Creating an Environmental Social and Governance framework (ESG) has always been a focus for company leaders who are concerned with sustainability. In the current economic environment, ESG concerns have emerged as a crucial subject for all executives seeking to enhance performance. With Design Thinking, sustainability management professionals will benefit greatly in developing an effective framework for their businesses.
With issues like environmental degradation, economic gaps, and social justice movements seeing a constant spike, businesses are keen on adopting an ESG framework. Environmental Social and Governance framework is rapidly gaining acceptance in the business world due to increasing conscious consumerism. However, this phenomenon isn’t new. It is a deed of investment in social responsibility which has always been there silently but now has gone mainstream.
ESG concerns and corresponding measures are targeted towards bringing sustainability to the world. Sustainability, in its essence, is for people to live on Earth in peace and harmony for as long as they can. It is for the betterment of people who live and who are yet to live. These ESG concerns are human-centric to their very core. And this is where Design Thinking can be helpful in creating a framework for your business.
“There’s a lot to consider at the intersection of business and social work. It’s about earning a lot of money while adding a lot of value to people’s lives and making the world a better place.”
― Hendrith Vanlon Smith Jr,
CEO of Mayflower-Plymouth
What is the Environmental Social and Governance Framework?
An Environmental Social and Governance framework is an approach to identify, evaluate, and integrate how businesses create an economic, environmental, and social impact on society as well as the environment. ESG can affect different aspects of business, such as setting objectives, usage of sustainable procedures and machinery, and formulating policies and plans. Environmental Social and Governance frameworks can be used to spot risks that could negatively affect an industry or even many industries. While some dangers may be industry-wide, others may be company-specific. The first step in assessing your company’s sustainability is to use a framework to develop a sustainability report.
ESG concerns are intricately entwined with your business, as they are with every other business. Therefore, it makes logical sense that an effective environmental social, and governance framework can provide value. Let’s take a quick look at each of the components of ESG:
- The environmental criteria in ESG, or the “E,” refers to your company’s energy consumption, waste output, resource requirements, and any resulting effects on living things. E also includes climate change and carbon emissions. Every business utilizes resources and energy, and every business influences and affects the environment.
- The social criteria, or the “S”, focuses on the connections and reputation your firm has among the organizations and people in the localities where it operates. S includes working conditions of laborers, (for instance use of child labor), local communities, conflict, health and safety, employee relations and diversity etc. Every business functions within a larger, more diversified society.
- The governance criteria, or the “G”, is the internal framework of practices and policies your business uses to govern itself, make decisions, abide by the law, and satisfy the demands of external stakeholders. Every business, which is a legal entity, needs governance.
Indeed, ESG concerns are real and need to be addressed to make the world more sustainable for the better sustenance of our future generations. However, creating an effective environmental social, and governance framework isn’t just for the greater good. For a business, an effective ESG framework allows a marriage between sustainability and productivity. It not only makes your business more environmentally and socially friendly, it also enhances your value in the market by creating a strong message that your business understands business ethics’ meaning and importance. This makes your business more responsible and relevant. It helps you attract consumers as well as valuable employees.
Why Design Thinking for ESG Concerns?
Design thinking, is a non-linear, iterative approach to understanding consumers, challenging beliefs, reframing problems, and developing solutions by prototyping and testing. This method is used to derive strategic solutions to complex problems. As sustainability issues are challenging, sustainability management professionals will need to supplement user-centered and systemic approaches. Design thinking can assist us in understanding the current issues on both a micro and macro level. Outlining the human and non-human players within the system and breaking down their behaviors, needs, and expectations, reveals chances to creatively solve problems. It elevates the conversation about what, where, and when and provides a canvas on which to map out complex and linked problem spaces. And in doing so, it makes fresh, genuinely game-changing opportunities clear to us. Thus, allowing us to act and iterate for change while utilizing all of the resources at our disposal.
How to Create an Effective ESG Framework with Design Thinking?
Socioeconomics is driving the market as the current economic climate is constantly changing. Organizations are being encouraged to figure out how to design a structure that is more purpose-driven. Developing top-down and bottom-up strategies as well as changing the culture from shareholder to stakeholder, are some difficulties. With Design Thinking, you can create an Environmental Social, and Government framework with a more human-centered approach. This methodology will also assist in creating an agile, adaptable, and continuous learning company that today’s market demands.
Whether designing a product or a framework with the Design Thinking process, end-users must be understood. It is necessary to empathize with users, define their problems, ideate solutions, and test the design’s effectiveness. This will ensure what you’re making will be worthwhile for the end-users by collecting their feedback. Let’s discuss these five stages of Design Thinking in detail.
1. Empathize – Develop empathy by getting to know the people your initiative may affect.
As the “S” in ESG refers to Social, it is important to consider what social impacts your business is creating. By creating an effective Environmental Social and Governance framework, there is an opportunity to bring about meaningful change in impact that can be created through your business. You can do that by empathizing with people your ESG framework may affect. For instance, customers, communities, businesses, workers, and supply chains are all affected by ESG concerns.
