25 Apr 2024

ESG – Smoke and mirrors?

By Ann Sumerhayes, CEO of Inside Job Productions and Lucy Findlay MBE

Environmental, Social, and Governance (ESG) principles are increasingly becoming cornerstones of brand identities. It’s all part of a shift in consumer and client expectations towards sustainability and ethical business practices. Simply put, we care more about doing the right thing. However, the integration of ESG into brand strategies often raises questions about the authenticity of these efforts: are brands genuinely committed to making a positive impact, or is ESG sometimes nothing more than marketing, especially when you see exploitative behaviours caused the drive to maximise shareholder value that counter these strategies in the same business?. 

It can be tough to discern between genuine commitment and superficial greenwashing. Brands that embed ESG principles authentically into their operations, and more importantly governance, demonstrate a deep understanding of their environmental and social footprints, and actively seek to mitigate negative impacts while enhancing positive outcomes. They do well out of it – consumers and clients respect it, and it’s good for resilience. If it is not embedded in business governance, though, ESG practices can be at risk if the going gets tough (for example in the current cost of living crisis.

Brands that leverage ESG for branding alone risk undermining their credibility and trust with consumers as well as exposing inauthenticity. In an era where information is readily accessible, people are more informed and sceptical of greenwashing tactics. It’s crucial to not only say you’re doing the right thing – organisations must ensure that their ESG efforts are substantive, transparent, evidenced and reflective of a genuine commitment to making a difference.

As social enterprises, we’re proud of the genuine impact that businesses like ours can achieve. By integrating social missions into their core operations and governance, social enterprises contribute significantly and uniquely to the economy and societal wellbeing. Take the Buy Social Corporate Challenge, led by Social Enterprise UK (SEUK). This initiative has successfully galvanised corporate partners across sectors to commit to spending £1 billion with social enterprises by 2025, with £350 million already achieved. But this doesn’t even touch the sides.   there’s  long way to go, as corporates are, by their nature, shareholder driven.  

Social procurement from social enterprises should not be viewed as mere tokens or checkboxes on supplier lists. They are vital components of the economy, offering innovative solutions to social and environmental challenges as well as being driven primarily to make a difference as their raison d’etre. . 

We need to introduce the Better Business Act and wider corporate reform.  More than ever, we need an upscale of social enterprises and mission led businesses to create true change as well as incentives such as tax breaks and the right type of finance to support this.  We are lobbying for this through the Social Economy Alliance’s manifesto ,Let’s fix our future.

It’s crucial to acknowledge the economic significance of social enterprises, turning over around £78 billion and re-investing £1 billion in profit into their vital missions. 

For corporates to genuinely improve their supply chain to  support social enterprises, they must go beyond mere lip service. This entails facilitating SEs’ access to supplier lists, educating second tier suppliers, simplifying procurement processes, and considering alternative payment structures that accommodate the unique challenges and scales of these smaller organisations. Corporates should recognize that social enterprises often offer services rather than products, meaning we need a different approach to integration into corporate supply chains. By acknowledging and adapting to these differences, corporates can more effectively support social enterprises, making it easier for them to make a difference, and helping to create a more inclusive and sustainable economy.

Raising awareness about social missions and ESG principles is essential, yet it must be coupled with tangible actions. We’re not saying you shouldn’t make a noise. Making noise about ESG commitments can effectively draw attention to critical issues, but without substantive actions to back up these claims, such efforts can quickly be dismissed as empty gestures – which can undermine the whole cause. Brands and corporations must therefore not only vocalise their commitments but also demonstrate them through concrete actions, measurable outcomes and governance changes. Don’t just say you are committed to Net Zero – make sure your operations are fully environmentally friendly. Don’t have an EDI policy, if you don’t have a single Black female on your board. 

The importance of true ESG to brands goes well beyond branding—it reflects a fundamental shift in emphasis towards sustainable and ethical business practices and drivers. For ESG efforts to be perceived as genuine, they must be deeply ingrained in a brand’s operations, supported by transparent and measurable actions and outcomes on their balance sheet. 

The role of social enterprises and initiatives like the Buy Social Corporate Challenge underscore that there is  potential for businesses to make a significant positive impact through social procurement. However, recognising and supporting social enterprises as part of an ESG approach requires more than just acknowledgment; it demands concrete actions and systemic changes to procurement processes and legal reform by government of corporate motivations. Ultimately, the transition towards a more sustainable and equitable economy demands a collective commitment to genuine impact, and one that goes beyond the appeal of branding facades into the very DNA of what makes a good business fit to help fix the future!