ESG – is it the 5th Industrial Revolution?

Zurina Panesar | 10 Aug 2021 | News | Change, Sustain Change, General

Environmental, Social and Governance – could it be the 5th Industrial Revolution and are organisations clear on a strategy? By Principal Consultant, Stephen Lee

I’ve been doing a lot of reading recently, looking for emerging mega-trends and I’m getting a strong sense that there is another major movement gathering a head of steam; one that every organisation is going to have to take seriously – whether they want to or not.  I’m not sure if it will be deemed a 5th Industrial Revolution (see previous post for the 4th) but it seems that there are two tectonic shifts gathering pace and heading towards a symbiotic crash. 

Trend 1 – Purpose-led business leadership 

LinkedIn is awash with news and articles related to progressive operating models with purpose-led and conscientious business leadership, indicating a confluence of thinking on: 

  1. Purpose over short-term shareholder value, as brilliantly described in @Simon Sinek’s Infinite Mindset book 
  1. A massive shift towards the adoption of business agile – a build on the concept of scaled agile software development frameworks like SAFe and LeSS 
  1. More “progressive” ways of working and operating models; typically flavours of non-hierarchical, self-organising, network of team operating structures – for which you can find multiple case studies on @Corporate Rebels website 

Trend 2 – ESG (Environmental, Social, Governance) 

This area has a whole word-cloud of its own.  Only time will tell which phrases stick and join the common lexicon of business speak but, irrespective of labels, it is a huge topic.  Potentially the biggest issue (or for some, opportunity) the world faces is a truly existential threat for the planet and life as we know it. In some respects, business could seem irrelevant or inconsequential, but the industrial revolution and everything that followed is possibly the single biggest cause and governments and businesses across the world are now waking up to their responsibilities to be part of the solution. 

Ideas such as Circular Economy and Natural Economy are challenging how economics could and should change to more closely link to ecology. Put simply, that earth’s resources have to be viewed now as finite, with asset value assigned that also need to be managed. The emergence of B-Certification is arguably also linked to this. 

Convergence 

One strong link across both trends is the concept of infinite v finite mindset.  This applies to both Purpose and to ESG. 

There are those that want to 

Some companies seem to be firmly in the Purpose-led and ESG friendly camp, doing this because they genuinely care about their “just cause” whilst also being passionate about the environment.  Patagonia and Brewdog – notwithstanding recent news relating to Brewdog’s questionable treatment of staff – are a couple of high-profile examples.   

And there are those who will have to react 

Others are seeing the success of these types of company; how well they are performing, or successful marketing campaigns, so may feel they have to jump on the bandwagon just to avoid losing ground to the funky new competition.   

Either way, legislation may well ultimately prove to be the defining factor – the tipping point.   

Tipping Point 

Re-enforcing commitments and targets made in recent global summits and those being signalled in advance of the upcoming COP26 summit in Glasgow, the UK government is steadily pushing the Environment Bill through the Commons and the Lords. As it currently reads it will create a huge impact on the legal, economic and regulatory landscape. Companies will be forced to assess the impacts, risks and opportunities. 

And if government legislation doesn’t get leaders attention, then maybe the impact to talent and recruitment will. Multiple reports and surveys are suggesting that Gen-Z talent in particular will only want to work for companies they believe in; ones that align to their own values as well as allowing them the flexibility that comes with the more progressive working patterns they will come to expect in a post-Covid era. It may be a generalisation but I think it’s fair to say that Gen-Z and younger are among the most environmentally conscious age groups, so ignore that at your peril. 

So what? 

These are each huge topics in their own right so this short article is by no means exhaustive in terms of breadth or depth.  Neither does it attempt to suggest any academic rigour to the opinions and content but I do hope that it is thought provoking enough to stimulate a few Board-level conversations. 

A joint report by KPMG and Evershed Sutherlands titled Climate change and corporate value, with a notable Foreword by Mark Carney (ex-Governor of the Bank of England and now UN Special Envoy for Climate Action and Finance and UK Prime Minister’s Finance Advisor for COP26), suggests that although climate risk may be broadly understood at Board level, the financial and physical impact (and risk) to businesses and the transitions required are not.   

“Solutions and the opportunities around decarbonisation and adapting to climate risk, as well as how to finance these efforts, were at best generally understood concepts rather than strategies capable of being successfully implemented” 

So whether you’re a passionate advocate for purpose-driven leadership, progressive ways of working and green recovery, or you’re simply trying to protect your business, you’ll need to start assessing the impacts, risks and opportunities as soon as possible – because this is coming whether you’re ready or not. 

At Curium Solutions, we’re all about helping leaders and organisations achieve their purpose, so we’d be really keen to hear your stories.  Are you worried?  Are you already planning?  Do you have strategies that others might learn from?  Do you need help transforming or re-structuring your business? 

Fill out our contact form, to get in touch with us.

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