What does ESG mean, and why is it important?
Written by CREF Chief Digital & Strategy Officer, Ryan Hayden
July 19th – 21st, 2022
Chicago, IL – CREF recently sponsored the Advancing Construction Decarbonization Conference in Chicago July 19th – 21st. The conference tagline was, “Discover the Latest Carbon Reduction Strategies to Drive Your ESG Agenda & Gain Your Competitive Edge.”
That is quite a mouthful. The tagline is indicative of the peak hype-cycle phase we are in where nearly everyone agrees we should prioritize the topic, but it is so broad that very few lead with details. We’re all figuring out what this means in real-time. I personally learned a lot and want to share some of the highlights as “green tech”, “sustainability”, “climate change” and “ESG- related” topics are getting massive attention in the market.
The biggest takeaway I had was the realization that I have seen a trend like this before – and it brought up many of the same thoughts and emotions I remember from just a few years ago. I recall when “data & analytics” and “AI, automation, and machine learning” were all the hype, and every company in the world was forced to figure out their data and analytics strategy overnight. “Data is the new oil” was the main quip in the middle of every presentation. The “digital upskilling” of the labor force and the 4th industrial revolution were to accelerate innovation in every corner of the economy. Consultants were hired to figure out new business models; conferences updated their agendas to center on the latest dashboards, bots, and algorithms; new job descriptions were drafted; universities updated their curriculums and promised to graduate the best new minds in the space; and the war for talent was expensive for most businesses. All the while, everyone laughed at the same joke: “If you get 10 different executives in a room and ask them to define ‘data & analytics,’ you’ll get 20 different answers.”
All the same feels true for “ESG” in 2022 – we agree it is an important topic, but no two people have the same ideas about what it means to them, their employees, their communities, or their shareholders; all while we wait on federal and state regulators to draft new policies we must abide by. Therefore I wondered, “Where do we start?” While I don’t have the answer, my sense is we start by baselining “What is ESG?” and “Why is it important to me?” Here are my 5 key takeaways:
- “Prime the market” – Start with empowering people to understand the “Why is ESG important? And why now?” This conversation cannot be confined to board rooms and the C-suite. Everyone sees and hears the hype, so explain why ESG is important and the ways it may impact operations, client interaction, career paths, investments, and on-going research and learning. If we are expecting people to learn new concepts, and subsequently upskill themselves with new knowledge and capabilities, they deserve this information now.
- “The future is now” – The pace of innovation is beyond comprehension. There are so many cool technological advances being made that it’s easy to get lost or overwhelmed. Learn, listen, participate, advocate, and share. There are many new resources, including user groups and forums, conferences, webinars, podcasts, platforms, etc. on both broad and granular topics helping anyone learn more at their own pace. Don’t be scared, dive in!
- “The status quo is more expensive than change” – The upfront costs to learn and adopt ways to incorporate ESG are considerable. From new architectural plans and design, procuring and sourcing raw materials, interacting with new vendors, monitoring real-time data streams, reporting compliance of new policies to regulators, contracting for optimized energy, and more – all with layers of complexity and confusion. But this horse has already left the barn – and within the context of a few years, not adapting to this trend will only be more expensive in the form of your brand strength, public sentiment, investor interest, and consumer confidence.
- “The tech is ready, the mindset is not” – For every new technology that is tested and proven to do something in a better, cheaper, faster way (for instance, the team at Carbon Cure has found a way to sequester carbon in concrete while maintaining its strength). There are a million people stuck in their way, ready to tell you a thousand reasons why they shouldn’t change. This should sound familiar to all of us who have tried to teach old dogs new tricks. Technology won’t be what holds us back at accelerating adoption and realizing considerable gains – it is an antiquated way of thinking that will. I try and keep it simple – our world ecosystems are in bad shape, they need our help, and we all can play a part. Now get going!
- “Regulators will always be slow – don’t wait!” – The SEC’s recent announcement considering rules to require public disclosure of greenhouse gas emissions seems to have gotten everyone’s attention. While regulators will eventually draft new policies, don’t wait as you consider ways to adapt to changes in your own organization. As one speaker put it, “if it’s the right thing, just do it.”
Ok so this all feels familiar in context, but as I dug deeper, I realized what the biggest difference in the two trends are – their motives. Helping businesses learn more about ways to compete and succeed by better leveraging their data is a smart thing to do. But if businesses fail, life goes on. With ESG, though, the goal is to help businesses improve their energy consumption, sustain their operations, and be better stewards of the communities they operate in. These goals are things everyone can benefit from well beyond the four walls of a single company.
Failure on ESG seems far more doom and gloom – as we all have personal anecdotes of friends and family members experiencing the reality of what a warming climate can do to homes, businesses, and livelihoods. It was encouraging to see that we are well past considering whether helping cure our planet is a good idea or the right thing – at least we were in the privacy of a hotel conference room.