The University of Melbourne hosts industry leaders for insightful Environment, Society & Governance (ESG) breakfast briefing

ESG’s growing influence cannot be overstated. Essentially, a set of metrics organisations must now use to assess their environmental and social impact, a robust ESG framework not only empowers companies with the resources to help build a more sustainable future, but it can also promote employee wellbeing and is crucial for attracting investment from stakeholders who want to support companies that are proactive in their approach to ESG.

Led by Professor Daniel Samson, a renowned expert in business innovation and strategic leadership at the University of Melbourne, the breakfast briefing took place on the morning of July 25 at the University's Woodward Conference Centre.

Professor Samson delivered a comprehensive and engaging presentation to industry professionals that focused on current and future trends shaping the ESG landscape.

Beginning with a deep dive on the origins of ESG that took in American economist Milton Friedman’s  influential 1970 essay, The Social Responsibility of Business Is to Increase Its Profits, a doctrine that was embraced by corporate America before the 2008 Financial crisis and Global Recession led to a revaluation of Friedman’s theory and greater industry alignment with emerging ESG initiatives.

Professor Samson’s presentation reinforced the importance of ESG to the future of organisations, economies and the environment, highlighting that ESG should be viewed as far more than just compliance with new regulations and standards, but should in fact be used as a value-added tool that helps businesses build positive relations and capture investor interest.

“ESG can and should be about much more than just meeting minimal compliance requirements," said Professor Samson after the breakfast briefing.

“It can and should be very much about performance and improvement of the organisation’s non-financial metrics, and this can be done in such a way that it also creates positive value in terms of the financial outcomes. I am reminded of the phrase: ‘Doing well by doing good’ And this is where smart executives carefully choose their ESG initiatives such as to achieve this.”

This is particularly eye-opening when you consider the market share in ESG investment.

According to a 2021 report by Reuters, the total amount of money invested in global sustainable funds reached a new high of $3.9 trillion during the third quarter of that year, while a separate 2021 survey carried out by US investment firm Federated Hermes found that 81% of investors strongly consider ESG factors in their investment process.

“In the major investment markets of Europe, USA and Asia, there has been a significant shift in the past few years of where professional investors are directing their funds flows and a lot of it is moving into ESG oriented or ESG active funds.” Professor Samson said.

“We also see other stakeholders, including consumers and employees, who are increasingly expressing their preference to buy their goods and services from, and to work within organisations that are proactive in their ESG activities. Hence ESG strength is becoming a source of competitive advantage in labour and other markets.”

Key to Professor Samson’s presentation was the inclusion of an evidence-informed ESG Excellence Framework. The framework unpacked practices and initiatives for understanding, articulating, and reporting on ESG considerations, measuring results based on reduced business risk, higher alpha returns, and investor attraction.

“To really get a good handle on ESG performance as against the ESG compliance of an organisation, I developed a comprehensive evaluation framework that allows an organisation to assess its strengths and weaknesses on the many categories and elements of ESG and moreover, my framework adapts measurement scales from the American Business Excellence Framework to the present ESG context so that these can be scored.

“We can rigorously mix the quantitative elements of ESG performance with the qualitative or descriptive elements. This system provides a comprehensive ESG report at the organisational level which can be used for many purposes including communication to internal and external stakeholders.”

Guests at the breakfast briefing were given an opportunity to put Professor Samson’s methodology into practice by rating their own organisation’s current ESG policies, responding to prompts that included “planning for ESG progress,” “lowering emissions and pollution,” and “ESG as part of organisational values and strategic intent,” before sharing their responses with the wider group.

Professor Daniel Samson delivers his ESG presentation to guests at breakfast briefing.

To assist with this activity, participants were first guided through a sample industry-standard ESG summary scoring chart for Toyota that included all the key metrics used to measure practice, initiatives, and outcomes across five categories and 23 subcategories that rate ESG performance.

“Ultimately, the reason we should all be interested and indeed excited about ESG is because it's all about improvement in performance and not just minimalist compliance. Improving the ESG outcomes of an organisation allows for the strong alignment of the organisation’s stakeholders’ interests and outcomes, which is a big change from the 50-year-old predominantly shareholder domination view.” said Professor Samson.

As the session progressed, Insights and strategies on leadership practice within an ESG context became central to the discussion. Points of focus included how well top leaders and executives set clear organisational values, act to respectfully empower their workforce, and role model good ethical behaviour. These topics were particularly relevant for an audience that included senior industry leaders.

Professor Samson believes that these kinds of conversations not only educate and inform stakeholders about the importance of ESG, but also offer a platform for organisations to share ideas, strengthen partnerships, and plan future collaboration.

“I don’t think its [ESG] necessarily going to be called ESG in a decade or two,” said Professor Samson post-event.

“But the core idea of doing well by doing good will not fade away. It’s been proven, for example, that how well you integrate employee wellbeing into your ESG approach goes a long way to determining how successful your organisation is.”

Professor Samson finished his presentation by recalling Toyota’s 2014-17 response to the closure of its last Australian car manufacturing plant in Altona North – which resulted in more than 2,700 redundancies.

The company spent nearly $40million on upskilling and reskilling initiatives, preparing their people for life after Toyota. Professor Samson remarked that he had spent two years studying Toyota’s exit strategy from the Australian market and had access to senior managers at Toyota throughout the transition.

He was curious to know how they measured the return on investment (ROI) for $40million.

The response from Toyota management?

“Danny you’re asking the wrong question, we’re not doing this to get a shareholder return, we’re doing it because of our core principle of respect for our people.”

Professor Samson cited this as a great example whereby ‘doing good’ gave that company a great ‘doing well’ outcome, as shown by Toyota’s leading vehicle quality, market share, customer satisfaction, and shareholder value creation.

The University of Melbourne provides comprehensive training in ESG for organisations seeking a broad range of skills in sustainable practice. Find out more.