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Family businesses – with their long-term vision and deep-rooted values – are uniquely positioned to lead the charge in ESG responsibilities. The generational commitment to sustainability, and the importance of stakeholder trust and reputation is strong in family businesses, making them leaders when it comes to incorporating these principles.
As a result of the Mandatory Sustainability Reporting requirements coming into affect, there has been increasing conversations about sustainability and broader ESG issues. While businesses continue to prepare for these reporting requirements, it has become increasingly evident that family businesses are concerned not only about these climate related issues, but are looking more broadly to understand how all ESG issues affect their business and the impact on their long-term sustainable growth.
Incorporating ESG criteria into business operations is essential for building a sustainable future. ESG encompasses a wide range of practices, from reducing carbon footprints and promoting social equity to ensuring robust governance structures. For family businesses, integrating ESG principles can enhance long-term value and resilience, all while providing a safe environment and a guide to deal with complex relationships and facilitate succession planning.
Businesses can benefit from incorporating ESG principles in their day-today operations in a number of ways.
Family businesses can begin with an ESG assessment to pinpoint areas for enhancement, such as reducing energy consumption, implementing fair labour practices, utilising renewable energy, managing waste effectively, and enhancing governance transparency.
For instance, adopting sustainable supply chain practices can lead to significant long-term financial savings. By sourcing inputs ethically and sustainably, businesses can build stronger customer bases, improve brand reputation, and minimise costs associated with waste disposal and non-compliance penalties.
Many family businesses have already implemented strong sustainable practices within their manufacturing processes. These businesses genuinely care about their environmental impact and strive to create efficiencies for their people. By investing in green assets, such as energy and water-efficient products, and focusing on longevity rather than price, they can reduce overall running costs and enhance their competitive advantage.
Sustainability initiatives can attract various government incentives such as tax offsets, credit facilities and government grants to encourage such practices. In Australia, businesses can benefit from government incentives such as the Clean Energy Finance Corporation's funding for renewable energy projects and the Australian Renewable Energy Agency's grants for innovative energy solutions.
One of the unique strengths of family businesses is their generational commitment to sustainability. Younger generations – Millennials, Gen Z, Gen Alpha, and soon, Gen Beta – are often passionate about ethical investing. They prioritise the social and environmental impact of their investments and are often willing to accept potentially lower financial returns in exchange for supporting positive change. This shift is motivated by a desire to drive meaningful change and leave a positive legacy for others to follow suit.
To manage wealth, family businesses are setting up more private financial vehicles and they have different motivations compared to the previous generations who may have started the business. Given their profile, they are not under pressure to finalise deals and can be more selective about the stakeholders they engage with.
As a result, younger family members often bring fresh perspectives and are more likely to adopt new technologies and practices that can enhance sustainability. One of the latest trends is they make use of financial technology platforms offering ethical investment options to assist them in identifying and selecting companies that meet their ethical criteria for investment. This approach not only supports positive change but also aligns with long-term goals and values.
Engaging the younger generation in sustainability initiatives can foster innovation. By encouraging their involvement in sustainability projects, family businesses can develop innovative solutions, benefiting both the business and the environment.
This generational commitment to sustainability can be a powerful motivator for other family members and employees to embrace similar practices. Amidst the unprecedented surge in technological advancements and the remarkable strides in data collection and analysis, companies now have the privilege of accessing real-time, high-quality sustainability data, significantly enhancing their decision-making processes.
Building and maintaining stakeholder trust is crucial for any business, but it is especially important for family businesses. A strong reputation for ethical practices and social responsibility can enhance stakeholder loyalty and attract new customers and partners.
Family businesses often work closely with their communities, proud to be the products and custodians of their surroundings. By being transparent about their social efforts and regularly communicating their progress, they can build strong relationships with customers, employees, and the community. This might include publishing sustainability reports, engaging with stakeholders through social media and traditional forms of media, encouraging positive policy changes and participating in industry forums.
Fostering a culture of sustainability by engaging employees and stakeholders in sustainability efforts can build support for these initiatives and create a sense of shared responsibility. This engagement can reduce staff turnover and foster a motivated workforce aligned with the business's values and goals. By adapting to policy changes that promote sustainability, companies can aim to create a more conducive environment for both their internal and external stakeholders.
At Grant Thornton, we understand the unique challenges and opportunities family businesses face in their journey towards sustainability. Sustainable business practices are not only good for the environment and society but also essential for long-term business success – and family businesses are leading the way.
We offer tailored consulting services to help you navigate the complexities of sustainability integration and stakeholder engagement. Our experts can provide insights and guidance on best practices, ensuring your sustainability efforts align with your business goals and values. If you already have a strategy in place to integrate ESG principles, we can provide an independent review to ensure it meets your current and future needs.
