Being efficient, effective and relevant have always been the hallmarks of successful internal functions.
Yet many organizations find it is a challenge to enhance internal functions that are operating reasonably well but may not be fully consistent with new or emerging business realities.
Obbagy Consulting offers Performance Assessment Services to assist organizations maintain their sharp edge on the business relevancy of internal functions, specifically we focus on the environmental and social management function.
We don’t try to reinvent programs or practices or recommend actions that are disconnected to company culture. Instead, we focus on identifying hidden strengths and internal connections that can be leveraged in a practical and actionable manner to sustain performance and increase the return on investment.
Our approach is to review a broad array of data and analyze it relative to the environmental management function’s integration with organizational processes, risk management strategies, communication channels, and license to operate.
For example, a mining client had an evolving business strategy that included increased focus on local economic development to improve supply chain management. The assessment recommended that the environmental management function increase its presence as a community sustainability trainer as a way to connect to local businesses.
For a retail client, we suggested that the company consider identifying employees to be community ambassadors speaking on behalf of the organization but also to understand current trends, thoughts, and to obtain informal feedback on storefront operations.
Our expertise is based on more than 25 years assessing programs and practices for industry leaders and governmental organizations across the globe. We have worked in more than 20 countries.
Let’s come to our senses about the future. Today we have cleaner air, cleaner water, safer workplaces, and more responsive waste disposal practices. Assets under management that apply many methods to environmental and social governance (ESG) investing have grown to an estimated $23 trillion globally, an increase of more than 600% over the past decade. Stakeholders are appreciative of these efforts and investors have recognized the need.
Why role back the clock? Let our ESG legacy be one of leadership for responsible resource management so that future generations will be able to prosper and look back at and say thank you for all the hard work and letting us tackle the next big issue.
At every opportunity we should share with our elected officials and stakeholders the value we place on strong ESG practices and the lack of scientific evidence to roll back ESG policies and regulations.
Through the identification and control of ES risks, implementation of outreach programs, and setting realistic regulatory budgets, ESG has been good for society. Our legacy, if we choose it, will be one that has:
 Sustainable Funds US Landscape Report, Morningstar Research, January 2018.
 Core Values and Environment and Social Governance The Building Blocks of Performance, Obbagy Consulting, 2015.
As the Managing Director of Obbagy Consulting I have had the opportunity to travel around the world on behalf of corporations, governmental agencies, and for business development purposes.
What emerged from conversations with factory workers, miners, managers, senior executives, and governmental representatives in the US and abroad was a shared interest in embracing the policies for a better tomorrow.
Yes we all had different opinions as to strategy, but the underlying sense of mission was to preserve the environment, improve the lives of working men and women, and demonstrate a commitment to equality so that we can all touch the envelop of prosperity. Tensions emerge when perceptions of these core valves are stressed.
We change, we grow, and we welcome actions for impact. Our test will be to find common ground for moving forward to help build upon the incredible strength of people around the world. I believe we can achieve a better tomorrow as we have done in the past through incremental innovative pragmatism.
Clearly there is a growing need/desire to quantify the value ESG creates for organizations engaging in sustainability programs. Investors, governmental representatives, citizens, and others want to understand in a clear and concise manner the performance of sustainability efforts and return on investment.
From my perspective there are two dimensions to this challenge. The first one is focused on understanding the financial implications of sustainability initiatives relative to the efficient use of resources, employee wellness, and social equity. The Sustainability Metrics Calculator is a tool designed to address this dimension. The calculator translates environmental and social actions into financial terms. The outputs depict the competitive effects of sustainability efforts. The data analytics establish a benchmark confirming current activities or the need to improve the management of environmental impacts and employee/social initiatives for more synergy and greater return on the investments.
The second dimension is quantifying the ESG value that is being created by an organization. One way to think about this dimension is to acknowledge that many leading organizations within the heavy industry category create ESG value over a period of years. They do so by implementing a series of incremental actions that reduce impacts on natural resources, create jobs such that employees are treated fairly across the globe, and target sponsorships and grants towards activities that lead to positive social, educational, and environmental outcomes.
Alternatively, organizations such as retailers or consumer product manufacturers create EGS value by implementing strategies focused on green buildings, eco-friendly product selection, public reporting, and the nature of charitable giving programs. Similarly organizations manufacturing products requiring design approval or certification, create value through establishing a record of compliance, safety and quality of goods and services that underlie product positioning.
Year over year improvements by leading heavy industry, consumer product manufacturers, and retailers, for example, sustain the license to operate and contribute to growth and expansion.