Speaking to your audience in a more meaningful and compassionate way requires asking them compelling questions. This entails not only posing the appropriate questions but also letting go of your own expectations. Keep an open mind to what your audience has to say. That is the best method to start fresh conversations and research areas. However, if you enter the conversation with your own prejudices, you will end up knowing what you already perceive. True openness enables you to stake your brand in future prospects. Multidisciplinary collaborative teams – including internal and external participants as well as stakeholders at every level to build any desired activity that would affect them and their jobs.
Going sustainable doesn’t only mean revamping your business. You can also create an effective ESG campaign to solve customers’ needs. One such example is Who Gives A Crap, a toilet paper brand. Who Gives A Crap provides toilet paper that is, in their words, “healthy for your bum and fantastic for the globe.” They provide alternatives manufactured from 100% recycled paper, and their products are completely free of plastic. Additionally, they give away 50% of their profits to support the construction of toilets for underdeveloped areas worldwide. They engage with several community partners who have previously produced positive results. This demonstrates that it is advantageous and feasible to delegate the execution of effective community work to the professionals.
2. Define – Create a point of view that is based on the requirements and insights of the users.
Now that you have empathized with the target audience that may be affected by your ESG framework, it is essential to define a problem based on what insights you have. You can create as many viewpoints as possible on the basis of requirements from different sets of users.
For instance, you are a juice brand making changes in your current business to solve your ESG concerns. Chances are 20% of your consumers would want an aluminum can while 30% of them would like glass packaging. The other 50% would say paper-based packaging. This is a powerful insight that highlights the pain point of your consumers, which is the lack of sustainable packaging. Similarly, you can derive more such insights during the empathy stage which can give you different problem statements, like lack of natural ingredients, etc. These insights will help you come up with the most desirable solutions for the consumers.
3. Ideate – Come up with original ideas by brainstorming.
The third step is to create ideas and solutions based on the insights and problem statements. As mentioned in the previous point, there can be as many problem statements as possible depending on the insights of consumers. Now is the time to brainstorm ideas and generate solutions that solve the problems of the consumers. However, at this stage, you must keep in mind the three essential pillars of Design Thinking. These 3 pillars are desirability, feasibility, and viability.
When you decide on developing an Environmental Social and Governance framework, use the three pillars of design thinking. For example, customers desire green practices and energy efficiency, thus businesses must reduce packaging waste if they want to effectively persuade audiences that they are totally dedicated to renewable solutions. However, they must seek a material that is not only technologically feasible to generate in their production unit but also biodegradable when choosing their packaging material. It should also be viable, which means it should make sense for the company values at the same time. You cannot use paperboard that is used to create biodegradable tetra packs if your business sells food storage products like Tupperware.
4. Prototype – Create a prototype of one or more of your ideas to display to others.
As you brainstorm several potential solutions in the ideate stage, you create functional models of those solutions in the prototype stage. While creating the Environmental Social and Governance framework, create sample frameworks to be distributed to a bunch of consumers in order to gain real-time feedback. For instance, if you create an ESG framework that promotes eco-friendly packaging for your brand, let the consumers feel it in certain ways like creating prototype packaging. Create as many prototypes as you can.
5. Test – Go back to your initial user group and test your ideas there for real-world feedback.
In the last stage, it is time to test the created solutions, discuss them with consumers, and, if necessary, amend or redesign them. As the process of Design Thinking embraces failure, it gives you more chances to experiment and create improved solutions. If your ESG framework fails to impress the consumers, you can go back to the empathize stage and start over the whole process again. Ask them for feedback: where have we gone wrong and what can be improved?
The Bottom Line
Through an effective Environmental Social and Governance framework, companies have the chance to be open and honest with stakeholders about their stance on issues of corporate governance, social responsibility, and the environment. It’s gradually turning into a must for managing an enterprise business.
Numerous ESG frameworks across different industries are in use worldwide, therefore it is understandable that some businesses are unsure of where to begin when it comes to ESG concerns. Design Thinking can be a great tool to start your journey in constructing an effective framework for your organization.
About the author
A Haryanvi by origin, an entrepreneur at heart, and a consultant by choice, that’s how Ajay likes to introduce himself! Ajay is the Founding Partner at Humane Design and Innovation Consulting (HDI). Before starting HDI, Ajay founded the Design Thinking and Innovation practice at KPMG India. His 16+ years of professional career spans across various roles in product and service design, conducting strategy workshops, storytelling, and enabling an innovation culture. He has coached 50+ organizations and 2000+ professionals in institutionalizing design and innovation practices. He loves to blog and speak on topics related to Design Thinking, Innovation, Creativity, Storytelling, Customer Experience, and Entrepreneurship. Ajay is passionate about learning, writing poems, and visualizing future trends!
We at Humane Design strongly believe in the human ethos and draw inspiration from humans and other elements of nature to design innovative solutions for organizations of all sizes. We will be glad to be your success partner. Email us your requirements at explore@humaned.in.
