Which business functions (should) speak the ESG language?4 min read
If it is easy to identify external stakeholders in the ESG field (investors, rating agencies, banks, but also clients/customers, suppliers), it is more complicated to cluster the business functions actively involved in ESG topics. Those who speak the ESG language or that – for various reasons – can be considered ESG experts.
I am referring not only to potential internal stakeholders but to departments that can express solid ESG skills. And that can speak the same language as a Chief Sustainability Officer or an ESG Director, so to speak.
Procurement is definitely one of them. Especially when it comes to the green supply chain and ESG ratings of suppliers, Procurement represents a solid interlocutor. For the “E” (supplier environmental certifications). For the “S” (human rights, including those of subcontractors). And also for the “G” (ratings, other supplier practices, or standards to follow, e.g. ISO 20400 Guidance on Sustainability Procurement).
Finance represents another function where ESG issues, if not already current, should be part of the future roadmap. This is even more true with reference to the part dedicated to investor relations. But even those who deal with financial statements know that non-financial aspects tend to be increasingly incorporated into a single document. Integrated reporting encompasses both financial and non-financial reporting.
When it comes to regulations, Compliance should always be on the spot. It ensures that the entire organization can obtain specific certifications related, for example, to the environment (ISO 14000 family). But also others. ISO 26000 (Guidance on Social Responsibility), ISO 20121 (Event Sustainability Management System), ISO 37120 (Sustainable Development for Community), to name a few.
Let’s remain in the area of the internal control system. If Compliance represents the second line of defense, Internal Audit instead represents the third level of control with the highest level of independence. Internal Audit should (and could) provide useful contributions in the ESG field. How? By identifying areas to include in the audit scope first of all. Or, with a real advisory role, bring ESG issues to the attention of Boards of Directors and Risk Committees.
Let’s move to the Operations area. Undoubtedly the products (whether it is an industrial company or a service company) should contemplate ESG issues. And it turns out to be fundamental the presence of specialists who can support the implementation of these aspects right from the conception, passing through design and construction. Sustainability by design is now more than a reality rather than a trend.
And speaking of planning, we cannot fail to mention the Strategic Planning department. Especially because it deals with key results and objectives. Including ESG in the goals to be achieved could simplify the understanding of priorities right from the start.
If a company exists it is to finalize sales and make profits. Therefore Sales, in all phases from pre to post-sales and customer service, must intercept any ESG needs from the customers. And translate them into market opportunities.
Human Resources (HR)
Human Resources plays a fundamental role in seeking and retaining talents, communicating company values to them also externally. It is no coincidence that the new generations (Gen Z) are increasingly attentive to employers who have ESG issues at heart and choose jobs with increasing attention (see Deloitte Global Millennial and GenZ Survey). Knowing what and how to communicate ESG commitment (social purpose for example) can be a fundamental strategic lever for having the best talent on the market.
Communicate externally, right. Marketing cannot be missing from this list. It shapes messages and contents, telling the ESG story externally. Whether it is a social presence in which you want to communicate the goals and successes in the ESG field or the preparation of ESG reports that must then be shared externally. Having excellent marketing professionals (e.g. copywriters) with ESG sensitivity helps to convey the messages in the appropriate way. On the other hand, Internal Communications must internally explain the same ESG story to make all employees aware of ESG issues. And how the organization intends to address them.
It should therefore not be surprising that all company departments – sooner or later – will have ESG experts. These experts in various capacities will interact with the company function primarily assigned to command the ESG strategy as a core activity and that deals with ESG issues on a daily basis. Regardless of how you want to name it: Sustainability, Corporate Social Responsibility (CSR), Environment Social and Governance (ESG).
Is this an anticipation of how sustainability will evolve in the future for organizations?
Companies should be ready to experience changes in the balance and internal accountabilities of their departments in tackling the ESG topics.