Hong Kong, 9 September 2022 — No longer just a trend or a “greenwashing” PR exercise, Environmental, Social and Corporate Governance (ESG) has become one of the most important drivers of modern business – critical not just to an organisation’s brand and strategy, but to its investment appeal. Ignited by heightened corporate scrutiny from governments and consumers, and fuelled by increased investor recognition that ESG safeguards the company’s long-term success, it has arguably become the defining boardroom issue of the 2020s.

But many businesses in Asia are just beginning this journey, and even those with more experience would not claim full maturity yet. So what can you do to turbocharge your own company’s ESG delivery? How do you ensure your ESG strategy is practical and deliverable? How do you hire the right talent? What expectations should you have of a new ESG executive? And how can you put in place a strategy that works?

In this article, we will begin to explore some of those ideas within the overall landscape of ESG in Asia.

Boom in investments and increased demand for compliance

Evidence for the importance of ESG in Asia lies most clearly in the volume of ESG investments we are seeing (now an annual US$30 trillion globally) and the speed with which that figure has escalated in recent years (up 68% since 2014 and tenfold since 2004). We can also see it in the way the total investment value of ESG portfolios in the financial markets (“assets under management” or “AUM”) is ballooning. This has a critical impact in our region, as Asia’s AUM now promises to become a key driver of ESG growth globally – meaning a boom in ESG positions in the region. Research from Invesco, for example, predicts Asia’s ESG AUM will quintuple from $90 billion in Q3 2021 to more than $500 billion in the next four years.

National governments in Asia, too, are strengthening ESG-related regulatory mechanisms, in an effort to compel businesses to integrate sustainability into their operations. For example, as one of the top producers of palm oil globally, the Indonesian government has ratified The Indonesia Sustainable Palm Oil (ISPO) scheme. This prohibits further conversion of indigenous lands to oil-palm plantations and demands that farmers – from huge agri-businesses to local smallholders – achieve government certification in responsible land management, all in an effort to improve the sustainability of palm oil production.

ESG opportunities for businesses in Asia

All of this increases the demand on Asia’s companies to put real energy and investment into their ESG strategy and practice.

That is magnified by the region’s enormous potential for helping to alleviate the climate emergency, given that Asia has such a strong commercial reliance on both heavy industrial manufacturing (a key target of carbon-emission reduction) and large-scale agriculture (whose vast plantations often come at a cost to the region’s rainforests). In addition, while Asia’s growth in the last couple of decades has created development and prosperity, and raised millions from poverty, it has also left behind significant social challenges. It is incumbent upon multinationals who have benefited from their commercial positions in Asia to address these issues, such as enduring rural poverty, pollution, or labour exploitation.

Opportunities for ESG professionals in Asia

All of that makes this an excellent time to be an ESG professional in Asia – something that organisations (putting together a hiring offer) and practitioners (looking at their careers) should recognise: It is a seller’s market, careers-wise, with many more open positions than professionals to fill them. (True ESG expertise, in particular, is at a premium, and many organisations are unwisely filling senior ESG positions with mid-to-junior talent, such is the shortage of real experience.)

And it is an attractive career: There are real, human challenges to address as the region continues to grow, but also – thanks to the hunger of corporations and governments to accelerate ESG delivery in the region – vast opportunities to make a real and lasting difference to the lives of hundreds of millions.

In short, for the first time perhaps, ESG professionals can now enjoy both the will and the resourcing to make this happen, and can expect to see real impact from their activities. Meanwhile, a well-developed ESG strategy now allows senior professionals to contribute genuine financial and operative outcomes to their employers. And all this besides the other important roles ESG professionals can play in the region, dealing with issues like diversity, mental health and labour rights, for example.

ESG & business: What companies need to do

How, therefore, should businesses in Asia now be acting to strengthen their ESG position?

• Find the right skilled personnel: To devise and execute great ESG programmes, companies clearly need expert skillsets, especially at senior level. Do not make the mistake of thinking communications generalists will suffice – ESG is a highly skilled position, requiring specialty knowledge across several areas (investment, risk, regulation, reporting, environmentalism) that the average communications practitioner does not have. And the most critical thing: You must act now if you want the best talent because it’s a bear recruitment market for Asia’s companies right now, with vastly more open senior ESG positions than truly experienced candidates to fill them.
• Consider a split of roles: ESG professionals come in many shapes and sizes, so companies should consider exactly what shape of delivery they need, and how best to achieve it. Best-practice organisations, for example, typically divide their ESG teams between external and internal expertise. External ESG professionals would usually be responsible for activities like reporting, branding and external positioning; internal ESG more with due diligence, internal policies, employee awareness and project management between different departments. Where is your greatest need, and how will responsibilities be divided?
• How will you facilitate delivery: In most multinationals, ESG is already a key pillar of the overall global business strategy, so ensuring “strategy alignment” is less critical than it once was. What matters now is delivery. Even with the right skills and a clear link to business strategy, how will the ESG team be resourced to make sustainable practice a reality? What process roadblocks might need to be removed for them to be effective? What authorisation will you give them to make major changes to established company practice? It’s one thing to sign off on easy, short-term wins. It’s another to truly empower ESG professionals to change the whole way the business operates.
• Understand the reality of the job: That need to clear away roadblocks becomes particularly acute once you understand that an ESG professional won’t “deliver” sustainability in the organisation. They can only be an expert organisational facilitator. ESG is a company-wide activity, where the “actual work” is carried out by multiple teams – arguably, all teams in the organisation. A high-value ESG professional’s work therefore typically begins by building organisational awareness (of ESG strategy, policies, frameworks, values, etc) and then coordinating, overseeing and directing across multiple business streams. If they can’t move freely across the organisation, with the authority to redirect traffic, you won’t get value from them.
• Think beyond your own walls: In overall strategy terms, organisations must also consider the full value chain of their activities when wishing to improve their ESG. For example, although many multinationals have made great efforts to make their facilities carbon-neutral, it is of little real-world impact if the company uses thousands of external partner businesses – from unsustainable materials providers, to diesel-powered delivery companies – to get their products to market. So how can the business take its whole supplier and vendor ecosystem on the same journey?
• Plan for the future now: Companies can run hard at ESG initially, and then rapidly fade away when they consider that the work is now done. So as you commit to it, plan for how your organisation will move beyond short-term, headline-grabbing initiatives (planting trees, announcing new inclusive hiring policies, etc.) and begin putting in place measures today that will make lasting change over the long term. Such initiatives might have less PR impact today, so will excite fewer immediate passions, but in five years’ time they will enable you to present the company from a position of real strength.

The explosion in concern for the environment over the last decade, the refreshed interest in humanist challenges induced by the pandemic (such as employees’ work-life balance and consumers’ welfare), and the unique position of Asia to make a real difference to a sustainable commercial world, have all created a sense of urgency in the region for corporates to step up and actively drive sustainability. There is finally the financing, intent and wherewithal to make it possible. The critical differentiator now will be having the right resourcing in place, and the right strategy, to turn noble aspiration into lived reality.