When COP26 brings the world’s leaders together in Glasgow later this year, expect to hear plenty of talk about proposed regulation, but little in the way of real, strong action.
The gap between rhetoric and result is best illustrated by the current approach to ESG, which risks flopping before it can even become the standard. Despite the best intentions of policymakers, regulators and business leaders, the environmental surveys that currently define ESG have so far produced few results that are felt in local communities.
In its current state, ESG is doing little but flood the financial services sector with greenwashing. The rise of ‘ethical funds’ has emboldened businesses that prefer token gestures to principled action on climate change or improving their local communities. In the current environment, branding, PR stunts and slogans take precedent over substantive action.
Luckily, there’s a better approach to sustainability – one that’s driven by businesses and entrepreneurs in touch with their local communities, rather than politicians and regulators sitting in Whitehall, the City of London and international conferences.
But it requires more attention from businesses to the S in ESG. This doesn’t mean neglecting the environment, but it does demand more substantial contributions to the social good, whether it’s through education, skills or other pathways to employment.
Our local communities currently don’t feel the benefits of the open consultations and voluntary environmental surveys that dominate ESG frameworks. To move towards initiatives where they do, CEOs must reflect on the social purpose of their organisations – ESG won’t require compulsion via regulation if businesses are clear about the contributions they make.
That’s why my company, True Potential, co-founded the Social Mobility Pledge, which has led to more than 600 businesses putting social mobility at the heart of their organisation. The pledge shows that businesses can self-regulate when they come together to build a clear social conscience.
It’s also an initiative that takes the burden off government and empowers the communities they are based in. If more businesses adopt this approach, we can beat back the tide of regulation and bureaucratic box ticking exercises that COP26 will inevitably embrace, while improving the resilience and sustainability of our local communities.
One way for businesses to proactively do this is by tying profit directly to social mobility. Local communities should be more than stakeholders in the minds of business – at True Potential they are shareholders through the Harrison Foundation. True Potential recorded its best year in business in 2020 and as it continues to grow in profitability, the Harrison Foundation gives back more to disadvantaged youth and homeless people, creating pathways to well-paying jobs in their own communities. Over the last year alone, £400,000 has been donated by True Potential and the Harrison Foundation to social mobility impact causes, making a practical difference on the ground.
Ahead of COP26, policymakers should consider how to incentivise more of this behaviour. The Government’s new apprenticeship scheme is a good start and should be embraced by businesses across the country, while moving the Treasury to Darlington is at least an attempt to understand the needs of different communities.
But businesses can be bolder than bureaucrats, and as far as boots on the ground go, there’s a lot more of us than them. Businesses are better placed to react to local needs, and can do more to harness the benefits of these links in order to boost education, skills and good jobs.
Without more focus on the S in ESG, environmental initiatives will fail. World leaders and philanthropists attending COP26 should understand that people need to be safely employed before they are able to turn their minds to building a greener society. That’s why I firmly believe that a business-driven initiative like the Harrison Centre for Social Mobility is a better approach than the one we currently take to ESG, which is measured by the amount of paperwork a business files or environmental surveys they complete.
By taking a broader approach to sustainability and putting community at the heart of our businesses, entrepreneurship can be the heartbeat of a fairer, greener and more dynamic Britain, one we can be proud to showcase on the international stage in November.