Purpose is a defining metric for how many people choose their careers, lead their lives, or contribute to the greater good of society. A purpose-driven culture relies on purpose-driven leadership. At some point or another, we all have been empowered and inspired by good proactive leadership that cares about the common good, especially in times of crisis. During the nationwide shutdown, Americans seeking mental resilience looked to leaders like Dr. Anthony Fauci for trustworthy facts, positive direction, and a sense of purpose in our social distancing efforts. At a time when purpose is more important than ever, how can ESG efforts better enhance company culture and its sense of purpose?
The answer lies in the quality of your ESG Data. It lies in how CEOs communicate their ESG story and how board leadership participates in equitable outcomes. To improve your company culture, we’ve laid out a starting point for your purpose-drive ESG initiatives:
ESG data helps executive leaders tell a powerful story about their company’s purpose
Purpose is about doing the right thing. It melds together your company’s mission and values. The most famous example of how employees perceive the meaning and impact of their work is the anecdote about JFK touring a NASA facility, asking the janitor mopping the floor what he was doing, to be told: “I’m helping put a man on the moon, Mr President!” That’s the true meaning of inclusive purpose.
Purpose can also strengthen every aspect of your ESG efforts. Since ESG is data driven and relationship-oriented, a powerful story can emerge from your ESG strategy planning. Simply ‘adding ESG value’ doesn’t push forward with momentum, the way it does when purpose is embedded into company culture. When your executive team evaluates ESG data and results, do so with merit in engaging what it means for your wider workforce. What difference are you making in the world and for your people? Can you define a purpose statement for your company? For instance, Patagonia is “in business to save our home planet.” Salesforce is known to blend “doing good by doing well, together.” Here at Good.Lab, we are “working toward a more sustainable and equitable economy.”
Use your ESG data to build a purpose statement and credible ESG story, then integrate it into your company’s culture for long-term value creation.
ESG analysis offers a powerful opportunity for leadership to holistically look at their company. Valuing your company’s effects on people and the planet—and integrating that into traditional financial analysis—will offer a more comprehensive picture of actual corporate performance.
For the corporate purpose to be central to your firm’s culture, ESG must be a priority for the CEO and top executives. When the Chief Executives for Corporate Purpose (CECP) analyzed 20 CEO presentations on long-term strategic plans, they found that when CEOs did well at communicating corporate purpose, stock prices and trade volume rose in the following days.
Embedding ESG strategy into your company culture and operations requires blending your ESG materiality and your corporate purpose. Only then can you build a powerful ESG story around your authentic purpose to share with your stakeholders. For example, the first step is for executive leaders to fully understand which ESG issues are most material to their company. Once you’ve established your material ESG baselines, and identified a corporate purpose, the next step is to effectively communicate your results. What are you most proud of and where do you hope to improve? Ensure consistent engagement with all employees and commitment across the entire business ecosystem to embed a strong sense of purpose and transparency into company culture. This establishes a positive ESG feedback loop and deeper connection to stakeholders, investors, and the greater good of society and the natural world.
Investors are hungry for ESG strategy linked to purpose
As ESG continues to grow, being a purpose-driven company will gain you more leverage in investment decisions. If sustainability and ESG initiatives aren’t embraced by your company culture or lack good data to back up your claims, then ESG efforts tend to get dismissed as greenwashing or greenwishing. As per Larry Fink’s 2021 Letter to CEOs, “The more your company can show its purpose in delivering value to its customers, its employees, and its communities, the better able you will be to compete and deliver long-term, durable profits for shareholders.”
Investors pay attention to management’s effectiveness in linking ESG strategy to purpose and creating accountability structures for ESG integration. It’s about going beyond short-term profit or serving only shareholders. It’s about overcoming criticism of your leadership when it arises, like Google and it’s diversity challenge. It’s about communicating your efforts in a way that builds morale in your employees and excites them to go to work each day.
The role of purpose driven board leadership
Never underestimate the value of the board’s role in purpose driven ESG accountability and transparency. Purpose-driven board leadership is long thought to only apply to nonprofit organizations. This is no longer the case. ESG efforts require an incremental yet transformative shift in thinking of a company’s financial health to ecosystem health. It can also change the way boards are populated like we’ve seen at Wynn Resorts, who now have a 40% female board.
ESG requires boards to demonstrate a service-oriented equity mindset. For example, the board should be the entity that ensures that ESG metrics are carefully considered, adequately measured and disclosed for auditing. They can oversee that executives are fairly compensated, and that diversity is encouraged. Where a traditional board may ask: How will our ESG strategy advance our bottom line? How will this decision impact our shareholders?
A purpose-driven board asks: How will our competitive ESG strategy create more equitable outcomes? Are there ways that it would reinforce systemic inequities, and—if so—what are we willing to do to avoid that? As an ecosystem, how will this impact all of our stakeholders and drive the most environmental protection for our desired social outcome?
ESG output and sustainability reporting doesn’t always translate to actual impact or authentic purpose. The most important part of the ESG process happens when companies scrutinize their business practices and their business model to understand which issues are most material in terms of ESG risk.
At Good.Lab, we deliver leading ESG data management tools to materially focus and quantify metrics. Our Fractional Sustainability Resources are fully trained in stakeholder engagement and how to embed purpose meaningfully in company culture. Put your best foot forward with Good.Lab. Contact us today to get started on your ESG journey.