The ground has been laid

Fabien Seraidarian
Director of Knowledge Transfer and of SKEMA Global Executive MBA, SKEMA Business School

The advent of the social impact company

While the acronym ESG is now established as a way to express the challenges of the Anthropocene, the study of acronyms is very revealing, reflecting different representations and rationales for action, as witness the categorisation used in the thought process.

The language and terms used influence our approach to the issues we face, and stakeholders often find themselves at loggerheads. In the political sphere, after regulatory legislation, ecological planning responds to the urgent issue of climate change. The same applies to the organisation and approaches implemented within a company, as shown by the analysis carried out, including the development of terminology and organisation (positioning, skills structuring, governance, etc.).

These conceptual changes are found in not only emerging academic fields, but also the development of communities (Weick, 1995). Literature on innovation and sustainable development has introduced several ideas like “eco innovation”, “green innovation” and “sustainable innovation” in different communities and geographical areas, leading to subtle differences in understanding and generating highly varied viewpoints and practices (Franceschini et al. 2016). The evolution of ideas and acronyms and the development of concepts help us to grasp the complexity of the pathway.

Though categorisations differ, three approaches seem to be at work: the sustainable company, the contributive company and the regenerative company:

Becoming a sustainable company involves change, i.e. identifying the actions to be taken in terms of practices and processes to comply with new standards. Guiding a more or less ambitious approach like this may require engineering, the management of multiple projects and centralised coordination within the organisation and a group of projects.
Taking up the challenge as a contributive company means going even further and mobilising to bring about a transformation that affects the organisation’s culture and strategic choices. This requires resources, investment and very often cognitive development of the teams. It also means accepting uncertainty and making mistakes. The idea is to make the organisation more ambidextrous (linking operational excellence and exploration) and uncouple the rationales for action. Transformation is primarily a managerial challenge that requires governance tools to initiate structural changes in steering the business.
Lastly, making the move to regenerative company status means committing to a paradigm shift that involves rethinking the organisation’s raison d’être and mission, and questioning employees’ relationship with work, as well as individual and collective responsibility.

ESG is a long-term undertaking, despite the desire and the need to achieve tangible results as quickly as possible.

Fabien Seraidarian, SKEMA Business School

ESG raises the question of value creation. It has long been established that it goes beyond shareholder and financial value, but characterising the forms of value creation means developing tools and calculation methods to provide metrics, so that reports can be made on the actions taken. How can a full picture be given of the social initiatives and innovations introduced by businesses? How can the impact on the planet of changes in the consumption of goods and services be assessed beyond the “simple” reduction of the materials used?

Yet there are more and more benchmarks, which can also be based on historical debates that seek to go beyond GDP as an indicator of wealth creation measurement. The various categories distinguish between the types of value creation. Here we can stress that there is a difference between economic value, which can benefit from strategic choices aimed at greater sustainability, and ethical value creation, which covers value creation forms arising from ESG initiatives involving environmental impact (reforestation, soil regeneration, etc.), social impact (impact on well-being and health) and governance (e.g. an institutional impact for the development of common goods).

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The diagram shows how value creation is structured according to the model. In the regenerative company approach, a distinction is made between “pure players” , i.e. native firms committed to a more beneficial ESG approach that is part of their DNA, and contributive companies that may seek to incubate structures, to create experience effects supporting the dynamics of transformation.

ESG is the result of a dialectic between the social and business spheres, and is becoming a (macro) process. The dynamics of the ecosystem are decisive: the role and position of stakeholders
co-evolve with the company.

Fabien Seraidarian, SKEMA Business School

This categorisation reveals several fundamental questions about the processes at work in the organisations we talked to.

The relationship with time. Firstly, the relationship with time is decisive: ESG is a long-term undertaking, despite the desire and the need to achieve tangible results as quickly as possible. It is also a complex process that involves developing rapid learning loops within the company. Experience shows that becoming a sustainable company is a prerequisite for then going still further and developing a positive net contribution incorporating the ecosystem(s). The companies that started out first have built up a competitive advantage, like Schneider Electric.
Skills and capabilities. All the companies set up training programmes, firstly to ensure acculturation to the various issues at stake. Whether achieved through awareness-raising modules or sessions like the Climate Fresco, employees’ awareness is a vital step in tackling companies’ responsibility and their environmental impact in the Anthropocene era. Training employees is the first stage in creating a shared discourse and facilitating mobilisation. But far beyond training, skills development is becoming strategic in order to create “dynamic capabilities” and help value chains evolve.
Organisation and governance. The companies have set up a specific and usually centralised organisational framework to be proactive and achieve results, bringing together the key skills needed to put their words into action and create impetus within the organisation. A strong link with the company’s governance often establishes the legitimacy of employees. Teams are generally on a human scale, given the challenges involved, with organisations counting on the leverage effect across the various activities.
Corporate culture. A company’s culture is decisive in accelerating the staff’s commitment and mobilisation, and authorising them to initiate projects and innovate, whether through regulated design or more exploratory approaches. In addition to regulatory requirements, ambitions in terms of ESG mean shaping perceptions and developing convictions that foster collaboration and collective intelligence. The company culture must also facilitate initiative-taking and innovation, and allow for the right to fail.
Investments and technologies. Though ESG has become “irrefutable” and the greenwashing era is over, strategies are faced with not only the ability to act and the complex challenges of change and transformation, but also the financing of transitions and the development of technical and technological solutions. The allocation of resources, strategic partnerships, the creation of ecosystems involving local and regional authorities, funding bodies, higher education and research institutions and market federations and organisations are all essential for creating a positive environment that supports strategic choices.

ESG is the result of a dialectic between the social and business spheres, and is becoming a (macro) process. The dynamics of the ecosystem are decisive: the role and position of stakeholders co-evolve with the company. Key players like non-governmental organisations, market organisations and federations, customers, suppliers, higher education and research institutions and agencies enable companies to move forward, push back the boundaries, develop new practices, devise new business models and give credibility to a raison d’être and mission in harmony with the living world. It is worth noting that the customer’s role is becoming more activist, enabling the economic sphere to be reconciled with society. NGOs in various spheres are taking both a political and a technical approach in supporting players in the different sectors. Suppliers are encouraged to turn the prevailing rationale on its head, take the initiative and show leadership as regards their principals, shaking up the hierarchy of value chains. Higher education and research institutions help to give meaning to technology and play a decisive role in innovative initiatives. ESG can thus become a major collective project, at least at the level of ecosystems, industries and regions.

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