Sustainability has been the buzzword in science and scientists have been ceaselessly creating a prolific literature on the subject. It all has the milestone mark and seal of Garret James Hardin’s essay in Science Journal in 1968 titled the Tragedy of Commons. He went on with his majestic march of 27 books and no fewer than 350 articles with his much-quoted maxim “Freedom to breed is intolerable.” This academic blockbuster lingers like an unloved guest….
The articulation of a universally acknowledged definition of Sustainable Development by physician-politician Gro Harlem Brundtland in 1987 as “development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” was the second milestone. This stuck strikingly.
The formulation of Sustainable Development Goals (SDGs) in 2015 by the United Nations General Assembly is the third milestone. These goals are a collection of 17 interlinked and crosscutting objectives designed to serve as a “shared blueprint for peace and prosperity for people and the planet now and into the future.” Most targets are to be achieved by 2030 and are being monitored by the UN High-Level Political Forum for Sustainable Development. Actionable plans started unfolding.
With sustainability waves impacting every facet of human activity, the Corporate responsible leadership started responding to them in a spectrum ranging from the reactive to the proactive. The landscape of Environmental Social and Governance and the three letters ESG became common terms of the CEO conversational vocabulary. It is the widely used New Equation entering into company reports painstakingly prepared providing the health status of the company.
E
The E in ESG signifies Environment. Concern for compliance with environmental laws and regulations became high priority. Beyond that, other environmental criteria, such as the energy the company takes in, the effluents it discharges and the resources it consumes came into laser focus. Expanding the E dimension, carbon emissions and climate change issues engaged engineering attention. Every company uses energy and resources; every company affects, and is affected by, the environment. E is now deeply entrenched in all company affairs.
S
The S signifies Society. It is the people and neighbourhood factor. Social criteria, addresses the relationships the company has with the social space in which it operates. The community around a company and the totality of stakeholders are admitted into company affairs in a way different from the corporate mindset of business as usual. S includes labour relations, diversity and inclusion including the LGBTQ+ community. S is now a critical variable.
G
G signifies governance. A company being a legal creation is a legal entity and all its activities need to be necessarily lawful and ethical. Governance is the internal system of management practices, administrative controls, and operational procedures the company follows in order to govern itself. It covers decision making processes. Compliance with laws and meeting the needs of external stakeholders are integral to The make-up of the Board of directors and the take-away executive compensations, lobbying and political contributions come in the ambit of G.
Leadership
Responsible and responsive corporate leadership involves assuming and asserting proactive initiatives to addressing ESG issues and envisioning the long-term health of the company ensuring value to stakeholders. Leadership demands a holistic perspective to company operations weighing in grudging scales the merits and the demerits of them on environment, communities, customers and employees. Leaders will keep eternal vigil on environment reducing the use of natural resources, eliminating waste generation and downsizing greenhouse gases. The source of electric power will be reviewed and renewable energy will be selected. Supply chain management will look at the green colour of all suppliers and two and three tier suppliers till the very primary supplier.
Transformational leaders will be operating in the sensitive elevations of absolute transparency and unfiltered communication ringing in a new corporate ethical culture. An analysis of the leadership and stewardship styles of CEOs against the evolutionary background of ESG shows that in the formative phase of ESG the leaders could be characterized as Guardians, Pioneers, integrators and Pilots. Guardians zealously guarded their monogamous straight jacket of profitability. Pioneers were ahead of their times and had implemented most of the ESG demands. Integrators scurried into action and brought together their ESG sensitive functions under a common umbrella. Pilots went into driver mode giving power and direction to ESG destinations.
With mounting pressures of ESG demands and heightened public understanding of ESG benefits, sustainability is at the core of the company purpose. There is a marked change in the transformation characteristics in the second phase. An X-ray analysis coupled with an MRI scan of the contemporary CEO mindsets reveals the fine structure of ESG compliance by the Corporate sector. This can be stylized as the Scale of Sustainability Ambition of CEOs. We find Sceptics, Pragmatists, Strategists and Idealists based on their approach to and perspectives of ESG. CEOs of Private Equity Firms and Portfolio Companies are seeing the opportunities and challenges in value creation in the business environment guided by ESG.
Owing to the interdisciplinary, multidisciplinary and transdisciplinary character of ESG universities have entered the horizon to prepare future ESG leaders.
-Dr.A.P.Jayaraman
Chairman, NCSC, Mumbai
