Leading ESG
One of the fastest-growing priorities for organisations today is ESG. The momentum behind ESG is extraordinary, with organisations across all sectors rapidly mobilising efforts to establish their presence, practices, and reputation across all domains of ESG.
As with any significant movement, ESG has both advocates and sceptics. Advocates envision the long-term benefits ESG can bring to both organisations and society more broadly. Sceptics remain cautious, citing early efforts often characterised by shortcuts and 'greenwashing'. This divide has significant implications for leaders and talent, who must navigate a myriad of expectations, perspectives, and aspirations to unlock the benefits and opportunities that ESG presents.
For those unfamiliar with ESG, it stands for Environmental, Social, and Governance. While the movement has gained considerable momentum in recent years, its origins can be traced back to 2004, when Kofi Annan, then UN Secretary-General, invited major financial institutions to collaborate with the UN and the International Finance Corporation to identify ways to integrate environmental, social, and governance concerns into capital markets.
At its core, ESG is about companies having a positive impact on people and the planet while ensuring that their policies, practices, and behaviours measurably align with their intentions. These efforts span areas such as environmental stewardship, community care, diversity, equitable work practices, and ethical business conduct. While the principles of the triple bottom line and corporate social responsibility (CSR) are not new, ESG has brought greater emphasis on evidence-based approaches that demonstrate direct action and measurable outcomes. This is particularly relevant in areas like climate change and carbon reduction.
ESG data and evidence are not solely driven by regulatory requirements and compliance. They also provide investors and consumers with valuable insights to make informed investment and purchasing decisions. This might include measuring a company’s carbon footprint, reporting on gender pay gaps, or demonstrating how supply chain practices lead to positive environmental outcomes.
Initially, organisations viewed ESG primarily as a way to manage risk and compliance. Increasingly, however, they are embracing ESG because of the social and commercial benefits of incorporating sustainability principles into corporate and investment strategies. According to McKinsey's report, Five Ways that ESG Creates Value (November 2019), global sustainable investment now exceeds $30 trillion—an increase of 68% since 2014 and tenfold since 2004. This represents around a third of assets under management globally. McKinsey notes, “The magnitude of investment flow suggests that ESG is much more than a fad or a feel-good exercise.”
The evolution of ESG reflects several key shifts:
From operational initiative to strategic imperative
From compliance and risk management to value creation and impact
From the ‘right thing to do’ to the ‘smart thing to do’
(In time) From a novel approach to the new normal
According to Yatra Forudi, a Director at Rennie Partners, “It’s important for companies to see through the hype and noise of ESG, right into its substance. Alignment with ESG is a long-term investment rather than a short-term trend, and so its adoption must be holistic.”
Rennie Partners is one of several emerging players in the ESG consulting market. Established in 2021, the firm advises organisations on navigating and optimising the transition to a net-zero and sustainable future. In just over 12 months, it has experienced rapid growth, with a team of 30 professionals now advising clients on strategy, commercialisation, and regulation.
Why ESG, and Why Now?
The United States and Europe are ahead of Australia in terms of ESG adoption, but a combination of local and global factors is driving growing interest in ESG within Australia.
Recent bushfires and, more recently, floods across Eastern Australia have brought the issue of climate change to the forefront of the national dialogue.
The COVID-19 pandemic prompted people to reflect on various aspects of their lives, including work practices, purpose, meaning at work, and social responsibility.
Movements like Me Too and Black Lives Matter have raised awareness of discriminatory practices and responsible behaviours, drawing attention to the role organisations play in creating safe, fair, and inclusive environments.
Millennials and Generation Z—together comprising around 40% of the Australian population—are far more likely than earlier generations to make purchasing or investment decisions based on personal and ESG values. Crucially, one of their key purchasing decisions is a job. Millennials, who represent the largest demographic in the workforce, overwhelmingly prioritise ESG: research shows that 64% would not accept a job at a company that is weak on ESG.
Talent and Leadership Implications
As with any emerging discipline, the demand for ESG talent outstrips supply, creating a classic 'war for talent'.
Like many search and recruitment firms, Derwent Search is moving quickly to understand and respond to the talent implications of ESG for its clients. According to Ben Derwent, Founder of Derwent Search, “We are quickly realising that there is no one-size-fits-all approach to implementing ESG. Different industries and organisations are approaching it in different ways. The key is to understand each client’s unique requirements.”
In a tight labour market, creativity in sourcing and recruiting talent is essential. Derwent adds, “We know companies need to be creative with their recruitment strategies. This is an opportunity to look for individuals who may not have extensive experience in all areas of ESG but possess a strong mix of skills and attributes to succeed.”
So, what are those skills and attributes?
Commercial Orientation – ESG professionals must balance environmental and social responsibility with a strong commercial mindset. They need a deep understanding of operations, business drivers, and commercial risks and opportunities.
Influencing and Mobilising Skills – Success requires personal influence rather than positional power. Effective ESG leaders can secure buy-in from internal and external stakeholders.
Systems Thinking – ESG touches multiple areas of a business. Leaders need to analyse interconnected systems, predict cross-functional impacts, and prioritise actions with the greatest value.
Futurism and Disruption – As ESG evolves, professionals must anticipate trends and adapt their strategies accordingly.
Derwent notes parallels with past movements, such as the rise of digital transformation. “Five to seven years ago, digital acumen was a major focus. I suspect we’ll see something similar with ESG, as organisations prioritise ESG acumen to future-proof their operations.”
Building the Pipeline for ESG Talent
In June 2021, PwC announced plans to invest $12 billion over five years to create 100,000 jobs focused on climate and diversity reporting, alongside artificial intelligence. It also launched an ESG Academy and increased training for partners and staff. Similarly, EY announced it would fund MA programmes in sustainability for all 312,000 employees.
Ultimately, building the ESG talent pipeline will require a mix of developing internal capabilities, hiring externally, and partnering with academic or training bodies.
ESG is not merely a trend—it represents a profound shift in societal expectations and business practices. Companies that treat it as a transformational effort, rather than a box-ticking exercise, will be best positioned to lead this movement.
Mark Busine