Sports, ESG and the link to Corporate performance and Sportive potential

As Environmental, Social and Governance factors (ESG) further infiltrate the sports industry, along with fans, supporters, athletes, employees, and investors demanding for more socially advanced and eco-responsible sports organizations, attention to integration of sustainability in daily operations and business strategies is growing fast.

Moreover, Covid-19 pandemic has created an opportunity for sports organizations to rethink what they do and how they do it, and those organizations prepared to adjust to the stakeholder agenda where focus on long-term value creation through ESG factors may well have a competitive advantage in the coming years.

But what do we mean by ESG?

ESG stands for Environmental, Social, and Governance. It is the framework for measuring an organization's progress towards sustainability through existing practices, policies, and culture. This term is used to classify issues related to sustainability or corporate social responsibility matters that have an economic/financial effect on an organization’s short- and long-term value.

In most cases, ESG factors exemplifies elements of good corporate citizenship. They generally cover the following:

• The Environmental factor is primarily concerned with the organization's influence on the environment and its ability to mitigate various risks that could harm the ecosystem. Every organization uses energy and resources, so it affects and is affected by the environment.
• The Social factor examines the organization’s interactions with other organizations and communities, and the attitude toward diversity, inclusion, labor relations, and human rights.
• The Governance factor is all about internal affairs and the organization´s relationships with its main stakeholders, including employees and shareholders. Here, internal practices, controls, and procedures to comply with the law, and meet the needs of stakeholders are assessed.

To sum up, these considerations seek to address the following questions: 

1. How does the organization use/manage natural resources and treat the planet?
2. How does the organization take care of people and communities?
3. How is the organization being run?

Here are some examples of ESG metricsthat might help you consider the individual elements of each factor:

Hands down, there are too many metrics to address every ESG factors, but given limited resources and time, sports organizations should focus only on those issues that have the greatest impact on their activities and stakeholders. If you do not know what those are, a materiality assessment can help you identify them (materiality is the principle of defining the ESG topics that matter most to your business and your stakeholders).

Sports organizations currently address some of these ESG issues through anti-discrimination policies, I&D plans, codes of conduct, supplier best practices, and other isolated initiatives. However just a handful of sports organizations are linking ESG issues to corporate strategy and value creation.

How can ESG factors create value for sports organization and their stakeholders? 

• ESG factors and corporate/financial performance are linked. A strong ESG strategy lets the organization build corporate reputation with stakeholders, respond to competitive pressure, and comply with regulatory requirements.
• Research shows that organizations with higher ESG performance are likely to attract and retain quality employees, motivate them by instilling a sense of purpose, and increase productivity.
• ESG factors are being considered, more and more, as a commercial/business asset rather than a simple manifestation of devotion to social and environmental issues.
• Many investors have integrated ESG factors assessments into their decision-making processes and are now requesting organizations to report on how they deliver on those factors.
• Organizations with solid ESG grounds are likely to be more resilient in the face of unexpected crisis as they are managed for the long term and in line with societal megatrends, such as inclusion and climate change.

According to McKinsey, getting your strong ESG proposition right links to value creation in five essential ways:

ESG long term value lies in how sports organizations integrate these factors/metrics into its overall business strategy, such that it builds onto the organization's purpose and vision and contributes to business growth.

Clearly, the sports industry is facing rising expectations from different stakeholders to take a proactive approach to manage ESG factors (risks and opportunities) as part of their corporate strategies. They are now demanding organizations to improve sustainability practices that both, benefit the bottom line and sportive perfomance and create greater impact on the wider community.

Sports organizations need to adopt a proactive approach to holistically integrate ESG into their corporate strategy and play the long game by meeting its fans, supporters, athletes, employees, and communities’ needs and expectations to maximize value creation. ESG integration changed from a simply nice-to-have to essential-to-have.