What Future Managers Need To Know About ESG

Dr Asmita Chitnis Feb 20, 2023

In managerial decisions, as in the case of everything else across the industry, ESG is bound to play a major role given that not only are governments taking bold steps to ensure ESG regulation adherence, but also the employees and stakeholders at large have woken up to the pressing needs for ESG compliance.

To begin with, ESG considerations have become a part and parcel of managerial tasks. With governments aggressively moving towards a more sustainable and incisive world, companies are often mandated to furnish an ESG report, documenting their progress on the sustainability and social front. Therefore, as we progress further into an ESG-oriented world, monitoring the adherence to ESG regulations will soon become a key result area for managers.

Given this thrust on ESG concerns among the government, managers, being leaders, need to be thoroughly informed of issues such as carbon and water footprint. Further, the rise of ESG demands that managers strive towards sustainability, seeking solutions to measure the impact of their current operations as well as the remedies to counter the resultant harm. If unable to find solutions, the managerial powers could be leveraged to identify and apply the right resources who are adept in auditing problems and finding solutions.

Also, it is important to note that as managers push their companies to take ESG-compliant decisions, they are helping businesses cut long-term expenditures as well as mitigate future risks.

In terms of the social responsibility suggested by ESG norms, the first thing that comes to mind when considering the role of a manager is people skills. A prized possession of leaders across time, domain and geographies, interpersonal skills play a major role in ensuring that the team is performing at the optimum efficiency, unhindered by conflict among colleagues and problematic behaviours such as racism, misogyny, anti-LGBTQ+ sentiments etc. But the problem with expanding globalisation is the ever-expanding ambit of dos and don’ts in terms of what is socially appropriate, especially when corporate teams are becoming increasingly diverse. Therefore, the more aware a manager is, the better it is for the integrity of the team.

ESG compliance aside, not only does a socially aware manager, ensure a sensitive work environment but also encourages a wider talent pool to climb a ladder, making the best of their competence and contributing more meaningfully to the progress of the organisation.

When it comes to risk management, an insightful manager is all too aware that environmental factors, directly or indirectly, affect their supply chain, while investing in goodwill or social justice-centric initiatives, keeps the reputational damage at bay.

For example, if a manufacturing unit has high energy consumption, it is advisable for the company to invest in renewable alternatives to continue its operations without any fear of it coming to a grinding halt in the event that there is an energy crisis. Similarly, a company that ensures a healthy environment, devoid of discriminatory practices, mitigates the chances of getting embroiled in scandals.

Another important aspect of a manager’s role is improving stakeholder engagement. The consumer today is well-informed and opinionated about ESG issues and increasingly prefers goods and services to comply with ESG regulations, which are designed essentially keeping in mind the overall welfare of society. Thus, it is not surprising that companies, to sustain growth, are becoming ESG-conscious and demand that the next generation of managers is well-equipped to understand the market with all ESG considerations.

Regarding sales generation, as managers often directly deal with shareholders as well as participate in strategy and decision-making, with ESG knowledge they can better serve both, the stakeholders and the company.

To summarise, as ESG has pervaded all aspects of the industry, managers given their significant influence in the company can bring in a positive change, on all fronts, be it commercial, reputational, as well as environmental.