We’ve talked frequently about the competitive edge that responsible sourcing can be with a growing number of clients focused on sustainability in our industry. Turns out your banker AND your clients may have a similar interest in just how responsibly.
Banks are taking a closer look at environmental and social risks when considering an extension of credit. According to the Wall Street Journal, sixty-seven percent of banks screen their loan portfolios for environmental, social and governance risks, based on a survey published by Fitch Ratings. The risks being screened, known as ESG risks (Environmental, Social, and Governance), help lenders and investors find companies with values that match their own. For a company to be considered “transparent,” disclosures need to include information on a company's energy use, waste management, pollution control, natural resource conservation, and/or treatment of animals. Digging deeper, it also might include how climate change impacts risk, working and safety conditions, respect for human rights, anti-bribery and corruption practices, and compliance with local laws and regulations.
If you’re sourcing from a sophisticated supplier, you may have already heard them tout their CSR position. Fact is, ESG data can be more illuminating than your supplier outlining their corporate social responsibility initiatives. CSR represents a company’s efforts to have a positive impact on its employees, consumers, the environment and the wider community. It’s a form of self-regulation that most large companies report on annually. A couple of good examples of this are the annual CSR report for Patagonia, and the one for Nike, entitled “Purpose Moves Us.”
ESG, on the other hand, is an effort to measure activities much more precisely. So, rather than producing impressive sounding rhetoric, ESG demands metrics. What does that look like? Environmental programs must demonstrate kilowatts of energy saved, tons of carbon emissions avoided, or gallons of water preserved—and doesn’t stop there. Good ESG data even includes improvement metrics year over year.
CSR, ESG ….. I know, you may be thinking that I am well into the weeds discussing this alphabet soup of an issue. But this isn’t a discussion of the right way or the wrong way to do business. I’ve had many discussions on the topic of ESG integration with executives who dismiss it as a premature concept for the promotional products industry, referring to it as no more than “sustainability semantics.” I argue that companies doing it right define (and practice) ESG integration in terms of embedding. When you practice ESG integration in this way, every day, and in every business action, environmental, social, and governance (ESG) considerations are woven into business strategy, operations, and product and service offerings. It’s just the way these forward-thinking companies do business—not right or wrong.
Finally, another reason to think strongly about sourcing from companies that share ESG data, or a reason to start sharing your own—your employees. Recruiting and retaining younger employees is changing, you likely already know that. But in a recent survey published in Fast Company, nearly half of all respondents and three-quarters of Millennial workers said they’d take a pay cut to work for a company that is socially responsible, and more than ten percent of workers said they’d be willing to go as far as to take a $5,000-$10,000 pay cut.
Millennials, who will make up three-quarters of the workforce in six years, are most likely to already have done this—in fact, one could be in your shop right now. Nearly 40 percent of Millennial workers said that they’ve chosen a job in the past because the company performed better on the issue of sustainability than others in the market. Less than a quarter of GenX survey respondents said the same, and only 17 percent of Baby Boomers. The times, as you’ve heard, are changing. Are you ready to move toward publicizing your work with the metrics in an ESG report? Your clients, your vendors, and your employees are waiting for them.
Jeff Jacobs has been an expert in building brands and brand stewardship for 40 years, working in commercial television, Hollywood film and home video, publishing, and promotional brand merchandise. He’s a staunch advocate of consumer product safety and has a deep passion and belief regarding the issues surrounding compliance and corporate social responsibility. He retired as executive director of Quality Certification Alliance, the only non-profit dedicated to helping suppliers provide safe and compliant promotional products. Before that, he was director of brand merchandise for Michelin. Connect with Jeff on Twitter, LinkedIn, Instagram, or his personal blog on Tumblr or jeffreypjacobs.com. Reach out to him on email at jacobs.jeffreyp@gmail.com.