An Interview with Dr. Michael Nates

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In a rapidly evolving corporate landscape, the emphasis on Environmental, Social, and Governance (ESG) principles is no longer a choice but an imperative. As companies wrestle with integrating these principles into their operations, the importance of guidance and leadership becomes paramount. In this fascinating interview, Michael explains how, as a seasoned executive coach with a mechanical engineering background, he guides executives through their transformative ESG journeys.

Michael, how has your journey in executive coaching intertwined with the increasing emphasis on ESG principles in today’s corporate landscape?

My motivation for training as an executive and leadership coach came out of my recognition that organisational transformation is heavily premised on the CEO’s and leadership team’s perspectives, values and beliefs. If the head of the organisation is looking in one direction while the organisation is trying to move in another, then progress is unlikely. In my experience, the vast majority of senior leadership and board members are significantly ill-prepared and ignorant of the consequences that global warming, climate change and the resulting environmental and social changes are going to have on their businesses. For example, during a recent training session with board members, 20% of them thought that coal was a renewable resource. Coaching creates a safe space for discussion of difficult topics, including environmental, social and governance (ESG) issues. A coaching session that focuses on ESG may initially be more of a mentoring session that lays the foundation for the executive to deepen their understanding and enable more sustainable options and decisions

Are ESG and sustainability one and the same concepts, as they are often used interchangeably?

ESG and sustainability are two distinct concepts and should not be used synonymously. ESG has its origins in a United Nations’ Principles for Responsible Investment (PRI) publication from 2005 that used ESG as the basis for a risk management and due diligence process to assess the ESG risks faced by an organisation that could materially impact its value. Sustainability first emerged in the 1980s and addresses the impacts of an organisation on the external environmental, economic and social dimensions. Sustainability is often summarised as the triple bottom line of people, planet and profit. Counterintuitively, an organisation could meet ESG risk criteria while still being unsustainable, while the reverse is unlikely.

How do you perceive the role of ESG in change management and transformation?

All organisations, and I mean all, are going to be impacted by climate change and the resulting changes in economic markets and  global society. Organisations that actively engage with these risks and opportunities will be better prepared to survive and thrive in the years to come. By way of an example, the younger generation Z entering the labour market are giving preference to organisations that can demonstrate their sustainability credentials. This younger cohort understand that climate change is existential and do not want to work for misaligned organisations, so the fight for talent is becoming linked to your ESG credentials. Organisations that choose to ignore ESG considerations as part of a transformation programme will face greater challenges and performance headwinds.

Can you describe a pivotal moment in your coaching career where ESG principles significantly influenced the direction or outcome of a transformative process?

Part of the social dimension of ESG is diversity, equity and inclusion (DEI). During a recent project initiation meeting, I noticed that the team lacked diversity. Understanding the importance of diversity and the benefits it brings through different viewpoints and challenges, I encouraged the client to augment the team with a broader range of ethnicities, gender identifications and neuro-diversity. The larger range of experiences and backgrounds necessitated additional team meetings and engagements, but the outcome was a much richer insight into the problem, with the resulting solutions being more widely accepted and easily adopted.

What are executives’ most common challenges when integrating ESG principles into their strategic transformation agendas?

Most corporate decision-making processes and decision-makers are almost totally based on financial criteria. Their decisions lack consideration of environmental and social issues. This is exacerbated by the lack of understanding (at both an organisational and individual level) of the importance of environmental and social issues in the outcome of longer-term strategy and planning. The significant obstacle is the lack of executives taking up leadership positions to move the organisations forward towards a more environmentally and socially responsible operating model. However, as noted above, most do not have a functional understanding of the issues and how they would positively benefit the organisation. So, the central challenge that needs to be addressed is the upskilling of executive decision-makers on the opportunities that ESG has to offer while simultaneously revising decision-making processes to include sustainability considerations. These two changes will fundamentally transform an organisation.

Conversely, where do you see the most credible opportunities for companies to leverage ESG principles as catalysts for change and transformation?

Besides changing decision-making processes to include non-financial criteria, organisations should consider three other fundamental changes. The first is to include sustainability considerations in the procurement of all goods and services. Responsible procurement will have an impact up the supply chain that will benefit organisations directly and indirectly. The second is to include sustainable culture and values in the recruitment process. This will have twin benefits of signalling to prospective candidates that sustainability is a core value, and it will enable the organisation to have the human capital necessary to meet and address the coming economic and societal changes. The third area for action is to ensure that anything that leaves your organisation be it goods, services or advice, embodies your organisation’s sustainability ethos. By way of an example, professional consulting firms should be offering their clients insight into how the proffered advice could be augmented to make the outcomes more sustainable or future-proofed for foreseeable climate change impacts.

How do Multiverse Consultants assist clients in balancing profitability with ESG responsibilities?

The key issue is helping clients understand that profitability is a short-term perspective while thriving in the changing world is a longer-term imperative for shareholders and stakeholders. What an organisation may lose in short-term profitability it will make up and recover in longer-term performance and efficiency gains. We help clients understand and make room for decisions that are longer-term rather than short. Part of this process is openly and transparently engaging with the Board of Directors, shareholders, and stakeholders to build trust and explain how the long-term plans will ensure future success. Trust is fundamental to ensuring reputation and brand value.

How do you approach executives needing clarification or support to integrate executive coaching strategies?

We simply listen. All journeys and relationships start with deeply listening to each other’s
backgrounds and contexts as a first step to building a shared reality. I do not have a preconceived outcome or expectation for these first sessions. What I hope will emerge is mutual trust and respect and a commitment to addressing, in an open, honest and collaborative manner, whatever may arise. What I propose is that we establish a professional partnership where we support each other in delivering the organisation’s ESG goals. I bring the sustainability content knowledge, hold a safe space for challenge and reflection, while the executive brings their organisational culture and understanding so that together we innovate and create practical ideas and opportunities.

How does your background in mechanical engineering help inform your work as an executive coach?

My engineering background enables me to understand at an operational level how things are made and how businesses function. I have a deep and technical understanding of, for example, how carbon emission reduction plans need to be developed and implemented. My understanding is of an industrial nature, which is exceedingly useful as compared to an ecological or  environmental science background. Secondly, coaching is quite emergent and complex, requiring lateral vision and spaciousness, which can lead to a lack of structure and focus. My engineering nature grounds my approach and brings the sessions back to actions and plans.

Do you foresee any potential challenges or pitfalls for companies superficially adopting ESG for branding or image rather than genuine commitment?

There is a very old saying; “the truth will out”. Attempting to short-circuit or greenwash an organisation’s ESG image will (as has been seen repeatedly) lead to the product and services being rejected by the customers when they come to understand the actual underlying facts. My advice to organisations is to put all that effort and energy into understanding and preparing their organisations for the environmental and social opportunities that are emerging all the time.