Progressive Insights on Urgency of ESG Investment for Family Business Reputation
Why is ESG investment important in family enterprises, such as Cove? What is ESG? And how can companies put more investment in this? Our founder, Bernie Geiss, spoke at Family Enterprise Canada’s event on Progressive Insights on Urgency of ESG Investment for Family Business Reputation. Other speakers alongside him included Andrew Bryson, the Head of Business Transformation for Family Business Network (FBN) International, and Sara Hughes, President of the Board for FBN Brazil.
Andrew led the way in discussing why environmental, social and governance (ESG) is important and why it’s more crucial than ever for family businesses to invest in ESG initiatives. Sara and Bernie shared their journeys with their family businesses and how integrating ESG and sustainable development goals into their business have helped them. Read the summary of the event below.
What is Environmental, Social and Governance (ESG)?
Based on Investopedia, ESG criteria “are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.”
Although the name was not coined as ESG at that time, the concept of responsible investing started in the Methodist church in the 1800s where they restricted its members to invest in controversial companies, which include alcohol, tobacco, weapons, and gambling. In 2006, the term “ESG” was first used in a report put out by United Nations called the Principle for Responsible Investments.
Why Does ESG Matter?
There are a few reasons why ESG matters:
Beyond just the investor community, ESG is becoming a big tool in terms of access to capital. Many large banks in the world are using ESG and whether you report on it as a proxy for good governance – to get access to capital, you’ll probably get asked questions on ESG. For banks, it’s about asking if you’re thinking of the long-term viability of the company, about the climate risks, and about the trends that are happening.
2) Public Reputation
The idea of humbly sitting in your corner and going about your business – that as long you did good business, people wouldn’t come after you – is rapidly changing. With the change in the media landscape, especially with the advent of social media, family businesses require greater responsibility over their public reputation. More and more of the public are taking a more critical look at the brands behind the products or services they buy and want to understand how these businesses conduct themselves.
3) Internal Stakeholders
The fact of the matter is that ESG is also being asked for on the employee level, the local community level, and various internal stakeholders. Many Next Gens (next generation of the family business) do not want to be involved in their family business anymore due to what the business believes in and what they stand for, or lack thereof. Many Next Gens take issue that their family business is not actively involved in initiatives that are important to them and the world.
4) Legislative Issue
If you operate in the EU, as soon as next year, they are likely going to start mandating that every business in the EU that has more than 250 employees publicly report on ESG metrics. All businesses in Europe have now gone from an “ESG is a nice to talk about thing” to ESG being a huge priority. This also means that companies that are doing business with companies in the EU may also be obligated to start reporting data on ESG metrics. Similar legislation is being discussed in the US, and a lot of companies are following suit.
Committing Your Family Business to ESG
You may now ask yourself – where do I begin? How do I measure ESG for my company? You can start your journey aligning your business with ESG by starting with these simple steps.
Read Thought Leadership Resources on ESG
First, you can learn a bit more about how your family business can redefine success through ESG. Family Business Network (FBN) is continuously working with thought and practice leaders around the world to try and identify how to define what sustainability means for family businesses, and as a result, FBN frequently publishes series of guides, articles, and case studies that are specifically applicable to family businesses. Find FBN’s series of thought leadership resources here.
Sign the Pledge
The next step is signing the Family Business Sustainability Pledge. The pledge is a “global call to action […] to adopt a more purpose driven business model therefore contributing to global sustainable development, inclusive growth and prosperity for all.” By signing this pledge, your name or business will go on the website to say that “Yes, I’m publicly committed to this.” The idea is for family businesses to start embracing transparency. By taking this first step in signing the pledge, you’re acknowledging that you’re committing to the ESG journey. Sign the pledge here.
Measure Your Business with the Sustainability Indicators
The biggest question is figuring out how to measure yourself. There are many standards out there, such as B Corp, ClimateSmart, GRI, CDP, CDSB, and SASB. However, what FBN realized was that family businesses have their unique differences to other companies, so it’s crucial to find metrics and tools that are relevant to them. Thus, FBN partnered with UN to put together The Sustainability Indicators for Family Business. This is the first set of ESG indicators that are assigned specifically for family businesses. The objective is to spur conversations, guide implementation, and be a benchmark for family businesses around the world. Learn more and view the sustainability indicators here.
ESG in Family Businesses in Brazil
Prior to the pandemic, there was very little talk about ESG in Brazil. However, nowadays, everybody is talking about it – it’s in the papers, people are asking for it, people are talking about it, and it has gone viral in the business world. A lot of Next Gens are now thinking about new ideas for developing a more sustainable business that goes beyond their generation. Instead of the “don’t fix what isn’t broken” attitude, there is a huge wave of energy about rethinking what they’re doing and how they can reinvent themselves for the future.
Sara Hughes’s company in Brazil chose to sign the Family Sustainability Business Pledge and apply the Sustainability Indicators to help them better communicate why they do what they do and how they make their decisions. She realized that although family members and owners may know the business’s sustainable development goals, they can’t necessarily say the same for the managers and employees.
As a result, they now have a mandate on what they expect of their board of advisors and how they expect to analyze things and what metrics to use. They are now creating global reports for transparency on their ESG commitments, and employees are starting to understand why their business is making the decisions they’re making, which helps them better make the smaller decisions at work.
ESG in Cove
When Bernie started his insurance brokerage agency in 1990, he made sure he was committed to these top three values: accountability, transparency, and inclusion. When running his business, he knew that he wanted to do things differently, but he also knew that in order to continue doing things differently, he had to think of a long-term plan. It was the idea that the business couldn’t just be in it for profit – the business, more importantly, had to be sustainable.
In 2016, Bernie discovered the concept of B Corp – an organization that measures your company’s environmental and social performance, public transparency, and legal accountability to balance profit and purpose. After Cove became B-Corp Certified, Bernie was introduced to 1% for the Planet, which is where companies, including Cove, commit 1% of their revenue to grassroots environmental causes. This also inspired Bernie to start up a fund called 1% for People. The fund helps people become self-sufficient while increasing their awareness of the importance of where they live.
Integrating these values and sustainable development goals have changed the business model and focus from being purely profit-driven to values that are much greater, such as lifestyle, community, stakeholders, and the environment. Now, the insurance brokerage agency includes his wife, Christie as a Co-Owner, one of their kids, Nikki, and Christie’s niece and husband, who moved from Edmonton to join Cove. With the unique business model Bernie has set in place for Cove, he believes he is able to achieve ongoing success and continuity of the family business for the Next Gens and beyond.