Capacity Building on ESG

We build capacity to advance best practices on Environmental, Social and Corporate Governance (ESG) in the private sector. Learn more

Capacity building

“Capacity-building is defined as the process of developing and strengthening the skills, instincts, abilities, processes and resources that organizations and communities need to survive, adapt, and thrive in a fast-changing world. An essential ingredient in capacity-building is transformation that is generated and sustained over time from within; transformation of this kind goes beyond performing tasks to changing mindsets and attitudes. [Through] Sustainable Development Goal 17: Revitalizing the Global Partnership for Sustainable Development, the United Nations is committed to transformation from within. Goal 17 includes targets for capacity-building, including increasing technology and innovation in least developed countries and improving data collection and monitoring for the achievement of the SDGs themselves.” (UNAI, 2021)

Transformation needs to be the overarching goal of every capacity-building effort aimed to advance sustainable development. And not only the transformation of a company’s organizational culture, but also of society itself. This means that companies that are already committed with ESG are in a better position to cast their entrepreneurship above and beyond their business plans, by defining the key role that they would like to play in this societal transformation, as partners of a global effort that runs across multiple sectors and activities.

The five elements of capacity

1. Attitudes, values and belief systems, specifically that individuals and organisations recognise the importance of ESG issues to companies and to investors,2 and accept that they have a responsibility for (as relevant) company or investor performance and action on these issues.

2. Skills, knowledge and expertise, specifically that individuals and organisations have sufficient knowledge and expertise to analyse the ESG information that is available, to make sense of this information in the context of their roles and their organisation’s goals, and to make informed decisions about the actions that they should take.

3. Resources, specifically that individuals and organisations have sufficient human resources, financial resources and organisational/institutional support to take appropriate action on the ESG issues that are relevant to them.

4. Access to information, specifically that individuals and organisations have access to the tools, data and information that they need to deliver on their ESG-related goals.

5. An enabling environment, specifically that approaches to investment focus on long-term financial returns and the factors – including ESG –that will deliver them.” (UNPRI, 2013)

Specifically, startups and micro, small and medium-sized enterprises (MSMEs) willing to become global partners for sustainable development need to go past Corporate Social Responsibility (CSR). They need to show that both their organizational culture and business plans reflect their key role in societal transformation, by building capacity on these five elements and measuring their ESG performance, through methodologies that are tailored to their own size and needs (simple and low-cost, yet accurate).

“The priority areas for developing skills, knowledge and expertise include:

For investors: how to integrate ESG issues into their investment processes, across asset classes, investment strategies and geographic markets.

For ESG research providers: how to present their information in a way that is relevant to their investment clients’ investment needs and interests).

For companies, NGOs, investors, policymakers, ESG research providers: how ESG issues affect investment performance, how investors analyse and use ESG information, what responsible investment is (specifically, the different responsible investment strategies such as screening, engagement, investment integration, etc.).

For policymakers, in particular those that do not work in finance or similar departments but that interact with investors: How the capital markets work and what role can be played by investors in improving corporate performance on ESG issues and in relation to public policy more generally.

For business schools: course/training materials on responsible investment.

For NGOs: how to engage effectively with the capital markets and with individual investment organisations. This includes both general capacity building around the structure, operation and potential contribution of the investment system itself as well as more specific support on the design and implementation of effective campaigns.” (UNPRI, 2013)

Our theory of change is based on the premise that “one size does not fit all”. Different sets of indicators need to be collectively developed by the respective stakeholders (companies/investors, suppliers/service providers, clients/users and communities), to measure the ESG performance of individual startups and MSMEs from different sectors and activities. Thus, a Participatory Action Research (PAR) approach, based on existing knowledge from individuals, communities of practice and companies/investors at the grassroots level, becomes useful for successfully and meaningfully completing such task.