Read: Entrepreneurs and businesses - not politicians - will drive ESG forward
When COP26 brings the world’s leaders together in Glasgow later this year, expect to hear plenty of talk about proposed regulation, but little in the way of real, strong action.
The gap between rhetoric and result is best illustrated by the current approach to ESG, which risks flopping before it can even become the standard. Despite the best intentions of policymakers, regulators and business leaders, the environmental surveys that currently define ESG have so far produced few results that are felt in local communities.
In its current state, ESG is doing little but flood the financial services sector with greenwashing. The rise of ‘ethical funds’ has emboldened businesses that prefer token gestures to principled action on climate change or improving their local communities. In the current environment, branding, PR stunts and slogans take precedent over substantive action.
Luckily, there’s a better approach to sustainability – one that’s driven by businesses and entrepreneurs in touch with their local communities, rather than politicians and regulators sitting in Whitehall, the City of London and international conferences.
But it requires more attention from businesses to the S in ESG. This doesn’t mean neglecting the environment, but it does demand more substantial contributions to the social good, whether it’s through education, skills or other pathways to employment.
Our local communities currently don’t feel the benefits of the open consultations and voluntary environmental surveys that dominate ESG frameworks. To move towards initiatives where they do, CEOs must reflect on the social purpose of their organisations – ESG won’t require compulsion via regulation if businesses are clear about the contributions they make.
That’s why my company, True Potential, co-founded the Social Mobility Pledge, which has led to more than 600 businesses putting social mobility at the heart of their organisation. The pledge shows that businesses can self-regulate when they come together to build a clear social conscience.
It’s also an initiative that takes the burden off government and empowers the communities they are based in. If more businesses adopt this approach, we can beat back the tide of regulation and bureaucratic box ticking exercises that COP26 will inevitably embrace, while improving the resilience and sustainability of our local communities.
By Daniel Harrison, CEO of True Potential