Keeping ESG in the family

T

he mantra ‘Profit Planet People’ has become a battle cry for many companies. ESG is naturally important to large global corporations who have been the first to consider and apply ESG best practices but the wider trend of introducing ESG strategies inevitably trickles down to all businesses.

Family businesses have been identified by the United Nations as being ideally placed to introduce measures quickly and with relative ease, future-proofing their operations.

But while many appreciate the value of ESG, only a third appear to have a strategy in place to achieve it, according to a global survey of 2,801 family business owners.

More than half those who took part in PwC’s survey saw the potential for their business to lead on sustainability, yet only 37% have a defined strategy in place.

While 79% of respondents in mainland China and 78% in Japan said they were 'putting sustainability at the heart of everything’ they did, only 23% of US and 39% of UK family-owned enterprises concurred.

Family-owned businesses may prefer to use philanthropy to avoid taking a strategic approach to ESG; however they could be creating a potential business risk by not thinking strategically about ESG. Setting meaningful targets and demonstrating a clear sense of values and purpose is an important aspect of planning for family-owned businesses which should not be overlooked.

A sustainable business is one which can carry on doing what it does over and over and over - forever. With two-thirds of businesses worldwide owned or managed by families, understanding how to create a sustainable legacy is vital to family-owned businesses.

The UN hopes to unlock this potential by setting up the Family Business for Sustainable Development (FBSD).

The FBSD is a joint project between the United Nations Conference on Trade and Development (UNCTAD) and the Family Business Network (FBN). It will bring together 4,000 families with 16,000 firms from 65 countries.

James Zhan, UNCTAD's director of investment and enterprise, said: “Family firms can make a huge difference in global efforts towards sustainable development. They need to be empowered to maximise their potential and seize the untapped opportunities associated with embracing the sustainability agenda.”

According to the UN, family firms tend to invest their own resources and have the ability to take quick action to put their businesses and investments on a sustainable track.

This means any ESG strategy can be adopted quickly and fed through to employees and partners.

Family businesses tend to think in generations, so they have the potential to think more long term.

This also means that any ESG strategy will be a pragmatic one which takes into account employees, partners and clients.

Close local ties allows family-owned businesses to better understand why the Sustainable Development Goals matter and where they can make an impact, while allowing them to benchmark their sustainability performance against other similar businesses.

Wim Ritz is the global head of funds at ZEDRA