Value Through ESG

Environmental, social and governance (ESG) issues are changing the relationships between customers and suppliers. Over the last two decades we’ve seen offer exceed demand in most markets and customers become less interested in product and more interested in service. Today the customer experience (CX) has developed even further with customers (and companies in general) wanting to be seen as being caring and human-like and not institutionalised and impersonal. Trust has become a major issue.

Companies want their customers to have trust in them. To achieve this they, in turn, need to be able to have trust in their suppliers and the supply chain. So how do companies earn trust? Trust is earned through actions and behaviour. Companies need to be true to their declared beliefs, be consistent, communicate effectively and be transparent in all that they do. They need to be seen to be addressing the important issues of the day. And this is where ESG strategies come into play. The decisions taken today will impact the lives of Generation Z and one of the critical issues of our times is climate change. Companies need to be aligned with the global efforts to address the issue.

Customers are extremely well-informed and demand ever higher environmental and social interaction from their suppliers. Product, service and ESG criteria are the elements used in evaluating suppliers. It is therefore important that ESG is given due consideration when formulating strategies.

E-Environmental

E encompasses climate change and a company’s carbon footprint. Every company consumes energy, natural resources and produces waste. They occupy land and, even if there is a shift towards flexible home working, the majority of employees still travel to work. Companies need to address these issues.

S-Social

Every company operates in a social context. Companies have many stakeholders with whom they must interact (customers, employees, suppliers, communities, shareholders etc.) and each has a different agenda which needs to be given due consideration. They must decide upon the reputation they wish to foster. Equality, diversity and inclusion are amongst the concepts deserving of attention.

G-Governance

Companies are legal entities and as such require governance. Governance is intended as the internal system of practices, controls and procedures adopted to ensure the effective running of the company, that the external stakeholders’ requirements are met and that all the relevant rules, regulations and laws are complied with.

E, S and G are not independent elements and there is often overlap, as evidenced above with stakeholders’ interests forming part of both the social and governance criteria. Defining strategies with ESG criteria in mind is a key factor in safeguarding a company’s long-term success as it contributes to enhancing its customer relationships and helps reduce a company’s exposure to risk. Risk (as defined by ISO31000:2009) is the “effect of uncertainty on objectives” and an effect is a positive or negative deviation from what is expected.

Companies must also generate financially viable strategies and one can legitimately ask if, and how, all of this makes financial sense.

In a recent article published by McKinsey, they reveal that their research found that ESG can be linked to cashflow in five ways:

1.      Facilitating top-line growth

A strong ESG policy augments the CX and enhances the trust that the customers have in a company. At the end of the day it translates into customer retention and the acquisition of new customers.

2.      Reducing costs.

Lean procedures mean less waste in terms of time, energy and materials. This translates into better working conditions for employees. For example installing solar panels can lower electricity consumption and consequently costs, whilst optimising the use of space in existing buildings can reduce the need to build costly extensions. Reducing building works has a positive environmental impact given that cement production is a major contributor to CO2 emissions.

3.      Minimising regulatory and legal interventions

Respecting regulatory requirements reduces the risk of adverse regulator actions and a strong ESG policy can even engender regulator support, often in the form of obtaining subsidized finance.

4.      Increasing employee productivity

A strong ESG proposition can help attract and retain employees, enhance employee motivation by instilling a sense of purpose and increase productivity. It inspires employees to perform better.

5.      Optimizing investment and capital expenditures.

So what are we doing in Siboni to address ESG?

Siboni is committed to reducing single-use plastics in the workplace and recycling its waste where possible.  We are phasing out the single-use plastic cups at the water and coffee dispensers and replacing them with recycled plastic water bottles for water and porcelain coffee cups.

We are reviewing all of our processes (based on LEAN principles) and we strive to continually improve everything we do. This increases our efficiency and has a knock-on effect of reducing the costs, whilst increasing the quality, of our products and services. Our investment in a tailor-made MES system, which is being designed around our value proposition and our vast know-how, will further our continual improvement drive.

The board has just approved an investment in solar panels capable of generating 100kw for our own use which will be up and running in Spring 2020. Given that the solar panels aren’t able to completely satisfy our energy demand a new energy supplier has been found who will provide our surplus requirements from certified alternative sources. All of our lighting will be LED based by the time the solar panels will be up and running.

Investment in training, and involving our employees in the courses chosen, has increased employee engagement and helped our employees gain power over their work.

Our shareholders are aware that the success of the business is dependent on all of the employees working together (WE not me) and in 2018 they actively encouraged the creation of an incentive based bonus package for all employees. Alongside this, work has begun on revamping the physical workplace with the goal being to improve the working conditions for all.

We encourage input from our employees in identifying ESG issues and the strategies necessary to reach the goals that we set. ESG is a fundamental part of the future development of our company.

 Whilst we still have a way to go the ball has started rolling and the results thus far are extremely encouraging.