In today's increasingly conscious world, sustainability advocates say identifying the environmental, social and governance (ESG) issues material to your business and figuring out ways to address them can strengthen organizations in the long run.

Food industry companies big and small, as well as institutions like colleges and universities, realize “sustainability” is not just a buzzword but a critical aspect of their operations.

We spoke with MAS consultant Melanie Corey-Ferrini, owner of Mixtup Studio, who spent the last two years earning an MBA and an ESG professional sustainability certificate. This certificate allows her to work with companies — including foodservice operations and related businesses, as well as universities and other institutions — to develop and implement plans focused on achieving high-level sustainability goals such as ESG reporting and B Corp. Certification.

The ESG in ESG

So, what is ESG?

The “E” part of ESG examines energy usage and type, greenhouse gas emissions (GHG), building materials carbon footprint, water usage and other environmental factors. Key questions to ask around this subject, explains Corey-Ferrini, include: “Are they using alternative energy sources such as solar or wind power? Are they using the city grid or alternative sources? What’s the air quality like of the building? What GHG emissions are coming from your own facility as well as from the facilities of your suppliers?”

The “S” in ESG stands for social. For example, what are companies doing from a diversity, equity and inclusion standpoint? “I worked with one company who wanted to put together a more diverse board of directors, so we worked on creating a DEI advisory committee from suppliers, NGO, and non-profits with the idea that maybe some of those committee members could become board members,” Corey-Ferrini says.

The “G” in ESG refers to governing: How does your governing board work toward DEI and are you including all the stakeholders? “Stakeholders could also include populations impacted by your product or service, nature, the ocean and even indigenous populations on your land,” Corey-Ferrini says.

ESG frameworks offer benefits beyond basic reporting of metrics, according to Corey-Ferrini. It initiates a transformative journey for businesses to engage with employees, collaborate with other businesses and foster a culture committed to environmentalism and social responsibility. What’s more, all of these areas can have a significant impact on a company’s sustainability goals, public image, risk factors and profit over time.

“Creating an ESG framework often involves crafting new actionable metrics for a company,” Corey-Ferrini says. “These metrics relate to creating not only ROI and risk mitigation for investors, but also showing pathways and goals for creating sustainable value for all stakeholders.”

A Holistic Approach

By tracking the social responsibility and environmental impact through an ESG framework, Corey-Ferrini says, companies can gain a holistic view of their performance and showcase a sustainable value proposition. “Value is measured by return-on-investment risk assessment to the brand and company expenses. It all relates to the business case I’m putting together relative to that,” she says.

Corey-Ferrini’s recent work with a kelp producer highlights the comprehensive approach of ESG framework. Beyond focusing on their own practices, companies using ESG frameworks must also evaluate the environmental practices of their suppliers and partners. This extends to examining the entire supply chain, from sourcing to packaging and energy consumption. The goal is to create a transparent and deliberate process that maps out the steps required to create a sustainable product.

“The kelp farm works with a co-packer for their kelp snacks, so it’s important to examine what that company is doing in terms of its environmental practices, not just the kelp farm,” Corey-Ferrini says. “For example, are they dumping water from their manufacturing plant; what kind of energy are they using and where is it coming from? Are they using compostable packaging or just the least expensive packaging? By being aware of what other companies involved with your business are doing in terms of ESG you can mitigate risk and develop a long-term plan for partnering with more sustainable businesses, if needed. Never underestimate the power of social media.”

The actionable metrics and strategies ensure an enhanced level of transparency that consumers and potential customers can see, Corey-Ferrini says. “These companies are actively trying to be at the forefront and consumers are seeing value in the companies they buy from them,” she says.

The Future of ESG Certification

Corey-Ferrini says that some believe there will be a mandated reporting process for publicly traded companies in the next three to five years in the U.S. Europe already has that; as of as of January 2023, there are mandatory reporting requirements for sustainability in Europe. “There are some reporting agencies you can now use in the U.S. to voluntarily report all of this data to investors and consumers,” she says. “Starting with a Sustainable Value Creation Map for each metric a company would like to track is the best place to start.” 

While the adoption of ESG reporting regulations varies by region and market, Corey-Ferrini underscores the importance of companies proactively embracing ESG frameworks and creating metrics to increase business ROI and sustainable value while also addressing future risks. She highlights that waiting for regulatory requirements for reporting is a short-sighted approach. Instead, being proactive and considering sustainability as good business practice ensures long-term success.

“With or without regulation, you can share with your customers and investors that a company has a Sustainable Value Creation Map focused on key business metrics relating to their leadership, processes and operations and it does add value and a return on investment,” Corey-Ferrini says, whether that’s part of a three-year, five-year or even 10-year plan.

“Companies with ESG framework or even those who have volunteered to report are also better equipped to respond to emerging risks and changing consumer expectations,” Corey-Ferrini adds. “As we get more science behind why [ESG] is important, I can see it growing in popularity.” Consultants who have a solid understanding of ESG frameworks and their application to business growth and success will be better equipped to help prepare clients for the future.