Connecting the dots
Different people have different opinions about ESG, but one thing is clear, ESG is a journey, not a?destination. We often hear from prospective clients who want to progress on their “ESG journey” saying: “…we do not want to be the leaders, but we do not want to follow either”, suggesting that there remains a perception that ESG represents a complex maze that requires considerable effort and extensive resources to navigate and integrate successfully across the business or portfolio.
An example of this complexity is a conversation six years’ ago with a private equity client as to whether it would be helpful to include ESG scope on a vendor due diligence assessment. My client’s concern was that, because ESG was not a focus during their investment period, such a?report may portray their business in a negative light. We therefore agreed to undertake the assessment and have another conversation before the report was written. During our assessment we developed data tracking impact of improved decisions following a life-cycle assessment (LCA) for three products. We quantified that, the business had reduced energy/carbon intensity, slashed freshwater use by half, and made material changes to its operations, including waste generation. When these data sets were normalised against unit of production, there was a demonstrable improvement in business sustainability performance across the investment period. All of this was achieved without this business setting any formal ESG KPIs, rather these steps were taken because they were sound commercial decisions. A key point made here is that some businesses have started their “ESG journey” without realising it. Needless to say, the ESG section of that diligence report was published, and it helped create value for our client. The assessment also supported the business to formally start and convey its “ESG journey” by connecting existing dots that in turn identified avenues for further improvement.