In brief, the two dimensions for quantifying improvements and value are linked. To achieve sustained positive impact organizations need to continually monitor activities and engage in program changes over a period of time. Managing ESG issues is a key determinant of success and value creation.
McKinsey & Company’s June 2016 article entitled Sustaining sustainability: What institutional investors should do next on ESG was certainly thought provoking. Organizations of all sizes and configurations have been grappling with the issue of ESG for more than 20 years. However, it is clear today that we have come a long way in integrating ESG into business activities. Discussions such as those presented in McKinsey’s article and those being undertaken by individuals and organizations associated with the Principles for Responsible Investment (PRI) underscores this observation.
There are, however, some time tested activities to help rejuvenate, launch, or explore how ESG creates value for an organization that may be extremely relevant today for organizations and investment decision-making.
A recent ESG survey completed by Obbagy Consulting overwhelmingly revealed environmental and social professionals affirm that ESG audits should look at past, current, and future programs and practices. This seems consistent with the notion that by assessing activities over a continuum of time, organizations position themselves to better identify trends related to vulnerabilities and uncertainties associated with their operations, ethnic diversity, community projects that may impact future performance. By assessing activities along a time continuum, this in turn creates value by identifying:
The global economy has created changes in the way organizations communicate and share information. As organizations build new partnerships, they are making incremental changes to reshape the nature and form of employee training and capacity building. ESG training, if designed and implemented appropriately, can build on past successes and best practices to help create value through innovation and efficiency. In addition, employees participate in community programs, take part in parent-teacher programs, attend church groups, or enroll in community education programs providing an informal avenue for obtaining information to improve practices and increase the return on investment and value to the organization.
The Sustainability Metrics Calculator is a modeling tool designed to measure the business value of sustainability activities. The calculator translates environmental and social actions into financial terms. The outputs depict the competitive effects of sustainability efforts. The data analytics establish a benchmark confirming current activities or the need to improve the management of environmental impacts and employee/social initiatives for more synergy and greater return on the investments.
The interpretation of the financial outputs also can lead to a more in-depth analysis of the character of the sustainability portfolio. For example: 1) Decreasing fossil fuel consumption reduces carbon emissions and impacts to the environment; or 2) Purchasing protected land as an extra component of a project creates carbon credits and contributes to climate change mitigation. In short, the tool provides concrete data to help generate additional value for an organization.
Years ago several of my colleagues promoted the concept of Pathway to Mastery or building knowledge to improve environmental and social governance (ESG) performance. Today, the concept is still valid as companies and organizations strive to improve ESG to address governmental mandates and increasing investor requirements.
The process is straightforward to meet this challenge. Engage your employees in training with the expectation that in the near future they will be ambassadors for the organization clearly articulating sustainability programs and results, or providing the skills to be in a better position to incorporate ESG into day-to-day business decisions and effectively leverage customer/stakeholder interests in ESG activities.
I would like to share with you some thoughts about potential environmental and social (ES) trends in 2016. These predictions are based on the momentum that has been building over the past several years in the areas of sustainability, energy, education/capacity building, and water.
Please share with others or email me your ES trend predictions for 2016.
Sustainability: Based on the success of COP21 and the efforts of various business groups and investors to raise awareness about environmental and social governance (ESG) issues, we anticipate that organizations will review, update or launch enhanced sustainability initiatives with a particular focus on ESG reporting, energy consumption, reuse of materials, and employee volunteerism.
Energy: Cites will take the lead in exploring renewable energy options, natural gas will be recognized as the transition fuel (suggested by energy forecasters years ago) as economies around the world evaluate climate change options. There will be more news about improvements in the design of the internal combustion engine and progress will be made in providing energy to the developing world (a key component in reducing poverty).
Education/Capacity Building: Midway through the year, organizations will start implementing changes to education and capacity building programs. These changes will include a greater emphasis on climate change, gender, and human rights especially with respect to the developing world and supply chain management.
Water: This year will be one of reflection and learning from the events of 2015. By the end of 2016 various analyses will be available regarding strategies for addressing drought conditions, climate adaptation, and rainwater harvesting programs for use in both developed and developing countries.
The mission of Obbagy Consulting reflects the many conversations with factory workers, managers, and executives around the world, including those in developing countries. All provided a window into the mindset of sustainability. That is, a desire to live in a world with better health and safety services, reduced environmental impacts, or increased connection with constituencies and local organizations.
Through our environmental and social (ES) evaluation, capacity building, or sustainability project assistance services, Obbagy Consulting works with clients to increase performance and better align practices with environmental and social governance (ESG) requirements to achieve more sustainable and long-lasting program or project results. These are key issues for investors and stakeholders.