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Studies have shown that organisations can derive sustained competitive benefits from ESG (environmental social governance) practices that are strategically derived as opposed to generic ESG requirements developed for industries since it can be assumed that industry norms will be adopted by the majority.
In previous columns we addressed the current trends within the Caribbean where green capital markets are still in their infancy and where stock exchanges and regulators are preparing to build awareness of, the potential for and regulations of green or sustainable finance initiatives.
Green or sustainable investments are set to grow many orders of magnitude over the next few years. Large proportions of investments are set to go into transforming infrastructure and power generation. But adaption to and mitigation of climate change as well as the digital revolution are set to disrupt every sector of the economy. And all over the world, social and human development are in dire need of strengthening as well.
Change brings with it risks and opportunities. All organisations, including private sector companies, are expected to actively innovate and invest into helping our societies achieve the sustainable development goals (SDGs) by 2030.
In order to make progress, organisations will need to be governed in a way that their ultimate value is a contribution to sustainable development. That means that all organisations must be governed and managed so that they enable people to satisfy their needs in the present without undermining the ability of future generations to address their needs. They must also be able to assure themselves and others of their value. Organisations need to demonstrate that they are generating value in the present while not harming and if possible strengthening nature as well as people and societies.
What aspect of ESG should companies focus on?
One of the advantages of a green capital market in its infancy in the Caribbean is that external investor demands are still minimal. That means that companies can focus on the sustainability issues that are most material for them and not get distracted by or fall into the trap of ticking ESG boxes simply for the sake of complying with an externally imposed standard.
[caption id="attachment_938963" align="alignnone" width="1024"] Dominic Nicholas, engineering manager at Belec Power and Energy Solutions Ltd charges an electric car at the National Petroleum solar-powered service station in Preysal, Couva. - FILE PHOTO/LINCOLN HOLDER[/caption]
Good practice would be for companies to start by engaging their members, and other relevant stakeholders in reviewing and re-defining their purpose so that it is very clear what ultimate value they are generating and how they ensure that they are not going to be profiting from generating harm.
Boards, and governing bodies of organisations more generally, could use ISO 37000 on the governance of organisations to determine their value
