Eager to join the ESG bandwagon? This ESG consultant will help you crack through sustainable investing
Written by Manvi Pant
Environmental, Social, and Governance (ESG) has been around for decades, but the domain has gained greater significance recently in the wake of several life-altering events, including COVID-19. After the pandemic left many vulnerable, businesses across the globe started to include climate-related risks in their operations. The ESG narrative earned a center spot in global sustainability conversations and became essential to building a resilient future.To understand how Environmental, Social and Corporate Governance creates value for businesses and how to turn ESG theory into action, The Sustainability Brands Journal caught up with Sofia Assab, an ESG Consultant, advising a wide range of large and mid-level companies on ways to develop their ESG strategy. Sofia graduated from Columbia University’s Sustainable Development Program, a program she entered following her profound personal experience observing the Western world’s impact on other cultures and societies. While at Columbia, Sofia also co-founded a tech startup working to make the cloud open-source and more efficient.
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Sustainability Brands Journal: What are you working on at the moment?
Sofia Assab: I’m currently working as an ESG consultant at Withum and co-founding a start-up in the tech space, working to make foundational infrastructure more efficient. Though the start-up is still in an early stage, I can confidently share that our work is guided by the belief that the environment is a stakeholder and our technology is being built with a more sustainable future in mind. When I’m not working with companies to improve their ESG profiles or doing research for my start-up, I’m working with students at the Columbia Earth Institute to bring more sustainability voices into the spotlight.
SBJ: ESG is complex yet in the recent years it has gained strategic importance for nearly all organizations. For someone who is new to the concept, can you explain why is ESG important for companies?
SA: When I started working in ESG, I saw it as a means for companies to declare their “environmental values.” In other words, I was under the impression that companies focused on building an ESG profile were doing so because they intrinsically cared about the environment. This may be true for some companies, but not all. The best way to understand ESG in the private sector is to realize that it’s guided by “monetary value.”. Though I hope to see a shift in measuring this “monetary value,” we have collectively agreed to measure using a monetary system. Since almost all companies still measure their success using monetary value, ESG initiatives must also fit into that measurement system.
However, customers favor companies that support a sustainable and transparent supply chain, which helps companies win market share. Others think of ESG in terms of risk management. Regardless of how the term is currently understood, more and more companies are beginning to realize that they are putting themselves, their shareholders, and their customers at risk by not partaking in ESG due diligence. For example, if a company decides where to build a new facility and doesn’t consider ESG, it may choose a location at high risk of sea level rise or other natural disasters. This would likely undercut their investment and make the company lose in the long run. In short, it’s not only better (and essential) for our planet that we change our current practices, but better for our business as well.
SBJ: Given there is a lot of noise around ESG – How do you think it drives value creation for companies foraying into sustainability?
SA: The noise and the uptake in the ESG space comes mainly from the fact that investors and companies alike no longer want to put their money into companies that aren’t taking the need for sustainability and human well-being seriously. Any company that enhances its commitment to the environment and its people will likely see more stakeholder interest (and, therefore, more value).
My observation is that those investing in ESG will see prolonged success than those not taking ESG profiles into account. There will be increasing regulations put on companies to stay within specific benchmarks. The companies/institutions that are proactive with tracking and reporting will be way ahead and avoid potential fines and reputational damage.
SBJ: Do you feel driving the ESG agenda mean sacrificing company revenues? To put it simply – can companies pursue an ESG strategy and perform well?
SA: I think there is a huge misconception around ESG that “being more sustainable and taking employee /community welfare into consideration will sacrifice profits.” On the contrary, from what I’ve seen in my work and from the trends, ESG’s due diligence is like any other. It helps companies make more informed and, therefore, oftentimes more profitable decisions. Many believe that the best way for companies to achieve long-term profitability as we move into a world more and more affected by climate change is to adopt an ESG policy ASAP.
Let me share an anecdote with you. I recently attended an investor conference where investors discussed choosing between similar companies and someone shared this example: say you have three different companies, one that had no sustainability/ESG initiatives, one that was doing the bare minimum, and one that was working to patent a new product to make their manufacturing process more sustainable. An intelligent investor will always pick option three because though their costs might be higher upfront, there is a higher opportunity for longevity and growth. I’ve seen that companies/brands that take sustainability into account have higher sales and more interest from customers and investors.
SBJ: Is it possible for companies to measure their ESG Impact?
SA: Yes and no! Many groups offer “ESG ratings,” but each rating service uses different metrics, and many find these methods opaque and questionable. I would say that the best way for companies to measure their ESG impact is to track their improvements in their ESG practice over time and measure against themselves. Monitoring and measuring company practices are imperative to developing a strong ESG profile.
Currently, there is no standard reporting of ESG metrics, making it very difficult for rating agencies to give an accurate picture of how effective a company’s ESG strategy is. I am waiting for the day when all companies are legally required to report their ESG data. The conversation right now is around how new technologies, such as the blockchain, will allow for increased corporate transparency, which is what we need to ensure we are doing our part to mitigate and adapt to the climate crisis. In the meantime, rating agencies must be paired with more qualitative methods to give consumers an accurate picture.
SBJ: In your role as ESG Consultant, how do you help companies analyze ways in which they can improve their sustainability footprints?
SA: At first, we ask companies to track their current practices. Once we have a good understanding of how the company is functioning by reviewing its materials (imagine an investigative journalist going through paperwork to find a common thread), we develop a roadmap for the said company to improve its sustainability footprint. This differs significantly for each company because each sector interacts with the environment differently. For example, if we’re working with a food company that relies heavily on refrigeration (one of the most intensive greenhouse gasses), we suggest they switch to a more sustainable refrigerant. On the other hand, if the company had no products but instead invested in different companies, we would help them develop a responsible investment (RI) policy to help them make more informed and future-forward deals.
SBJ: The past few years have seen a rapid acceleration in the ESG agenda of several companies, do you think there are some risks involved too? Is yes, then can you suggest some risk management strategies for companies to tread this path carefully?
SA: The only risks I’ve seen in the ESG space come from the misconception of what ESG means. Both politically and through greenwashing tactics, ESG has unfortunately been misconstrued to mean something it doesn’t. ESG is all about reducing risk and creating long-term value. That being said, I think the best risk management strategy to keep politics and greenwashing out of the ESG space is for those working in the field to promote transparency and to remind people ESG principles are not the same as impact investing or values-driven missions.
Even though there are countless conferences, articles, and posts about “what ESG means,” I still find that most people are confused by the definition. Perhaps the best way to demystify the meaning of ESG is to understand that it is not a thing in itself – it is something to be applied to investment strategies and business practices. There is much more to do to create a more sustainable economy than just applying ESG due diligence to business, but I believe it’s an excellent place to start.
SBJ: One of the things, our audience would love to know from you – what are some of the top ESG trends to watch out for?SA: As companies increasingly adopt ESG, there will be a drastic increase in regulations (which is a good thing!). A trend that we’re going to see in 2023 is that companies stating they are ESG without the evidence to back it up will be sanctioned by the SEC and other regulatory bodies. Therefore, companies will take more care and caution when publicizing their ESG metrics.
Manvi Pant is a writer with The Sustainable Brands Journal. She has worked extensively at the intersection of corporate research, academics, and media in a decade-long career. Passionate about narrative and informative storytelling, Manvi uses both as mediums to make an impact. She proudly calls herself a conversation starter, hates keeping a business card, is a fan of Marie Condo, and admires a classic literary piece in a world filled with fluff.
