Change by Design : The crucial link between Design Thinking and ESG Strategies

2024. Prof Lorenzo Sciadini - ESE - & Prof Pere Juarez - University of Barcelona -

Design Thinking is a powerful approach within an Environmental, Social, and Governance (ESG) framework, helping to address complex challenges in innovative and human-centered ways.

?About Design Thinking

“Design Thinking is a discipline that uses the designer's sensibility and methods to match people's needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity”?-?

Tim Brown, CEO IDEO.

"Design Thinking is a human centered approach to design innovative solutions for human problems. It is now maturing into a humanity-centered approach adding Planet to the People and Product dimensions, to drive ESG-aligned solutions for a sustainable future."

Sciadini and Juarez -2023 -

Design Thinking Principles that start the engine for a Human Centered Design Change:

Principles are fundamental ideas or general rules that are true regardless of the circumstances; they are the propositions that serve as the foundation for design thinking.

• Principle 1: Explore in an holistic way: Human centered design - empathising with end-users ?Embrace ambiguity and diversity as a reality
• Principle 2: Openness to radical collaboration – learning from diverse perspectives
• Principle 3: Co-create impactful solutions – promoting emotional engagement
• Principle 4: Implement and iteratively improvise – proactively work on perceived shortcomings

ESG Framework:? Environmental, Social and Governance

Our world faces several global challenges: climate change, transitioning from a linear economy to a circular one, increasing inequality, and balancing economic needs with societal needs. Investors, regulators, as well as consumers and employees, are now increasingly demanding that companies should not only be good stewards of capital but also of natural and social capital and have the necessary governance framework, the result of which is ESG.

• The 'E' in ESG stands for environmental factors and includes a company's impact on the environment, such as its carbon emissions, waste management practices, water usage, and other environmental risks. Investors are increasingly interested in a company's environmental performance, as climate change is becoming a pressing concern.
• The 'S' in ESG stands for social factors and includes a company's impact on its stakeholders, such as employees, customers, suppliers, and the wider community. Social factors may include issues such as labor practices, human rights, product safety, customer privacy, diversity, and inclusion.
• The 'G' in ESG stands for governance factors and includes a company's management and oversight practices, such as board composition, executive compensation, shareholder rights, and anti-corruption measures. Governance factors are important because they help ensure that companies are accountable to their stakeholders for operating in an ethical and transparent manner.

The Double Crown Engine: Design Thinking and ESG in action

During the last two years, we have had the opportunity to develop and test the way in which strategic intervention processes in ESG with Design Thinking in work meetings, workshops, and projects have led us to validate and reinforce our conviction in what it is as an important methodological resource for organizations that are committed to this change.

The double crown model:

Design Thinking is crucial for companies seeking to define tangible ESG problems and develop effective solutions.

By incorporating a human-centered perspective, fostering creativity, embracing an iterative process, encouraging collaboration, and validating solutions, design thinking enables companies to address ESG challenges in a more holistic, innovative, and sustainable manner, and well you narrow them as a reference for you corporate action plan with steps forward on implementing the solution you wish to address or respond to.

Here are few key arguments for applying Design Thinking within an ESG framework:

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Systemic Understanding

ESG issues are complex and often interconnected. Design thinking encourages a holistic understanding of the problem by considering the larger system in which it exists. It helps companies identify the underlying causes, stakeholders, and relationships involved, allowing for a more comprehensive approach to problem-solving. By examining the interdependencies and impacts of an ESG problem, design thinking enables companies to address it more effectively and avoid unintended consequences.

Human-Centered Problem Solving

?Design Thinking puts a strong emphasis on understanding the needs, experiences, and perspectives of stakeholders. In an ESG context, this means considering the diverse interests and concerns of various stakeholders, including employees, communities, customers, and investors. By empathizing with these stakeholders, organizations can better identify environmental, social, and governance issues that matter most to them and develop solutions that genuinely address their needs and concerns. For example, a company seeking to improve its environmental sustainability might use Design Thinking to engage with employees to understand their ideas for reducing waste or with customers to identify preferences for eco-friendly products.

?Innovative Solutions for Sustainable Impact

?Design Thinking encourages creative problem-solving and innovation by challenging assumptions and exploring new possibilities. Within an ESG framework, this approach can lead to the development of innovative solutions that drive positive environmental, social, and governance outcomes. For instance, Design Thinking can be used to reimagine supply chains to reduce carbon emissions, create inclusive workplace policies that promote diversity and equality, or design governance structures that prioritize transparency and accountability. By applying Design Thinking principles, organizations can generate fresh ideas and approaches to address complex ESG challenges, ultimately driving sustainable impact.

?Collaborative and Iterative Approach

?Design Thinking promotes a collaborative and iterative approach to problem-solving, involving multidisciplinary teams working together to generate, prototype, and test ideas. This collaborative process is well-suited for addressing the interconnected nature of ESG issues, which often require input from diverse stakeholders and ongoing iteration to achieve meaningful progress. By bringing together experts from various fields, including sustainability, social responsibility, and governance, organizations can leverage the collective intelligence of their teams to develop more robust and effective ESG strategies. Moreover, the iterative nature of Design Thinking allows organizations to continuously refine their approaches based on feedback and new insights, enabling them to adapt to evolving ESG challenges and opportunities.

Stakeholder Validation

Design thinking encourages user validation and feedback to refine solutions. In the case of ESG challenges, this validation is essential to ensure that the proposed solution is effective, practical, and aligns with the desired outcomes. By involving stakeholders in the testing and implementation phases, companies can gather valuable insights, identify potential barriers or unintended consequences, and make necessary adjustments to enhance the solution's impact.

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