Any company can embrace ESG principles

‘Many think that ESG practices concern exclusively large companies. ESG implies sustainable practices and sustainability is good for any business,’ says MANUELE VAGNOLI, senior manager at Tuning Fork, the ESG arm of NOUV which has recently obtained its ESG level 1 Certification from IASE, the International Association for Sustainable Economy, in an interview with Dayna Camilleri Clarke.

What do you think of the recent launch of the ESG portal for listed companies?

The ESG portal launched recently by the Ministry for Energy, Enterprise and Sustainable Development is a fantastic initiative that will shine a spotlight on the ESG credentials of companies listed on the Malta Stock Exchange. Hopefully it will also send a strong message to local businesses and investors who can look up to the leaders of the industry and either benchmark ESG performance indicators or use such information to make sustainable investments. Although the first users will be the listed companies, I do not doubt that the Ministry will extend this platform to SMEs, whose ESG reporting requirements can be equally instrumental.

ESG practices are usually expected from large companies and corporations. How can family businesses and SMEs effectively apply ESG values? 

Thinking that ESG practices are exclusively for large companies is a very common misconception. The same misconception could be applicable to smaller countries like Malta when compared to giants like the USA, China and other EU countries. ESG implies the adoption of a sustainable development strategy for businesses. The first businesses, big or small, that will succeed in implementing a sustainable strategy are guaranteed to have access to greater market opportunities, beat competition, gain reputational advantages, mobilize financial resources and ultimately strengthen their relationships with its stakeholders. Let’s not forget that societies are made by consumers who are becoming more and more aware of the products and services that they buy, keeping sustainability at heart.

From your experience with family businesses and SMEs, what could be the hurdles hindering them from applying ESG values to their full potential?

Realistically speaking the biggest burden for family businesses and SMEs is to access the information and skills required to implement a sustainable strategy. Human and financial resources are the existing barriers of sustainable development.

Furthermore, the misconception that sustainability is important only for large organisations results with family businesses and SMEs fighting change rather than welcoming it. Another issue is the misconception that sustainability comes at a cost, to date there are plenty of initiatives sponsored by government to help organisations implement their sustainable strategies.

How can such smaller companies start applying some of the basic principles of ESG values?

The United Nations has already deployed the Sustainable Development Goals (SDG) and the SDG Compass. The latter is a guide developed through a collaboration among various government entities, private industries and communities to help organisations implement the SDG within their business models.

Further support is also available from government to mobilise finances for smaller businesses to access the necessary skills and services. Nowadays, the sustainable movement is very large and sustainable services and consultants are readily available to address any company’s requirements.

To what extent do you foresee this push will impact company’s CSR policies? Can ESG and CSR go hand in hand?

The economic theory defined by Friedman in 1970 describes the only responsibilities of a company towards society is to generate wealth. More recently, Michael Porter coined the term “shared value”. This concept considers the generation of value by companies while simultaneously generating value for society.

It is not a zero sum game where one party wins what the other loses; on the contrary, this is a win-win situation where company profits increase while simultaneously advancing the social and economic conditions of the communities in which they operate. This is exactly the extent to which ESG will impact CSR policies.

How does Tuning Fork assist companies in their ESG requirements?

Tuning Fork Advisory bring years of experience from having supported a large number of major Maltese corporates, SMEs, government entities and authorities in business process optimisation, competence building, people management, cyber resilience, data management, sustainability and risk.

We apply international best practice while looking into the unique and specific requirements of clients who come to us for business process re-engineering, business diagnostics, operational reviews, ISO certifications and environmental management. Ultimately, all these services can be oriented towards the deployment of a sustainable development strategy to prepare organisations meet ESG requirements. In return, we yield them more value through effective solutions.

E, S, or G….which is the most important in your own opinion?

ESG factors are a source of both risks and opportunities and this is why company directors should worry about environmental, ethical, social and governance issues. What are the possible impacts of climate events on infrastructure, supply chains or raw materials supplies? What are the possible impacts of getting on badly with the local community or of workers’ engagement levels?

Apart from legal aspects involved, is corruption a source of risk and additional operating costs? Answers take different forms depending on the industry. At the end of the day, it’s in every company’s interest to embrace a sustainable policy that prevents risks and embraces opportunity.