ESG for owner managed and family businesses

Published on
3 min read

As a family business, you will be well aware of the important role that businesses can play in supporting the communities they serve. But we’re hearing more and more about the wider importance of “ESG”, and the pressure on all organisations to be “better” citizens. In this note, Neil Pearson, head of ESG and social value at Mills & Reeve, explains what ESG is, and how it might impact on your family business.

What is ESG?

ESG stands for “Environmental, Social and Governance” - a broad set of issues which underpin the move away from a “profit-at-all-costs” model, to a model that considers the longer term impact of a business’s actions on all of its stakeholders (particularly people and planet).

Or, more bluntly, it’s shorthand for a way in which all businesses can be “better” citizens.

Why is it suddenly so important?

The drive for a better ESG performance is coming from a variety of stakeholders. Your customers may be looking increasingly to buy from more sustainable businesses. Your employees increasingly want to work for organisations that do more than just make money. Your investors and lenders already recognise that a business with a strong ESG track record is likely to be a better credit or investment risk in the longer term. And government and regulators are looking increasingly at using regulations to drive businesses towards making change.

How will it impact on my business?

This is not just something that only affects the largest businesses, or businesses in sectors that may be heavy energy consumers. If you are already facing these issues now or, if you’re not yet, likelihood is you will soon. So businesses that don’t start embedding ESG into the way they do things risk, in the longer term, losing customers, or people, or even funding. Which illustrates why ESG is about long term financial (not just environmental) sustainability.

What should I do about it?

Your ESG strategy has to be proportionate to the scale and size of your business, and meet the needs of your key stakeholders. But any action, however small, is a step in the right direction. If you want to get started on your ESG “journey”, here are a few ideas:

  • Figure out where you are now – maybe do some form of audit around ESG – so you know what you’re doing well, and where you could improve
  • Speak to your key customers – that way you can gauge what it is they are looking for in their suppliers
  • Engage with your staff – they are key to your business, they’ll be very keen to help, and they will have some great ideas. Staff engagement makes it much more likely that your ESG strategy will work
  • Look at your policies in areas such as environment, diversity and inclusion, anti-corruption or modern slavery, and ask yourselves what more you can do to improve them
  • Set a (realistic and credible) target for carbon net zero
  • Start to report on what you’re doing – whether it’s an annual report, a page on your website, or a just a social media feed, your people and your customers will want to know how you’re developing your ESG strategy, and to share in your successes
  • Choose the low hanging fruit and start to make improvements now - don’t wait for a fully developed “perfect” strategy

And finally…

ESG is not a fad – this is an irreversible shift in the way we think about, and do, business.

But if you get this right, your business is more likely to recruit and retain the best people, more likely to keep and grow its customer base, more likely to be able to attract funding to grow, and more likely to make a difference (in the right way).  

 

 

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