ESG 101: Creating More Responsible Organizations
As companies strive to increase their sustainability and social impact, FMs are uniquely positioned to make a difference.
By Kate Rockwood
The events of recent years have made it increasingly clear that we’ve entered a new era of business — one in which a company’s worth isn’t merely tied to revenue and profit, but to its level of responsibility and the justness of its business practices. More and more, many investors and the public at large expect companies to do their part to mitigate climate change, align with calls for social justice and foster a robust and trustworthy leadership team to execute these crucial initiatives.
What that all means is that a company of today must possess an impactful set of environmental, social and governance (ESG) policies that, in concert, compel the organization to operate ethically and hold itself accountable.
ESG in Practice
What do ESG standards look like in daily operations? Like a company that takes seriously the imperative to use resources efficiently, mitigate pollution and reduce its carbon footprint and greenhouse gas emissions (GHG) (the “E,” or environmental, part of the equation).
It also means a company that holds itself to high labor standards, including diversity among its workforce and leadership; equitable pay; safeguards against discrimination and harassment; and a humane workplace culture (the “S,” or social aspects of the company’s operations).
Finally, it looks like a company with a strong internal infrastructure to maintain accountability, including teams and professionals dedicated to oversight, compliance and anti-corruption policies (the “G,” or governance, part of the business).
Fostering strong ESG standards doesn’t just ensure that a company is run ethically, but also sends a message of responsibility and modernity to external parties. According to Tom Kay, Chief Revenue Officer at SMG Facilities, ESG practices are critical for many reasons, but the “three primary ones are creating a competitive advantage through stakeholder engagement, a company’s’ ability to better manage or mitigate risk and establish greater loyalty with clients who have expanded their interests to the values behind the brand.”
What a Strong ESG Strategy Can Do For You
While the upsides of operating with an eye toward sustainability, inclusion and accountability are self-evident, there are some surprising benefits to adopting these operational standards. “Companies that perform well in ESG initiatives also tend toward lower cost to capital, strong financial performance, with better investment value and higher returns,” Kay said. In fact, a Deloitte Global survey found that when companies invested in their ESG policies, they saw a positive impact on:
Revenue growth (59%)
Customer satisfaction (48%)
Recruitment efforts (38%)
Perhaps that’s why these practices are gaining such momentum within the corporate world. Per the International Centre for Trade and Sustainable Development, 92% of S&P 500 companies have published a sustainability report for 2020, the most recent year for which such figures are available. That’s up from 90% in 2019. It’s clear that the influence of these standards is growing.
The Role of the FM in ESG
A facilities manager has a unique opportunity to meaningfully contribute to an ESG program—largely, as Kay emphasized, in the environmental aspects.
“FMs have the ability, directly or indirectly, to reduce greenhouse gas emissions from the operation of buildings, branches and distribution centers through the use of deployed energy management systems,” Kay said, “as well as oversee renewable energy goals and contracts, transition their fleet of vehicles to electric, reduce office paper use, establish preventative maintenance programs that extend useful life of critical equipment, divert e-waste from landfill and partner with suppliers to advance sustainability goals.”
Johanna Farfan, Regional Facilities Manager for Swarovski North America, agreed. “FMs can become more involved with ESG practices by setting up a Green Team of employees to set clear goals for the office recycling program and waste reduction initiatives,” she said. “Additionally, FMs are becoming more and more insistent that their suppliers become better aligned with corporate ESG strategies and targets.”
Regarding ESG standards, Farfan emphasized the importance of one particular aspect of building operations: HVAC systems. “There are multiple options for more ‘green’ HVAC equipment,” she says. “From an environmental standpoint, the most important thing for a retail FM is to rid themselves of all units installed prior to 2008, since these contain R-22, a non-environmentally friendly and highly-expensive refrigerant. In 2020, the EPA banned the manufacture of new air conditioning systems that use R-22.
Kay pointed out that FMs can also get involved with the social part of the ESG equation. “FMs can support these goals by considering their own hiring practices and the fairness of pay within their department,” he said. “They can establish health and safety practices, and assess their department’s working conditions, DEI policies and sexual harassment prevention measures. And they can examine their department’s impact on local communities and gauge the diversity of both their team and their suppliers.”
If you’re not quite sure how to begin, take a page from Farfan, who recommended a bit of strategizing. “Understand and define your business objective,” she said, “while aligning those objectives with your footprint and the critical physical assets. Identify stakeholders both internal and external, and the ESG topics that you can directly impact and influence. And lean on your supplier partners to assist you in your ESG efforts.”
Kay echoed this advice. “Become engaged,” he said. “Do your homework. Does your company have an established ESG strategy — and if so, how can you impact those initiatives from your realm of influence?” Kay also suggested obtaining outside perspectives, including those of suppliers. “Ask for their feedback and guidance,” he advised, as well as those within ConnexFM. “ConnexFM has established an ESG Committee who will produce content and best practices, and its members are a great resource as to how to get started, since many of them are actively involved in ESG within their own organizations.”
It’s abundantly clear that the role of business has shifted dramatically in just a short time. And with this evolution has come a remarkable opportunity to guide organizations forward, helping them to meet and exceed the highest of standards and deliver on their greatest potential. ESG targets are one way to rise to the challenges presented by our ever-changing world, and FMs are in a position to assist in that effort, guiding their companies into a more modern, ethical, just and sustainable future.