Ash Modha is the CEO and Co-Founder of Certified B Corp, Mondetta Clothing, and dedicated to ESG, sustainability and social impact.
The power of environmental, social and corporate governance (ESG) has emerged as a game-changer in the business world and enables corporations to promote sustainable development and contribute positively to the community. A clearly outlined strategy can bolster a company’s image, increase market share, attract the best talent and cultivate lasting ties with significant stakeholders.
In my 37-year tenure in the garment industry, I’ve weathered four recessions, navigated through two private equity flips and even bought back our company. During this time, I’ve observed substantial changes in the apparel industry.
Early in my career, North America was an apparel production hub, but the World Trade Organization’s 1996 agreement set a wave of outsourcing in motion. By 2005, foreign production quotas were removed, leading numerous companies to migrate to Asia, pursuing lower manufacturing costs. We found it difficult to compete with more established brands in New York or California; however, we turned best-in-class compliance into our core strength to establish our position in the industry. The rush to offshore production saw the emergence of factory compliance and labor conduct issues, problems that continue to persist in the industry to this day.
In recent years, a new frontier has emerged: ESG. Beyond its social and governance facets, it emphasizes the importance of becoming cognizant of and reducing environmental impacts. ESG has quickly become a fundamental consideration to companies of all sizes across various industries.
Previously, many believed pursuing ESG goals would be too expensive to implement and reduce an organization’s ability to compete. However, studies show that a clear ESG strategy has myriad benefits for companies willing to put in the work. Research by Bain & Company and EcoVadis found that companies with a clear ESG strategy outperformed those without. And as climate crises worldwide grow in frequency and devastation, I believe that soon, governments will begin to mandate ESG and carbon reduction as a facet of regulatory compliance. The question now becomes not if a company should invest in ESG but rather when.
It may sound daunting, and you may already be imagining the outsized expense of pursuing ESG initiatives. But the costs to do nothing will be even higher. To be sure, embracing ESG takes time and concerted effort and requires a commitment to continuous improvement.
Here are six essential steps toward embarking upon this journey.
1. Mandate ESG at the senior level.
Companies can’t simply make this about PR events or tasking internal committees to “deal with it” while executives maintain profit or stock price as their only motivation. C-suite executives have to lead the charge to remain engaged and communicate clear objectives, reasons why and desired outcomes along the way. From the CEO to all the employees, it has to be a company-wide initiative.
2. Build a team of specialists and ESG leaders.
The goal of the team should be to establish, monitor and evaluate goals as initiative implementation occurs. Supply chain experts with extensive knowledge and experience who understand the complexity of these significant issues are well-equipped to understand ever-evolving and complex regulations.
3. Find the right external partners to help with data collection and footprint evaluations.
For example, the Sustainable Apparel Coalition has recently received negative press coverage in the apparel industry. That doesn’t change the fact the tools they created allow apparel makers to conduct in-depth supply chain assessments that assist in pinpointing precisely where improvements and changes must occur. Organizations such as the SAC help companies establish baseline performance upon which ESG goals can be set.
4. Set realistic targets and objectives.
Once a company has collected and compiled all applicable data, the next step is to set realistic targets and objectives to guide the journey as it progresses. Becoming overly ambitious is a recipe for disaster. Failure to reach lofty goals can result in disappointment, leading to journey abandonment and wasted investment. Stay grounded and build on past wins and successes to expand efforts in the future.
5. Be transparent.
Making claims of doing better is one thing; proving it and showing results is another. Avoid allegations of “green-washing” or “performative allyship” by sharing data and information openly. Any company with a clear ESG mandate should be able to publish its ESG journey outcomes to consumers, the media, industry agencies and staff. Doing so provides accountability, keeps goals clear and focused and establishes your organization as trustworthy with a legitimate commitment to ESG efforts.
6. Stay flexible.
When starting the ESG journey, remain flexible and maintain the ability to alter the course as required. Allow your team to remain adaptable and agile to redirect efforts and resources when challenges arise. New benchmarks will arise, novel forms of technology will emerge and norms, once considered set in stone, will erode as time passes. As the paradigm shifts, your organization must follow the change in tide or risk being swept out to sea.
In conclusion, creating a plan to launch an ESG journey can not only help the environment, improve communities and have an overall net positive in general, but it can also improve your company’s operations, eliminate inefficiencies, reduce waste, create a more positive brand image and encourage increased consumer brand loyalty. By making ESG an integral component of your brand’s mission, you can effectively demonstrate a commitment to change and do your and your company’s part to alleviate the challenges that face our planet today.
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