Selling to large businesses by focusing on ESG
Using environmental, social and governance (ESG) criteria to guide your company’s activities is a way to show that your business operates sustainably.
A growing number of companies have been setting ambitious sustainability goals. As a result, these businesses are changing their procurement practices to incorporate ESG criteria into their supplier selection process.
“Everyone—financial institutions, individual clients—is increasingly looking at how a company’s culture has a role to play in sustainable development,” says Hugo Jabbour, Advisor, Sustainability and ESG at BDC. “Businesses are seeing that, for them to stand out and be successful over the long term, they need to adopt principles that align with the concerns of society.”
These kinds of changes can be an asset for Canadian businesses because they encourage local purchasing and a more ethically sound procurement. So how can your company adopt ESG criteria and sell to large businesses? Here are some concrete actions you can take.
Measure your current performance
Before you do anything, it’s important to know where you’re starting from and what initiatives you should be prioritizing. A good place to start is with the free “B Impact” assessment. It measures how you:
- run your company
- treat your staff
- interact with the community
- manage your environmental impact
- and whether what you sell has an inherent positive benefit
Taking environmental factors into consideration
There are seven environmental factors to consider in ESG methodology:
- Greenhouse gases
- Encroachment on ecosystems
“You need to step back and look at the impact your company’s business activities have on the environment and the surrounding community,” says Jabbour. “For example, how does the company get its energy to heat its premises and operate its machines? Where does it access raw materials? How does it deliver its finished products?”
You can complete an energy audit to understand how you use energy, or think about doing a waste management audit.
This will allow you to identify the actions your business can take to reduce its environmental footprint. For example: it can switch from fossil fuels to renewable energy sources, seek out more locally sourced raw materials to reduce its transport footprint, and opt for less energy-intensive delivery methods.
Businesses are seeing that, for them to stand out and be successful over the long term, they need to adopt principles that align with the concerns of society.
Taking social factors into consideration
With regards to social issues, you’ll want to ask yourself how your company contributes to the development of your employees, the communities it serves and society in general.
“It’s also necessary who the company hires,” says Jabbour. “For example, does the organization do anything to promote diversity? Does it offer good working conditions and a healthy environment?”
You also have to think about your supply chain. “Take time to analyze your sourcing and that of your suppliers,” advises Jabbour. “This isn’t the easiest thing to do, but discussing these issues with partners is important.”
One of the best ways to reduce risk in the supply chain is to shorten it. “The longer the chain, the less you’re able to see what the companies supplying your suppliers are doing,” says Jabbour. “Choosing local suppliers allows for greater control and for reducing transport needs and procurement lead times.”
Taking governance factors into consideration
Customers expect your businesses to be managed using the highest standards there are. For example, having diverse voices on your board of directors and among senior management. “The presence of women is especially important now,” says Jabbour. “And, more and more now, the presence of people from different cultures is valued.”
It’s not just about having a clean conscience. By making senior management and the board of directors more diverse, a company becomes exposed to different perspectives and, in turn, reduces its blind spots.
“A company has to pay attention to many elements, such as ethical issues and transparency,” says Jabbour. “It must also be interested in relationships with various stakeholders, such as staff, shareholders and Indigenous communities. To do so, it must have a strategy that it will follow whenever it develops a new project.”
Small actions are no longer enough. Simply recycling and reducing paper use in the office, for example, won’t be enough for a business to stand out.
How do you showcase your company’s actions?
The market is changing. As part of the procurement selection process, many large companies are now asking potential suppliers to complete forms to disclose their ESG practices. Taking action now will give you a step up on the competition moving forward.
Consumers are also increasingly paying attention to ESG criteria when making a purchase.
But it’s important to not take actions that might be seen as greenwashing—a marketing technique that consists of presenting a false image of an environmentally friendly company.
“All companies seem to be going green, with a confusing amount of product labels out there,” says Jabbour. “Companies must make sure that what they’re claiming is reflected in their actions.”
Because society has changed, “small actions are no longer enough,” he says. “Simply recycling and reducing paper use in the office, for example, won’t be enough for a business to stand out.”
Making changes now takes real work and needs to take account of your industry and province. You’ll also need to talk to your suppliers and customers.
“You have to ask them what they want, what their big issues are, and what you can do as a company to help them achieve their goals,” he says. “Sometimes just starting the discussion can help you find more sustainable solutions. Some may already exist or you can create new ones with their support.”
Should you get a certification?
Tenders may require certifications. For example, the ISO 14001 standard can be applied to every industry, although it’s most often used in the manufacturing sector. This certification provides a framework for companies or organizations to implement an effective environmental management system.
Leadership in Energy and Environmental Design (LEED®) certification is very popular in the real estate industry. It is an international mark of excellence for sustainable buildings. The Breeam and Energy Star certifications are also popular in this field.
The FSC’s Forest Management certification is often required for paper procurement; while an ECOLOGO certification is often required for house cleaning products.
But even if no certification is required, obtaining certification helps a company demonstrate that it’s taking action on being more sustainable. B Corp is an example of that.
“B Corp is a recognized certification that clearly helps a company stand out from the competition,” says Jabbour. “It’s a way for your business to show that it’s done its due diligence, which can help your business build trust. So, beyond helping you do business, these certifications help you build relationships.”
Working on these different elements will have impacts on society and the environment, but also on your finances.
Cost reduction and risk management
Implementing a sustainable development strategy can help with more than just your market positioning.
For example, performing ESG audits will allow you to review all your cost items. “You’ll often find unnecessary expenses and other costs that you can easily reduce, such as for energy consumption and transportation,” says Jabbour. “Working on these different elements will leave an impact on society and the environment, but also on your finances.”
In addition, thinking about these issues could help you identify potential problems, says Jabbour.
“Remember the photo of the sea turtle with a plastic straw in its nose that was shared around the world in 2015? From that moment, serving plastic straws became bad for business. Everyone wanted to purchase paper straws, which put pressure on the supply chain. But long before that photo of the sea turtle, any company concerned with its environmental impact understood that alternatives to single-use plastic products needed to found.”
Taking ESG criteria into consideration can result in certain changes in your company and help keep you ahead of others.
“This may mean incurring costs at the onset, but these investments will have long-term benefits,” says Jabbour. “For example, they could help you find new customers or shareholders who want to help solve the problem.”
Assess your impact
Measure your company’s impact on your staff and customers, and on the community and the environment with a free “B Impact” Assessment.