Profit and Purpose: Family businesses can make a big impact with ESG and EDI strategies
In my last article on ESG and EDI principles, I shared three ways that family businesses are better positioned and uniquely optimized to implement these practices. As a quick recap, ESG encompasses the Environmental, Social, and Governance issues that businesses, boards and families are increasingly prioritizing. A component of ESG are the EDI (equity, diversity and inclusion) activities that a business undertakes. These areas have become vital for any modern business to understand as it relates to operations and performance. And, rightfully so.
Family businesses have an opportunity to literally change the world by focusing on ESG and EDI initiatives. If that seems like a lofty statement, consider this: over a fifth of the global shipping industry is run by just a few family-owned businesses. In the automotive industry, 36 family companies account for 55% of the total global market. These big players and those across other industries have the power to protect the environment, grow sustainability initiatives, and build inclusivity practices. Whether you’re an enterprise level company or a small business, family businesses can make a big impact. "Family businesses, based on their DNA and definition of being around for the long term, are positioned to lead on sustainability, because they are not interested in short-term profit but long-term value creation," says Peter Englisch, global family business and EMEA entrepreneurial and private business leader, and partner for PwC Germany.
According to PwC: “The public’s heightened expectations for companies have dovetailed with the growing interest of investors in environmental, social and governance (ESG) factors, which include diversity and inclusion (D&I). The pursuit of diversity isn’t just about doing the right thing. A diverse workforce can drive better outcomes that can actually enhance business growth and brand reputation”. Your customers care, your employees care, and the next generation of leaders care. Despite this, many companies are still struggling to implement meaningful, lasting practices when it comes to ESG and EDI.
And for those who are eager to make changes, it can still feel like a daunting task.
In my work with family businesses, I’ve uncovered some key ways to help my clients understand how to implement ESG and EDI principles without overwhelming their businesses. These tactics are best practices from learned experience among me, our advisors, as well as expertise from other leaders in the field.
Determine how big of a bite you want to take
We’ve all heard the phrase “don’t bite off more than you can chew”. When it comes to changes within a company it’s admirable to want to do it all and go big. But this is where many businesses end up getting stuck, or can’t follow through when it comes to implementing their vision. Start small to build sustainable practices; develop an actionable plan with small milestones over a realistic time period. By creating an action plan with small bites, you’re much more likely to attain the bigger goal, and enjoy the long-term benefits of a diverse, sustainable, environmentally and socially conscious business.
A few ways you can get started:
Meet with your team and draft an ESG and EDI commitment statement
Determine your goals, big or small, and identify how you will measure your progress
Start reporting on ESG and EDI results to employees and shareholders
Start the process to become a B-Corp and/or research ISO 26000 and 37000 standards
Hire a third-party advisor to help you determine where you currently are and where you want to go
Look at your current policies and determine where sustainability fits
Take a close look at your current company policies. It’s likely there are some quick win changes you can make that incorporate ESG and EDI into your business. Consider tapping into your employees for ideas, especially the younger generations. As EY Leader Orlan Boston says, “this is a topic that couldn’t be more prominent for younger generations — for Millennials, GenY and GenZ. They’re expecting to be part of the solution. They want to contribute. How do you unleash that innovation, those creative ideas, as a leader, from your younger generation of employees and staff?”.
This is one area where many families that I work with are pushing the planning to the next generation. Working together with the rising gen, we often craft ESG and EDI policy and strategy, using this activity for skill development that builds generational capacity, creates buy-in from the next generation, and delivers real value to the ownership and business. Because of the often long-term time-frame required for ESG and EDI strategies to be completed, the rising gen can participate in the full realization of their vision from ideation to implementation working across generations
Sustainability practices to consider:
Bus passes for employees / bike lockers
Energy efficient building practices / LEED standard buildings
Recycling / no-waste office programs
Working with vendors who adopt sustainability practices
Eliminating use of paper products and plastics
Hosting virtual meetings/conferences over in-person business trips when possible
Connect EDI to your company vision, values, and mission statement
If you’re not ready to commit to the audit level required for a formal ESG
and EDI structure, you can still make these areas a focus by digging into your company vision and values. By performing an internal assessment of the alignment of your vision through an ESG/EDI lens, you can identify any gaps or blind spots. A lot of family business owners I work with aren’t ready for the formal process that’s required for a full audit in these areas, but they’ve gained great value out of their own internal assessment. The exercise of mapping out how your company visions aligns with ESG and EDI principles can also help you uncover areas where your mission and vision statements could use updating.
Areas to consider:
How are you encouraging diverse hires? (and how are you tracking and measuring this? There are some amazing tools and platforms out there to help)
What do your employees and customers care about? How are you reflecting their priorities in your own operations, policies and community efforts?
What is your company's current environmental impact? How does that fit with your overall mission and vision?
Align business strategy and governance to stay accountable
So many businesses document their vision in words, and that’s as far as it extends. After you’ve worked ESG and EDI principles into your vision, the next step is aligning it with business strategy. Sustainability is built into the DNA of family business. That means, having real discussions and dialogue along the long-term plan to work ESG and EDI into your business. As we talked about in the previous section, if you’re unable to comply with formal audits, you can still create policies, practices, and standards within your organization that ensure that social impact, environmental standards, and diversity and inclusion are strands in the DNA of your organization. I encourage you to look at what your competitors are doing to comply with these important principles, not only to stay relevant, but as a source of inspiration and best practice. For certain industries, regulations in this area will become mandatory, not just a nice to have, making it even more pressing to make it a priority. The entire process needs to be one the organization buys into, and often that starts from the top; with the ownership council, the board, and the C-Suite leading the way. Regardless of whether your company is private or public, big or small, there needs to be accountability practices built in to ensure ESG and EDI remain an integral part of your business strategy. Creating this alignment will also help create a strong foundation for the next generation. These principles are growing in importance for any company, and family enterprises, with their long-term view of business, are particularly well positioned to embark on the journey. As the next generation steps in, you’ll have set them up for success by operating with a company vision rooted in ESG and EDI principles. It matters.
Kathy Bright has worked with family enterprises for nearly twenty years and is an integral part of the Trella Advisory Group team. Her range includes hands-on experience with strategy and governance and she has acted as the President and an Officer of the Board for Family Enterprise Canada and Director of the Board of the Business Families Centre at UBC’s Sauder School of Business. Kathy’s interests include leadership, succession and continuity planning, strategy, risk management, governance structures, fiduciary responsibility, and the development and maintenance of positive relationships in family enterprises.
Learn more about Kathy and the rest of the Trella team on our About Us page.