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Want to balance strategy and ESG? A strong sense of purpose can carry your business a long way with stakeholders

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To navigate stakeholder demands around environmental, social, and governance (ESG) while also pursing the right strategy, companies need a clear mission or purpose. At a Fortune conference on Thursday, that was one takeaway from a panel of business leaders who also called on organizations to measure their ESG impact and be transparent with stakeholders.

“It’s a topic that is, call it, lumpy around the world,” Wes Bricker, vice chair, U.S. trust solutions co-leader with PwC, said of ESG. “Different standards, different rules.”

Leaders can address that by simplifying things, Bricker said at Fortune’s CEO Initiative summit in Palm Beach, Fla. “Bringing it back to our business model, how it’s integrated with the business model. Finding the value and opportunity conversation in ESG, I think, is the next hill for us to climb.”

Sebastian Picardo, president and CEO of Holt, Renfrew & Co., explained that the fashion and lifestyle retailer’s reason for being is to empower self-expression and ignite positive change. “This mission has given us the umbrella to be able to do a lot of things in the sustainability space with a lot of authenticity,” Picardo said of the 185-year-old Canadian company.

Given that about 87% of clothes produced globally end up in the incinerator or landfill, Holt Renfrew needed to take action, Picardo said. Besides recently becoming the first Canadian retailer to set science-based targets for Scope 1, 2, and 3 emissions, Holt Renfrew signed the Climate Pledge to accelerate its plan to achieve net zero by 2040.

“This is such a strategy aspect for us that we see sustainability almost as the new digital,” Picardo said.

Investors have great interest in the connection between sustainability and a longer-term horizon, Bricker noted. As a result, they’re focused on metrics that cover everything from carbon emissions to performance management to supply chain resilience against natural disasters, he said. “It may not come out as an ESG conversation, but it’s nonetheless a conversation about the resilience of the business model.”

The CEO of Soylent, a Los Angeles–headquartered maker of plant-based nutritional shakes, powders, and bars, highlighted his company’s purpose, too. “Our mission is to solve the problem that we’ll have 10 billion people by 2050, and today’s food system cannot feed us all,” said Demir Vangelov, whose company’s investors include Andreessen Horowitz and Google Ventures. “We envision a world where every person can afford and access all the nutrition and the calories that they need.”

Whatever your purpose, it’s important to concentrate on the “G” in ESG, Vangelov stressed. “You cannot have a mission-driven company for the long-term unless you’re profitable.”

Vangelov also counseled companies to be consistent in their messaging. “If you support diversity, equity, and inclusion, and you support it all the time, with everything that you do, people will have a harder time jumping on specific issues.”

Balancing ESG with multiple stakeholder groups can be a challenge. Last year, as part of its commitment to reduce Scope 3 emissions, Holt Renfrew decided to stop selling products with fur—a big step for what began as a fur shop. Although many customers and employees were on board, Picardo and his team didn’t know how their brand partners would react.

Those stakeholders took it well. “The conversation very quickly moved toward, ‘OK, so what’s next?’” Picardo recalls. “‘What are material innovations that can produce a product like fur that is not fur and that is sustainable for people and planet?’”

For Holt Renfrew, that experience “taught us a lesson about how we need to approach every sustainability aspect,” Picardo says. Now it’s “not about setting ambitions and expecting people to conform to that, but instead sharing ambitions and working together with the different stakeholders to make it happen.”

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