At the centre of every Environmental, Social and Governance (ESG) program is change management. Businesses now have the opportunity to design strategic agility into their operating model, develop new products, expand into new markets, forge new alliances and transform the performance of the organisation itself. To be successful in this new paradigm, it is necessary to not only manage change but also improve the organisational structure, the way in which people are developed and the manner in which the culture is curated.
IT systems can play a vital role in the promotion of ESG strategies. At a base level, IT enables the transparency of data relating to a company’s ESG indicators. This data can be made available to stakeholders on an online platform where it can be continuously updated. This ESG data often includes metrics on environmental impacts and commitments and workplace diversity and inclusion, among others. IT systems can provide an optimal solution for emissions reductions though the use of cloud computing technology. Other sustainable IT solutions, such as energy efficient lighting and heating, vehicle route optimisation, and digital twin technology all represent opportunities for sustainable enhancement in the workplace.
Many companies that are paving the way forth on the sustainability agenda have been driven by a number of factors, such as competitor activity, operational efficiencies, and the introduction of new regulations such as Ireland’s Climate Action Plan 2021. Effective ESG change management recognises that the ownership of sustainability related matters is not a top-down approach, but rather the responsibility of all employees across a business. In order to achieve an impactful sustainability strategy, it is essential to develop a sustainable workforce that shares the same vision about their company’s impact on the environment and climate change.
Divestment refers to the reduction of investment of assets which can support negative impacts on the wider ESG agenda, such as fossil fuels, unethical stocks, and unsustainable political objectives. Divestment can create significant downward pressure on the valuation of such assets, creating a stigmatised image and diverting company investment in alternative sectors, such as renewable energies. Moreover, divestiture in the context of ESG can play a crucial role in modelling a company’s business portfolio and ensuring long-term profitability.
The ESG agenda is continuously impacting how M&A is conducted. Sustainability is increasingly becoming an imperative element of deals and is taking a more prominent place in the boardroom on such acquisitions. Moreover, higher levels of technology and date on EDG factors are enabling dealmakers to easily access metrics that assign values to ESG factors. Examples of these include GHG emissions, climate-related insurance costs, social indicators (such as employee retention and productivity), and demand for products/services with a positive social/environmental characteristics.