ESG as a compass for future-proof leadership

How do organizations become stronger and more future-proof? The ESG Innovation Institute - a collaboration between Nyenrode Business University and KPMG - deals with this question every day. According to André Nijhof, Professor of Sustainable Business and Stewardship, organizations should invest in a strategy that is sustainably, socially and administratively responsible, to help them make a positive impact. "The question is not if, but how organizations will be working based on ESG. We are beyond the point of noncommitment."

Nijhof is involved in several programs offered by the ESG Innovation Institute. The common denominator of these programs is to learn how to invest in ESG. "Investing in Environment, Social, Governance means implementing these themes in the strategy, planning and control of your organization. And let’s not forget: the conversations you will be having with your accountant", Nijhof argues. "After all, the measures you take to improve ESG values within your organization, will affect your business model.” Nijhof gives the example of a packaging company that, due to the European ban on single use plastic, has to innovate to make sure that packaging can be used multiple times. "This turnaround affects the valuation of your business and therefore your books."

Required

It is not only legislation that has organizations put ESG as a priority on their agendas. It is increasingly required by customers, suppliers, employees and society. "In terms of the 'E' of Environment, it is among other things about reducing CO2, your contribution to a circular economy and biodiversity", Nijhof explains. "The 'S' of Social is partly about how well you take care of your employees. It is not only salary that matters to people, it is also about meaning. For example, PostNL has decided to reinstate parcel deliverers as permanent employees in order to offer them more security. But it is also about social issues that affect society as a whole, such as: how can we reduce poverty in a rich country like the Netherlands?" Finally, organizations are asked to take responsibility when it comes to improving Governance. "There is more focus on gender equality within governance, but more room can be freed up within the old boys network for the younger talents. In addition, the call for transparency is getting louder", adds Nijhof.

Cockpit

Within the programs of the ESG Innovation Institute, participants learn which ESG buttons organizations can push. However, Nijhof warns: “It is complicated, just like in a cockpit. It wouldn’t be smart to start pushing all the buttons in a cockpit, so you have to make choices." The first button stands for getting answers to the question of whether you can do more for people, the environment and society, in addition to what laws and regulations require of you. The second button represents gathering information. "Measure what you treasure, measure what is of value", Nijhof says. "For example, I think that as an organization you need to properly map out what your carbon footprint looks like. If you cannot answer that question, you are a bad manager according to the ESG paradigm." The third button is about having the guts to choose. "Tony Chocolony, for example, endorses that chocolate contributes to obesity, but they deliberately choose to focus first on the elimination of modern slavery."

Accountability

The message that the time of noncommitment for organizations is over, is the main focus throughout the program. "That is why we need game changers", argues Nijhof. According to him, leaders must be brave, but they also have to be realistic. "Problems aren’t fixed overnight, but you have to take steps forward now, take action now. It is about taking responsibility both as a manager and as a human being, and how to balance the two. If that is when you start working with ESG values, you are doing it right."