The Sustainability Group: how businesses can implement more just, sustainable and profitable practices 

We were lucky recently to host a breakfast with The Sustainability Group and interested PE folk. Mike Penrose and Alex Smith brought a wealth of experience and clarity to our discussion around how businesses can implement more just, sustainable and profitable practices. 

Here are my take-aways on what investors need to know… 

What is ESG? 

At its heart, ESG is about understanding the impact a business has on the communities it works in, with and for. 

It is essential to understand what is driving ESG adoption 
  • Pressure from stakeholders including customers, employees and shareholders. 
  • ESG measures required for RFP, tenders and proposals. 
  • Valuation. 
  • Brand building and marketing. 
  • The company wants to improve, but does not know how. 
Businesses face several significant challenges when implementing ESG 
  • ESG is unstandardised, with only ~20% of standards and measures common across different frameworks. 
  • ESG needs to be looked at holistically as interrelationships between different elements of business are complex and individual initiatives often have positive and negative impacts. For example, working from home is partly positive (no commuting) and partly negative (domestic heating is less efficient than office). 
  • An excessive focus on any one of the elements can lead to issues and companies need to recognise that E and S elements of ESG are often in tension with each other. 
  • There are no easy fixes, for example carbon offsets are problematic and any accusations of greenwashing will be damaging.  
What an investor should look for 

Honesty: the company should be able to state their current performance, aspirational performance, and intent.   

Transparency: they should be regularly measuring progress against their intent / goals and be comfortable to publish their progress. 

Small steps: it takes many incremental steps to deliver ESG practices, beware the single big bang solution. 

Resilience: the company will face roadblocks, how have they identified and addressed them? Did they seek specialist advice? 

Mindset: ESG is seen as a value driver, not a cost to the bottom line. 

ESG success is achieved through lots of successful incremental changes, applied consistently and with the engagement of all stakeholders. It requires long-term commitment, honesty and transparency.  

If you are interested in finding out more about ESG or The Sustainability Group, please speak to myself or a member of the Armstrong team.

Tom Raymond, Chair

[email protected]
+44 7762 386 216

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