By Keith Pearson, AVP, Financial Services Industry Go-To-Market at ServiceNo
The UK government has outlined its plans to put sustainability at the forefront of its agenda, and this requires putting pressure on businesses. The government is not alone, as many others are pushing for changes to the system. Employees, customers, and investors are putting pressure on businesses to implement more sustainable practices.
Yet most executives (58%) have little or no confidence in the reliability of their current ESG (Environmental, Social, and Governance) programs, according to a report from OCEG. The disconnect implies that the C-suite is a long way from meeting the expectations of stakeholders. But as executives grapple with offering exceptional services to consumers, while also identifying ways to reach carbon neutrality, sustainability can often take a back seat. Companies that do not put the environment at the heart of business priorities will face a backlash.
This is especially important for the financial services sector, which is built on one fundamental principle: customer relationships. Entrusting an organisation with finances requires a great deal of assurance, and if a client does not feel like a business will support them adequately, they won’t remain a customer for very long. Traditionally this relationship was based on how the customer felt they were treated personally, but consumers now expect companies to take stances on wider issues and to be aligned with their beliefs.
This shift in attitude aligns with many people’s growing desire to help improve the world as well. According to a Deloitte survey investigating consumer attitudes towards sustainability, nearly a third (28%) of consumers have stopped purchasing certain brands or products, because they had ethical or sustainability-related concerns about them. Very few companies can afford to lose almost a third of their customer base, especially in an industry like finance where competition is stronger than ever. Sustainability within the sector therefore simply cannot be ignored.
The benefits of strong sustainability strategies do however go much further than keeping customers happy. According to McKinsey’s research, successful ESG programs are tied to five core advantages. These include: higher top-line growth, reduced costs, minimised regulatory and legal interventions, higher employee productivity, and optimised investments and expenditures. Thinking of the environmental impact of business is no longer just a CSR initiative; it is essential to both financial and strategic success.
Setting goals for the future
Despite the immense pressure from stakeholders, designing and implementing a sustainability strategy will not happen overnight. To help accelerate the changes, financial services businesses should look at existing sets of standards, such as the ones set by the Sustainability Accounting Standards Board or the World Economic Forum. These organisations help create guidelines and goals which can then be adapted to suit the business’s overall objectives. If a business is accountable to industry-wide guidelines, it will have a competitive advantage against those not following the same standards.
By aligning with these guidelines, businesses will also display their commitment to employees. Given that, 65% of employees would be more likely to work for a company with robust environmental policies, green policies are more likely to help retain and attract talent. This is essential given that there were 40% more financial service jobs available in the fourth quarter of 2021 than in the same period of 2019. Being aligned with employee beliefs is also likely to help boost morale and productivity in the workplace. Employees feel a sense of purpose within their firm, as well as a positive affirmation for the customers they serve.
Demystifying the data
Just like every other part of a business, data holds the key to sustainability strategy. The challenge for many organisations is the lack of integrated data-collection methods, reporting and related processes. Many of the component parts of ESG are scattered throughout operations and corporate departments. As we’ve seen in other areas of financial services, the silos need to be broken down so that the data can be analysed collectively to show the value of sustainability initiatives.
Having a clear overview of data can also be a powerful tool in communicating with stakeholders to show a business isn’t just talking about sustainability, but also making a tangible difference in terms of hitting sustainability goals. The initiative can strengthen investor relations, build better relationships with customers and employees, and boost overall brand reputation. This can help financial services companies stand out in such a competitive market.
It’s time for change
Being greener and more sustainable is something that will impact every part of our lives. The key for the financial sector is to remember that their employees and customers are watching. While committing to an ESG strategy is a step in the right direction, it isn’t enough. Stakeholders – especially employees and customers – want to see action and they want to see it now.
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