Preparing for ESG revolution

As stakeholders' expectations from businesses are changing rapidly, organisations are looking for the right ways to address the environmental and societal needs with appropriate governance. Here's where the much-discussed ESG comes in.

But what are the environmental, social, and governance (ESG) principles? It essentially is a framework for evaluating the performances of organisations with respect to their robustness in governance, and effectiveness in managing environmental and societal issues. However, ESG is not just about ticking these boxes. It's also about making a difference in business performance as well as instilling confidence in the sustained outcomes.

Board members and chief experience officers of large global organisations are increasingly pondering upon the questions around ESG and its impact. Moreover, they are trying to understand which of the wide-ranging issues directly or indirectly linked with ESG they should focus on. Finally, they are trying to understand the opportunities available to their organisations to create value and stay relevant in the future.

Today, many organisations – including those in the readymade garment (RMG) sector in Bangladesh – are active participants in the supply chains of large global companies. When these global companies consider ESG aspects, they also expect their suppliers to comply with their ESG requirements. Such a business imperative is likely to make ESG a necessary boardroom agenda for the companies in Bangladesh.

However, implementing this in actuality is not easy. While ESG initiatives come across as meaningful, there is a lurking concern around business growth and profitability. In a recent consumer intelligence survey conducted by PwC, about 40 per cent of the executives expressed concerns regarding balancing ESG with their business growth targets.

However, once ESG adoption starts gaining momentum for large global companies, their suppliers worldwide – including the organisations in Bangladesh – will eventually follow suit. Therefore, business leaders of the organisations in Bangladesh have to start formulating their plan now, which would include three major areas that will have to be considered.

The immediate call for action would be to revamp the entire reporting process. There will be an increasing demand to enhance transparency on how data is collected, sanitised and leveraged in reporting

The immediate call for action would be to revamp the entire reporting process. There will be an increasing demand to enhance transparency on how data is collected, sanitised and leveraged in reporting. This would require a robust data governance framework built on comprehensive data architecture.

The next focus area will be to refresh business strategies and reinvent competitiveness. Executives and board members must ask themselves questions on what must be done to sustain and improve competitiveness, and create value for stakeholders.

Finally, there must be a good degree of focus towards business transformation. This transformation will include digital, ecosystem, and value chain transformations.

The impetus for businesses to address ESG issues and opportunities is likely to grow in the coming years. Hence, it is the right time for business leaders to prepare themselves for this transformation.

The writer is a partner with PwC. The views expressed here are his own.