Emerging Findings from a Study of ESG practices in Family Firms
Prof. Mat Hughes, University of Leicester
ESG, rooted in Health and Safety and Corporate Social Responsibility, is more than just performance metrics. It reflects a family business’s values and commitment to sustainable development.
ESG issues are becoming increasingly prominent due to social pressure, activism, international bodies, and government regulation. UK ESG disclosure requirements, based on the International Sustainability Standards Board’s inaugural standards, are expected to grow.
Family businesses are well-positioned for the ESG agenda due to their community identification, heritage, business conduct, and generational continuity. The Family Business Research Foundation commissioned research in 2024 to understand how UK family firms approach ESG and the benefits, risks, and challenges they face.
The project is reviewing existing evidence on ESG in family firms and surveying the practice guidance available to UK firms on ESG. It also seeks to identify UK family firms with good ESG practices. This will inform new research on ESG in family firms and the development of new guidance tailored to UK family businesses.
Some emerging action points from the project were presented at the FBRF’s recent family business research conference which took place on 20 May 2024 in partnership with Lancaster University Management School. For example:
Data is King; Narrative is Queen: A significant amount of episodic data is required to track a firm’s achievements against sustainability disclosure requirements. However, the true value lies in the stories the business can tell about ESG.
Stakeholder Engagement and Compromise: Pleasing every stakeholder to the same degree is impossible, leaving family businesses with little choice but to compromise.
‘Greenwashing’: It’s crucial to ensure that rhetoric and reality align to avoid accusations of ‘greenwashing’, which involves using ESG activities to falsely portray sustainability and good practice when other business activities are environmentally, socially, or governance-wise detrimental.
The Silent Majority?: SMEs are currently on the periphery of ESG regulations and debates. While ESG regulations are extensive and apply to large firms, they will inevitably trickle down and apply to SMEs. The form this will take is uncertain, but SMEs need a voice to lobby governments on ESG standards and reporting.
Existing Research on Family Firms and ESG: Current research on family firms and ESG is dominated by quantitative studies, many of which focus on financial returns from ESG endeavours. More qualitative research is needed, and more appropriate dependent variables should be used in quantitative studies. It is illogical to view ESG solely in terms of financial gain and maximising firm performance.
Professor Hughes shared interim findings from this research at the FBRF’s family business research conference which took place on 20 May 2024 in partnership with Lancaster University Management School.
The slides from the presentation can be downloaded here.