From ESG To Genuine Impact: A Sustainable Path To Effective Governance

Forbes

a day ago

Morten Johansen is the COO of DP World Americas.
At first glance, today's focus on environmental, social and governance (ESG) aligns with longstanding business principles. I've found this to be particularly true for supply chains, where ESG considerations run from labor rights to greenhouse gas output. In effect, corporate governance was integrating central elements of ESG well before the term gained popularity.
But ESG is more than a metric—it's also a pathway to resilience. In an era of compounding disruptions, I've seen how ESG-driven strategies can not only foster responsible practices but also serve as buffers against volatility. Whether it's supply chain disruptions, regulatory shifts or climate-induced resource scarcity, companies grounded in ESG principles are often better positioned to adapt, recover and thrive.
One proof point is found in an annual report from CDP, which determined that corporate liability for supply chain-related environmental risk could cost upward of $120 billion by 2026. Falling behind on this track could result in decreased competitiveness, exacerbated by the reality that these expenses trend 11.4 times higher than those associated with business operations. In other words, ignoring ESG imperatives directly threatens long-term resilience.
Understanding Inconvenient Truths
Amid our steep real-world challenges, there is a general consensus for enhanced sustainability efforts to address escalating global climate impact. However, business and government pledges to offset C02 emissions by nearly four gigatons by 2030 are falling short—by about 70%—of achieving the 1.5°C target set by the Paris Agreement. In recognizing these shortfalls, McKinsey Sustainability issued a leadership call to increased sustainable action:
• Decarbonized Assets And Value Chains: Companies reducing costs and emissions can gain market share, providing financial support for carbon neutralization.
• Climate Technologies, New Green Businesses: Demand for green technologies could generate up to $12 trillion annually by 2030 and facilitate innovations for a more affordable transition. Green transition funds, industrial venture capital and infrastructure growth funds could enable up to $3.5 trillion in annual financing by 2050.
• Socio-Economic Implications, Net-Zero Transition Tools: Understanding affordable energy access, investment requirements, jobs impact, growth, competitiveness, lived environment and health can help leaders better define pathways forward.
• Collaborative Efforts Against Environmental Threats: Public and private sectors, working with philanthropic organizations, can catalyze solutions.
• Early Action: Pace-setters can help define nature-positive progress.
These measures aren't only about mitigating harm; they're about embedding durability into the business model. ESG isn't charity—it's strategy. It's about safeguarding the future and adapting to what's already here.
Refocusing Sustainability
In my experience, staying grounded is important in a time when business leaders are being tugged between the hard financial realities of environmental fallout and the increasing number of legislative proposals that could restrict the use of ESG criteria in investments. While ESG filters provide an external benchmark, I believe that resilient governance requires business leaders to make a deeper commitment to stakeholders. Prioritizing sustainability—along with risk mitigation and cost-efficiency—can set companies apart and attract investors by bolstering regulatory compliance and contributing to long-term viability, flexibility and brand strength.
Holding Vendors Accountable
Addressing challenges with a balanced mindset is important, and I've found that authentic sustainability efforts can encourage consideration of market dynamics and lead to fair governance.
For example, the supply chain is ripe with potential. According to CDP, only 37% of suppliers hold vendors accountable for emissions reduction. Buyers play an important role in fostering transparency and optimizing processes among suppliers, so by recognizing the cost risks associated with environmental impact, leaders can advocate for sustainability across their networks and spheres of influence.
Resilience begins upstream. In my experience, when companies set clear expectations with partners and implement accountability mechanisms, they can reduce vulnerability to environmental, reputational and operational disruptions.
Use Cases: Google And Walmart
Google is at the forefront in adopting renewable energy for its data centers, meeting "67% of its data center electricity needs with renewable sources on an hourly basis" and even reaching about 90% in some facilities. Leveraging AI, they've pioneered cross-industry solutions, including the development of data center load shifting that optimizes energy-intensive tasks to bolster grid stability and align with abundant renewable energy periods.
Tying its sustainability initiatives to emerging technologies, Walmart employed blockchain tools to empower real-time traceability of perishable food products along its supply chain, from producer to delivery dock. This provided improved pathways for identifying the sources of foodborne diseases while boosting the efficiency of food delivery and reducing waste—wins for both the bottom line and the environment.
Frameworks For Sustainable Business
In order to boost your company's financial viability while yielding external benefits, I believe it's important to go beyond mere compliance and align with fundamental sustainability principles. These principles can also increase your organization's ability to absorb shocks, respond quickly to change and seize new opportunities in uncertain markets.
While each business approach will vary based on internal and external influences, here are three best practices for creating a unified framework that encompasses impactful sustainability programs:
• Integrated Reporting: Combine your financial and nonfinancial information to offer a holistic view of the company's performance, emphasizing its impact on various capitals.
• Sustainable Development: Align your strategies to the UN's Sustainable Development Goals to help address global challenges.
• Triple Bottom Line: Expand your bottom line to include social and environmental components; this can help hold your company accountable far beyond financial performance.
The pursuit of sound, broadly beneficial governance requires real and honest action. In many companies, earnings are the primary focus, which is why leading with strength, purpose and a low tolerance for rhetoric is important to delivering productive sustainability efforts. I believe that by keeping these factors in mind, leaders can steer their organizations on a clear path toward enhanced profitability, stronger resilience and meaningful contribution.
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