Environmental, Social and Governance strategies for family businesses

Although our recent survey of family businesses in Australia revealed family businesses don’t necessarily resonate with corporate terms, it’s important to note they still conscientiously adapt and care about key issues affecting our world today.

Family businesses prioritise sustainability policies and actions that benefit their business and community, even before regulation around Environmental, Social and Governance (ESG) initiatives were mandated. This genuine drive allows family and mid-sized businesses to act authentically while integrating corporate terminology to create a competitive advantage. 

So, what does it mean to have an ESG or sustainability strategy, and how might family and mid-sized businesses develop one based on existing policies in order to create a competitive advantage for their business?

What is an ESG or sustainability strategy?

ESG and sustainability are interchangeable terms for a comprehensive plan that incorporates environmental, social, and governance considerations into an organisation’s operations, decision-making, and corporate culture. Larger corporates refer to it as ESG, whereas sustainability tends to be used more by smaller family and mid-sized businesses – however, they largely refer to the same things. A successful sustainability strategy mitigates risks, creates opportunities for innovation, growth, talent attraction as well as retention, and improves brand reputation. 

In the context of a family business, a sustainability strategy can help align practices and goals with sustainability principles, create long-term value for the company and society and ensure the well-being of future generations.

How can an ESG strategy be implemented in your family business?

1. Identify existing ESG policies within the business
   Where do you already have effective policies in place? We find family businesses have strong sustainable practices within their manufacturing processes as they genuinely care about their environmental impact and creating efficiencies for their people; they have great people policies that put family first, and they work closely with the community. These practices form a great starting point for an ESG strategy.
   
   
2. Identify the ESG issues that matter most to your business
   Conduct a materiality assessment to identify ESG issues most relevant to your business and stakeholders. This will help you prioritise your sustainability efforts and allocate resources effectively. You may find your existing policies already cover a large amount of these issues or you may be surprised to hear what your stakeholders care about.
   
   
3. Set measurable sustainability goals
   Much like financial goals, sustainability goals should be specific, measurable and time-bound that align with your business strategy and values. Overall, an ESG strategy should be done alongside a business strategy and help achieve financial targets. Tracking progress and communicating your achievements to your stakeholders is critical.
   
   
4. Engage your employees and stakeholders
   Foster a culture of sustainability by engaging your employees and stakeholders in your sustainability efforts. This will help you build support for your sustainability initiatives and create a sense of shared responsibility.
   
   
5. Integrate sustainability into your business process
   Embed sustainability principles into your core business processes, such as procurement, production, and supply chain management. This will help you identify opportunities for efficiency gains, cost savings, and risk reduction.
   
   
6. Report on your sustainability performance
   While many family and mid-sized businesses may not be required to report under the mandatory sustainability reporting measures at this stage, having the ability to report on these measures to your engaged stakeholders ensures buy in, the ability to build trust and credibility, and enables you to demonstrate your commitment to sustainability in your own authentic way. 

By adopting an ESG or sustainability strategy, family businesses can create long-term value for their business and society, while ensuring the well-being of future generations. 

Working with you

Family businesses have an opportunity to be leaders in creating ESG and sustainability strategies by identifying what they’re already doing in their operations and building from there.

At Grant Thornton, we can assist you on the journey in creating these strategies to ensure you can be paving the way like larger corporates in this space. Please reach out to one of our Environmental, Social and Governance or Family Business Partner leads to discuss how we can help you create your ESG and sustainability strategies now.