The importance of ESG

John Gourd, CEO at Cambridge Network recently to chaired a discussion about the importance of Environmental, Social and Corporate Governance within the business community

John was joined by Charlie O’Riordan, Investment Manager, Foresight Group, Jo Slota-Newson, Principal, IQ Capital Partners and Giorgia Longobardi, Founder and CEO, Cambridge GaN Devices.

Whilst the term was originally coined in 2005 (in a landmark study entitled ‘Who cares Wins’), its prominence has risen over the past few years, and it has become a critical influence in the success of businesses across all sectors.

They were able to hear about its importance from both sides of the deal room – from the investor and the entrepreneur.

John took away a number of reflections:

• A company shouldn’t simply seek ESG ‘compliance’ for fear that this turns it into a tick-box exercise. Rather, as Giorgia expressed with evident passion, a company’s ESG strategy should be part of its DNA, led (and exemplified) from the top, but owned (and contributed to) by everyone within the organisation.

• They were reminded that ESG is fluid and companies need to remain, as much as is possible, ahead of the curve – we’ve all recently experienced how geopolitical influences can have an immediate, and enormous, impact on an organisation’s markets and supply chains.

• In a similar vein to green-washing, they heard a recent example of the gulf between a well-known company’s stated ESG ambitions and its recent practice – just talking about it and not doing it (or even doing the opposite) can throw up some very negative PR.

• ESG strategy is synonymous with the qualities that we would expect from a successful, sustainable organisation – including, but not limited to; a care for the environment in which we live, a desire for all employees to have a meaningful and rewarding career, an appreciation of the importance of diversity, democracy and fairness. Also, that these qualities should extend up and down the supply chain.

• Funders looking to invest in organisations will want to understand how well a company embodies ESG within its business – experienced investors will see beyond the quantitative measurement of ESG metrics and will appreciate the, often, more nuanced qualitative aspects.

• Similarly, an entrepreneur with a passion for ESG will want to work with investors who share their passion and who appreciate that, at least in the short-term, it’s not always the lowest-cost route.

• For both the entrepreneur and the investor, the positive impact that ESG can have on the longer-term financial performance of a company which can yield tangible financial benefits when exiting the business.

• Finally, they discussed the vital impact that a positive approach to ESG can have in the public sector – both in the way that an organisation operates, both for and within its community, but also the way it interacts and enables excellence in the businesses within its area.