For mid-sized enterprises, leadership is the key to ESG success

Sustainability is becoming a priority for mid-sized enterprises not only because of new legislation and competition but also because of investors’ needs. To succeed on your ESG journey, focus on three things: vision, ownership and data.

ESG is the new GDPR: the acronym that corporate management is aware of but doesn’t fully understand. Business leaders are unsure of which steps are needed on their company’s ESG path and why.

However, even if the European Union level legislation on corporate sustainability doesn’t concern your business yet, the businesses you are partnering up with are likely to require their ecosystem to take a stand on ESG soon. So far, sustainability has mostly been a focus area for larger enterprises, and they often employ dedicated ESG personnel. Soon, it will be time for smaller organisations to follow suit.

To go beyond the bare minimum, to be able to differentiate with ESG and to secure future financing rounds, companies need to start laying the ESG groundwork one step at a time: creating a vision, building a roadmap and leading the change in a structured manner.

Sustainability attracts investors

ESG is becoming a priority for mid-sized enterprises not only because of the developing legislation and competition, but also because of investors. Private equities and other investors need to demonstrate to financial institutions that their portfolios are sustainable. These sustainability requirements also apply to portfolio companies.

Therefore, you can secure a better position for future financing by showing that you are truly developing your business with sustainability at the core of everything you do.

Three things to focus on: vision, ownership and data

Sustainability requires systematic leadership just like any other topic, but it’s not rocket science. Your business needs to show that sustainability is a priority and that your improvement curve is upward. To succeed, focus on three things: vision, ownership and data. Annual reporting will then follow.

Take these three steps to start your ESG journey:

1 ) Define a shared vision.

ESG is a wide topic, so you need to know how to prioritise your focus and resources and decide at which level of sustainability you are aiming. You must also understand the reasons behind your level of ambition. This is crucial in communicating the road ahead to your organisation.

2 ) Top management must take ownership of ESG.

Prioritising ESG must be on the business management’s agenda. The items on your ESG roadmap must be actionable – define clear responsibilities to make sure the steps towards the vision are taken, measured and followed up. The only way to drive change and help the organisation to adapt to it is through commitment from the leadership team.

3 ) Data plays a crucial role in setting targets and tracking progress.

Although companies don’t yet have full capabilities to measure their ESG impact, technology is catching up to support the ESG agenda. You can already calculate estimates with industry average factors if data is lacking. The market is growing in ESG data management tool options that enable not only reporting but also forecasting.

ESG vision, data and ownership come down to corporate strategy. Strategy should guide the ESG path and target state to ensure ESG is not a separate topic but a way to reach strategic growth goals.

Remember the G in ESG

Too often the ESG focus is put on the first two letters while forgetting the governance aspect. However, practical solutions for ensuring good governance are already available.

For example, the Business Technology Standard is an open-source model for managing technology development that provides a business-driven framework to design, deliver and operate technology in a sustainable manner.

Forerunning mid-sized enterprises use ESG Business Design to integrate sustainability into their daily operations. It is a concrete way to drive change and to keep up with the moving target of ESG. |

Why a mid-sized business’ leader should act on ESG

• If you operate in the EU or are partnering with companies within the EU, your business will be affected by new legislation directly or indirectly in the next years.

• If you care to attract investors, ESG is your way. Investors and banks are focusing more and more on companies that take ESG seriously.

• If you want to improve your risk management. Business scalability is about risk management and wellgoverned business. ESG will bring structure to your growing organisation’s needs, improving your employee experience.

Sofigate is the leading business technology transformation company in the Nordics, with +700 professionals in Finland, Sweden and Denmark. Sofigate is also the founder of the Business Technology Forum. sofigate.com