While in the last decades an organization’s success was measured mainly in terms of turnover, profitability, market share and customer satisfaction, now and in the future they will also be held accountable for the impact they make on people, the environment and society. ESG (Environmental, Social, Governance) is now central to the balanced scorecard. To prepare current and future business and political leaders for this, Nyenrode Business University and KPMG are jointly launching the ESG Innovation Institute.
In view of durability for the future, organizations in a variety of sectors are investing in making their operations more sustainable. There is also an increased focus on equal opportunities for all, and ethical business practices are an absolute requirement for a successful company. Investing in ESG is not only a legal requirement, it is also socially substantiated. Customers, investors and (potential) employees are important evaluators of ESG policy. Companies thereby play a crucial role in the transition of our society.
This transition begins with new leadership. Whereas executives have so far been trained primarily for a world in which financial returns are paramount, current and future leaders must be prepared more to successfully navigate their organizations in a sustainable economy. For now, the transformation to a sustainable business operation is mostly a journey of discovery. How do you lead an organization on the road to the unknown, where the dot on the horizon is somewhat unclear and where managers now frequently cross pain barriers? This requires a totally new approach to education, where the leaders of the future will have to develop much broader skills and knowledge in relation to people, the environment and society.
The importance of further investment in ESG values is already widely accepted, but there are still lots that needs to change in all areas. This also applies to KPMG itself, as CEO Stephanie Hottenhuis acknowledges: "As KPMG, we attach great importance to honest and good business practices in which we put our people first and take the world around us into account. But we too still have to take the necessary steps in this area and do not claim to hold the truth. With this initiative, we mainly want to take the first step and bring the necessary expertise together. So that we can learn together and develop a common ESG language. I also feel personally responsible to work for equal rights and am critical of my own footprint. Not only as a director and investor, but also as a mother and consumer."
Science and practice
Prof. Koen Becking, President and Chairman of the Nyenrode Business University Board of Trustees, is pleased with KPMG's support: "We have been working with KPMG for some time. It is great that we can now combine our experience and expertise on the pillars of social and corporate governance as well. Our experienced professors have extensive knowledge of the various ESG themes; we supplement this knowledge with experiences and best practices from the boardroom. The cohort includes directors who gain incentives, ideas, knowledge and experiences on a daily basis in their sector. We want the ESG Innovation Institute to provide a platform for education, discussion and inspiration. The program therefore includes, in addition to educational offerings, an academic ESG chair, from which research, scientific publications, opinion and debate will emerge. Much research is already being done on ESG, but too little with a direct link to business. We research together with and test the business community. That practical applicability is crucial to us."
"It is also very valuable for us that the education available is supported by an academic chair," adds Hottenhuis. "We are really still at the floppy disk stage in terms of ESG. We are all facing an enormous challenge, in which we must not be afraid to be vulnerable. The transition we are currently going through as organizations and society is so great that you have to be willing to share knowledge with each other. There is still a lot to discuss and discover regarding issues such as circularity and biodiversity, to name but a few examples. We want to discover and develop together with business and governments."
We are really still at the floppy disk stage in terms of ESG.
Hottenhuis quite deliberately mentions political decision makers as an important interlocutor in the ESG debate. Both Hottenhuis and Becking emphasize that the necessary steps still need to be taken in relation to legislation and regulations to further facilitate companies in their ESG initiatives. Hottenhuis: "We really need each other as government and business. We need to develop the ground rules and uniform language for ESG together. Regulations in this area should be developed more at the European level, with leadership at the national level. In this context, attention must be paid to the distribution issue. We have to take the pain now for the future, but the impact on one sector or organization is greater than on another. How are we going to distribute this fairly? And do we all have to move at the same pace or can we differentiate by sector?" In addition to the collaboration between business and government, the program will pay particular attention to the leaders of the future; younger generations who, from an intrinsic motivation, already have a keen eye for aspects such as sustainability, diversity & inclusiveness, and corporate social responsibility. They will be actively involved in the program to prompt reflection, discussion, and inspiration.
ESG in the capillaries of business operations
Hottenhuis: "We want to offer managers but also members of the Supervisory Board a platform for learning and discussion. Talk to peers in a confidential environment about the challenges and dilemmas they face in the field of ESG. What questions should they start asking internally? How will you monitor and measure? How are you going to manage these change processes? Who is going to be in charge of ESG? How do you create a strategic plan? But also, what does the legislation currently look like and how is it changing? And what do we need to learn in terms of risk management? ESG should become an integral part of every organization's business model, but there is still a lot to learn and discover. That is something we are happy to work on together."
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Esther van Zeggeren
Director Brand, Reputation & Marketing
KPMG in the Netherlands