go away anytime soon, businesses are increasingly compelled to align their operations and values accordingly to contribute to a more sustainable and ethical business landscape.
Stock market vs sustainability success
A key barrier proving to be a challenge for many business leaders, is the misalignment between stock market success and ESG success, as the traditional financial metrics often overlook crucial aspects of environmental and social impact, and ESG deficiencies.
To ensure that ESG is taken seriously by investors, shareholders, and stakeholders, it is clear that a new system of metrics is needed – one which comprehensively evaluates a company’s sustainability efforts and social responsibility and provides a more holistic view of a business’s true value and sustainability outside of financial success.
The World Economic Forum has already recognised that ESG focused business practices can be an economically profitable path, so by transitioning from a purely profit focus, businesses can align their financial success with their ESG goals, whilst gaining the trust and support of all stakeholders and promoting genuine sustainable development.
Quietening the ‘noise’ surrounding ESG
Strategically and operationally, the topic of ESG and sustainability comes with a lot of ‘noise’. This ‘noise’ often refers to the overwhelming and sometimes contradictory information, marketing, and overall hype surrounding ESG initiatives.
Exaggerated claims about sustainability efforts (often known as ‘greenwashing’) and the constant stream of news and opinions on ESG-related topics can make it difficult for investors to differentiate between genuine ESG performance and superficial, surface-level and misleading statements and practice.
This highlights and greater emphasises the need for clearer, standardised, and transparent ESG metrics to not only cut through the ESG ‘noise’, but to help stakeholders make informed decisions based on accurate and meaningful data.
During Ismail’s session, he spoke about the power of large numbers of small events instead of a small number of large events, and the impact they can have on achieving positive ESG milestones within business.
The time is now
Although scepticism around prioritising ESG strategies prevail, the truth is that businesses who fail to get on board will soon not have the luxury of choice.
Whilst the climate emergency rapidly continues to invoke natural disasters, food and water insecurities, public health risks and ecosystem decline, these challenges pose significant risks to business operations, supply chain, financial stability, and infrastructure, meaning proactive ESG investment becomes not just a choice, but a necessity.
The urgency to act now is paramount, and leaders who delay ESG integration into their practices could see higher overall business costs, a greater vulnerability to regulatory changes, and diminished market competitiveness.
If you’re a leader looking to discover how to implement an authentic, realistic, ESG strategy into your organisation, join Ismail’s 4-day course, Leading ESG and Sustainability, where you will learn more how to create a lasting impact through ESG, and exceed business, stakeholder, and shareholder expectations.
