Yesterday, Millani had the pleasure of partnering with Mobilis Strategic Advisors, for a breakfast session to explore the link between ESG and corporate culture. Our Founder and President, Milla Craig, had the pleasure of moderating a panel which included James Cherry, Valerie Cecchini and Mary Larson. The discussion was inspired by the CCGG Director’s E&S guidebook, as well as the ICD.D’s recent paper on the topic.
Here are some of the key takeaways from our conversation.
1. ESG and the culture imperative
Business strategy and culture are inextricably linked. A good strategy will set out what a company wants to do, while a strong culture will allow the company to get it done. When strategy and culture are aligned, an organization can quickly identify the core risks, including ESG risks (i.e. employee turnover, cybersecurity or health and safety incidents). Once risks are identified, metrics can be put into place to ensure these risks are being managed and mitigated.
2. There is such a thing as a ‘good’ or ‘bad’ culture
It’s vital to determine an organization’s strategy in order to identify if a company has the appropriate culture in place, and if the culture helps to deliver the strategy. For example, an awards ceremony identifying staff that have excelled throughout the year can lead to better employee retention and a stronger culture, which anecdotally, can be more effective than rewarding bonuses.
Prioritizing deadlines at the expense of employee safety, selecting a CEO that doesn’t reflect the culture of the organization, or implementing compensation metrics that incentivize wrong behaviours are all concrete examples of organizations with a ‘bad’ culture.
3. Concrete actions from the top foster a strong culture
Boards play a key role in building a strong culture by clearly establishing the organization’s purpose, core values and desired behaviours. One of the first steps can be to identify appropriate compensation incentives, to ensure that behaviours are linked to the values of the organization (for example, bonus schemes based on high levels of employee satisfaction will encourage strong management practices).
There also needs to be solid trust-based relationships between the Chair and the CEO. It’s difficult to know what happens day-to-day so it is essential to implement strong communication channels throughout the organization.
4. Culture can be measured
Integrating a dashboard into Board meetings, with metrics such as staff engagement, turnover, client retention means that changes in culture can be measured. One of the best ways to instill a strong culture, is to show that the Board and the management team are living and breathing the company values. If staff see that the boss is interested, this will trickle down throughout the organization!
5. Investors can find value in assessing the culture of a company
A strong, sustainable culture is a powerful competitive advantage; something that can’t be copied by competitors. By assessing the culture of a company, investors can identify hidden value. There are several ways to do to understand the strength of an organization’s culture:
Assess the passion of the CEO and his/her core beliefs around an organization’s major projects;
Look for a strong sense of collaboration within the organization. A culture of collaboration can be quantitatively measured, for example, are options allocated in a fair and reasonable way;
Evaluate whether the company’s message is communicated coherently to different stakeholders (employees, shareholders, customers, etc.).
There are of course challenges when it comes to developing a strong culture. Changes can take a long time to produce results but the key is to keep an eye on sustaining a strong culture, rather than just talking about it.