Four Ways to Power ESG Strategy Through Culture
Learn how you can power an authentic ESG strategy and culture from the inside out.
Companies around the world are acting on the new reality that ESG – environmental, social and governance – has become the next horizon for business leadership. From going ‘all in’ on a particular social mission, to systematically integrating sustainability and social responsibility into their operations, organizations are taking action.
While ESG was once about compliance and risk mitigation, we believe it is now a requirement for unlocking uncommon growth. And the companies having the greatest success with their ESG strategies are the ones who have created authentic changes in the culture of their full stakeholder ecosystem.
At Prophet, we view all organizations as a macrocosm of the individual. Each one has a collective DNA, Mind, Body and Soul. To drive meaningful culture change, leaders need to think about every aspect of this system.
Prophet’s Human-Centered Transformation Model serves as a framework for effectively driving ESG thinking (and doing) into a company’s organization and culture. Let’s take a look at how these four elements can be used to power an authentic ESG strategy and culture from the inside out.
1. Code ESG Into Your DNA
Like the DNA of an individual, the DNA of an organization comes to life across every aspect of the business, helping to direct and blueprint any transformation. For some organizations that have been founded with purposeful, inclusive and regenerative business models, that DNA has been ‘coded’ with ESG from the start. For others, it may require some ‘re-programming’:
Set a powerful, actionable and clearly-defined ESG strategy—and build it pervasively into your company strategy
The most mature sustainable and socially responsible businesses are incorporating ESG concepts into the core of their strategy. Some examples include equitable and inclusive design of products or circular and regenerative business models. A materiality assessment can help determine which areas of ESG are most relevant to your organization and its external stakeholders—not only from a risk mitigation perspective but shared value creation. How might ESG help fuel transformative and sustainable growth for your business while doing good at the same time?
Embed ESG into other key organizational frameworks such as purpose, values and employee value proposition
The more it can be reinforced as a ‘red thread’ woven throughout the company, the better. How might you visibly showcase your commitment to ESG to help attract, retain and engage your talent?
Enlist leaders in championing ESG from the top
Vocal support from across the leadership team is critical to signal ESG as a priority. How can you ensure leadership is not only bought in but actively role modeling sustainable and inclusive behaviors, multi-stakeholder collaboration, etc.?
Some companies such as Allbirds have always had strong ESG DNA. It established itself as a benefit corporation, which shows a high degree of commitment to a strong ESG-centric operating model. Being a B Corp means a company is legally accountable to all its stakeholders – workers, communities, customers, suppliers and the environment – not just shareholders. And this status ensures that the organization will practice stakeholder governance even after capital raises and leadership changes.
The ESG orientation that’s genetically programmed into its organization ensures Allbirds takes flight in a sustainable way with commitments to regenerative agriculture, renewable materials, carbon neutrality and more.
2. Set Your MIND to ESG
Once an organization sets its ESG strategy, it needs to develop the skills to enable the change. A company’s collective Mind is formed from the talent and skills of its people, so you need to train up (and hire up) in a way that supports the organization’s approach to ESG—especially if it requires more of a departure from ‘business as usual:’
Identify the specific skills, capabilities and roles needed to support your ESG priorities
It is important to consider not only technical skills (e.g., climate scientists) but also critical ESG mindsets such as collaborative orientation and coalition-building. How can you upskill and equip your talent to activate your ESG strategy? Where might you need to hire external expertise?
Align talent systems in service of the transformation
How can you ensure your talent systems are designed to hire, measure, and manage employees toward activation of the ESG strategy?
Unilever, for example, was a pioneer in bringing the thinking behind the UN’s Sustainable Development Goals into the multi-national FMCG space. And the company helped build its ‘mental architecture’ to deliver ESG by internally framing the ambition through concepts of more growth, less risk, lower costs, and more trust.
As part of its internal education program, ‘bringing sustainability to life’ is a key business skill on the curriculum that needs to be mastered. Additionally, brand managers are taught how to think about the best way to get behind the corporate ESG agenda while delivering the distinctive values of their brand – so Ben & Jerry’s can be playful and provocative, while Knorr goes to market with more of an activist eater tonality.
3. Build Your BODY for ESG
In addition to upskilling talent for ESG priorities, it is essential to ‘hardwire’ these priorities into the Body of the organization – in a way that creates transparency and accountability. This includes evolutions in the operating model, org structure, processes and tools that are required to actually direct culture change and get the full power of the organization behind a unified approach to achieving specific ESG initiatives:
Determine the optimal model for ESG governance and goal-setting
Some organizations deploy a ‘teams of teams’ in a more holacratic fashion to tackle ESG priorities, while others take a more top-down approach, designating a chief sustainability officer (or similar title) to drive the ambition. In either case, a comprehensive measurement system to share, track and report progress toward goals is key. Which model best fits your organization?
Align incentives to drive cross-functional (and cross-stakeholder) work
Often, ESG work requires not only cooperation but collaboration between business units, regions, suppliers and even competitors. How might you empower greater collaboration across stakeholders (both inside and outside the company) to ensure the success of ESG initiatives?
Build inclusivity into your operating model and organization design
Given that DEI (diversity, equity, and inclusion) is often a top priority in the “S” of ESG, it is critical that your company is hardwired to practice what it likely preaches. How might you intentionally design (or redesign) aspects of your operating model to elevate underrepresented voices and bring more diverse perspectives to the table?
Johnson & Johnson is a healthy example of a strong ESG coordination model, with clear top-down direction, and a well-defined operating model for execution. It has clearly prioritized ESG topic areas, revisited annually, that provide a unifying framework for ESG initiatives and teams across the company.
J&J breaks down its “health for humanity” strategy into key strategic pillars, with metrics and initiatives mapped to each (and executive compensation linked to goal achievement). As for governance, there are focus area leadership roles (e.g., chief sustainability officer, chief DEI officer, etc.), but also a dedicated PMO for coordination across the entire enterprise to ensure a high degree of collaboration.
4. Inspire socially responsible SOULs
Finally, winning over the Soul for ESG is all about motivating transformation through shifts in emotions, mindsets, beliefs and behaviors. When it comes to ESG especially, there is an opportunity to truly inspire current and potential employees around an organization’s focus areas, from the environment to inclusivity:
Consider how you’re engaging your employees in ESG
While many organizations focus heavily on ESG areas tied most directly to their business model, it is also critical to assess areas that current and prospective talent care deeply about—and would expect their employer to take action against. How might you identify causes that are most inspiring and intrinsically motivating for your talent base?
Create rituals, symbols and awards that authentically showcase commitment to ESG
How might you motivate employee behaviors that deliver on your ESG strategy? (e.g., ethics, DEI, sustainability)
Rapidly share success stories and celebrate progress along the way (not just outcomes)
Often, ESG commitments such as Net Zero may take multiple years to achieve. How can you inspire belief in your ESG journey along the way?
Anglo American is creating kindred ESG souls within its organization through a collection of initiatives that inspire employees to feel passion for ‘re-imagining mining to improve people’s lives. Anglo American thoughtfully curates an ongoing feed of well-told verbal and visual success stories about what the organization is doing both within the company itself and within the communities where it operates. Additionally, the organization creates aspiration and symbology for ESG through an annual awards ceremony where employees are recognized for their specific ESG achievements in business and society.
All elements of the Human-Centered Transformation Model™ play critical roles in catalyzing a winning ESG culture and sustaining the change. Prophet can help companies close the gap between ambition and action. And we are eager to work with clients who share our view that ESG is essential to unlock uncommon growth for businesses and create solutions that move society forward.