Family businesses can lead on ESG
When conversation turns to ESG strategies and reporting, it’s often corporate Australia thrust under the microscope – and generally it’s for a transgression.
Locally and abroad, businesses are, to varying degrees, putting a greater emphasis on their ESG priorities. Investors, employees, customers or communities, now more than ever, demand greater effort in making full and frank disclosure of ESG performance against key measures and targets.
But a sound ESG strategy doesn’t just spell opportunity for the corporate giants – family-run businesses, too, can reap the rewards.
Australian family businesses clearly have a collective commitment to a wider societal purpose, but there are opportunities to better align these commitments with the issues that matter most to their key stakeholders.
According to our recent research, Australia’s family-run businesses have untapped opportunities to create value by getting their ESG strategies focused on the ESG issues material to them and their stakeholders – both locally and abroad.
Locally, 41 per cent of family businesses feel they have a responsibility to fight climate change – compared to 50 per cent across the globe.
Locally, a third of family businesses ensure sustainability is at the heart of everything they do – compared with 49 per cent of family-run businesses globally.
Further, 36 per cent of Australian family businesses identify an opportunity for them to lead the way in sustainable business practices – compared with 55 per cent globally.
By embedding a targeted ESG strategy into their core business model, these businesses may find a world of opportunity at their doorstep – not least of which will be the development of new products and access to new markets.
As businesses reassess their operations in the wake of the global pandemic, taking the time to consider what ESG means for their business, and considering issues through a glass-half-full lens, many may be surprised to learn just how much value and opportunity can be created by adopting a pragmatic and proactive approach to ESG.
Consider, for example, the cascading impacts on the supply chain brought about by the imperative of responsible sourcing.
Transparency and sustainability throughout the supply chain is a growing area of interest for regulators, investors and consumers, and many organisations are making sustainability a visible and measurable hallmark of their increasingly-complex supplier and distribution networks.
Global improvements in production standards and fair trade have had significant implications on the practices of food and beverage retailers around the world.
Provenance in the supply chain is another driver of change for many organisations in industries as diverse as agriculture to manufacturing to jewellery.
This all spells opportunity for those businesses embedding sustainability attributes into their core business strategy and supply chain, and trouble for those that are not.
For family businesses existing within these larger supply chains, there lies an opportunity to do something different, to differentiate from the pack and create sustainable long-term value, to promote business resilience, to better attract and retain a talented workforce and, all the while, to enrich the organisation’s brand and reputation.
ESG will lead the next decade of disruption and opportunity for businesses in Australia and abroad. This is good news for those businesses that are thinking proactively about changes they can make to better align their core business strategies with their broader stakeholder priorities.
But as all roads lead to an inevitable shift in reporting and disclosure expectations, the time is now to develop and embed ESG strategies into core business operations with a focus on delivering meaningful outcomes and transparency.
Future reporting for family businesses should clearly consider the material issues for stakeholders, and both the financial and non-financial impacts of these issues on the business, both now and into the future.
Remember, ESG always starts with stakeholders – and listening to learn more about the priorities that matter most to them.
Whether it’s customers, shareholders, staff or the community, expectations that might have once been viewed as niche, are now non-negotiables.
Recognising these priorities, and embedding them into core business strategies, is the key step to establishing an authentic ESG strategy that sets a business apart from its competitors and creates sustainable long-term value.
Written by Liza Maimone, Chief operating officer and ESG executive, PWC Australia