Industry Insights

Values-based leadership is the key to a successful ESG strategy

Posted by John Wills on Jul 20, 2023 12:33:01 PM

Aligning your ESG goals and activities with a well-defined set of positive values will allow you to generate the greatest possible impact.

What is values-based leadership?

Put simply, values-led leadership is when the leaders within an organization refer to a well-defined set of positive values for motivation and direction.

What constitutes a ‘positive value’ may vary depending on the type of culture that stakeholders within the organization wish to develop, and depending on the goals that they wish to pursue. But, in general, positive values can be said to be those that create a more harmonious, welcoming and productive working environment.

Read our article on 10 values for a great leader to embody to find out more about what types of values transform a good leader into a great leader.

Organizations may wish to change to a leadership style based on positive values as a way of beginning to address a specific issue in the organization: whether that is employee retention or gaining stronger trust from customers.

However, values-based leadership is intimately tied to environmental and social impact, and good governance, which play an increasingly important role in business decision-making at every level.

What is ESG?

ESG refers to an environmental, social and governance framework through which organizations can measure and manage the impact of their work and maximize positive outcomes for all stakeholders.

This includes careful consideration of employee health, safety and work-life balance, customer satisfaction and equity, and the environmental impacts of what the organization does.

What does ESG have to do with leadership values?

When leadership is not informed by a strong set of positive values, ESG can easily become a box-ticking exercise in which metrics for success are decided upon, targets are met, but no meaningful systemic change is achieved. On the other hand, being led by a clear set of values allows an organization’s leaders to reflect on the true purpose of their ESG goals, to look deeply into the environmental, social and governance questions that matter to them, and assess whether their actions align with their values.

What are the benefits of taking ESG seriously?

ESG can create a number of benefits for organizations when they sincerely embrace its implementation.

You can find out more in our article ESG and value creation.

By reducing waste and improving operating efficiency, ESG can lower overheads and help avoid incurring the costs associated with an organization’s environmental impact. Because having a large carbon footprint is increasingly expensive for organizations.

Putting an ESG framework in place, and constantly upgrading that framework to align with positive values, is an effective means of risk mitigation, helping avoid financial dangers such as environmental fines, legal action or reputational damage.

Because of the factors mentioned above, ESG is increasingly important to investors, who want to have confidence in the long-term financial sustainability of any organization they invest in.

Furthermore, values-led decision making is increasingly influential among investors themselves. This means that, beyond being interested in the immediate business case for ESG, ‘impact investors’ choose where to put their money based on an organization’s alignment with their own set of values.

ESG is important to customers too. Given the choice between spending money with a company that is committed to ESG and one that isn’t, customers are more likely to place their trust in the former, knowing they will likely experience better service, be supporting a conscientious employer, and will be able to minimize their environmental impact.

How does being guided by values improve teamwork?

A leadership style informed by strong positive values has several benefits related to ESG. And many of these benefits are most strongly seen in the way the organization’s team works together.

Agreed upon and shared values help to create a sense of mission within a team. This sense of mission inspires team members to put their best efforts into their work and encourages them to support one another as a cohesive unit.

Furthermore, employees that have a sense of purpose and that believe their organization is a force for good are likely to remain more loyal to that organization. This means that leadership led by a strong set of positive values can directly improve employee retention.

Find out more about the importance of ESG to talent engagement in our article on the topic.

How do I embed positive values in my team and become a leader in ESG?

A good place to start is by talking to your team about their personal values, how these values relate to the way they conduct their work, and where the organization may be falling short in aligning with the values held by the people within it. Simply by doing this, you may begin to see some benefits. Showing that, as a leader, you’re informed by a well-defined set of positive values, and that you recognize the values that are important to your team, can make a real difference to morale.

But sometimes just talking about it is not enough. Everyone prioritizes their values differently. And values that seem important when talked about in the abstract can have complex real-world implications. Having values is a lot easier than living by them.

One very powerful tool for tackling difficult questions like this is experiential learning. This is a tool that allows teams to take part in realistic business simulations, in which they can take responsibility for business decisions in a safe, controlled environment, and learn from the outcomes of those decisions.

Business simulations let high-potential employees take the reins, putting into action policies informed by their own values, before experiencing the results in the simulation without the risks associated with testing out strategies in the real world. This can open up the opportunity for the team to interrogate their own values more deeply, and to agree upon the set of values that they would like to see adopted for the benefit of the organization, its people, and its customers.

If you would like to find out more about experiential learning, and how it can help you and your team align your business decisions with a well-defined set of positive values, contact us today.

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