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Design Thinking in ESG

design-thinking-in-esg.jpg Feb 05, 2024
ESG

Traditionally, the word 'Design' is used to describe the visual aesthetics of objects. However, the meaning of this word has evolved, and it is not that limited anymore. Nowadays, design is not just about form or physical attributes; it is about new method of thinking. Design thinking is a strong advocate of problem solving based on first principles, reaching out to all stakeholders, co-creating solutions that would be sustainable.

Design thinking

Design thinking, fundamentally, recognizes that design should achieve purpose and business goals not just beauty. Design thinking shifts the focus from a business-centric engineering solution to a customer-centric solution.

Evolution of design thinking

The concept of design thinking was developed by social scientist and Nobel laureate, Mr. Herbert A. Simon. In his book 'The Sciences of the Artificial' [1969] - “Everything designed should be seen as artificial as opposed to natural. The engineer, and more generally the designer should be concerned with how things ought to be in order to attain goals and how to function.

Design thinking definition

“Design Thinking is a discipline that uses the designer's sensibility and methods to match people's needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity” - Tim Brown, CEO IDEO.

Design Thinking is a human centered approach to design innovative solutions for human problems. It is now maturing into a humanity-centered approach adding Planet to the People and Product dimensions, to drive ESG-aligned solutions for a sustainable future.

Design thinking principles

Principles are fundamental ideas or general rules that are true regardless of the circumstances; they are the propositions that serve as the foundation for design thinking.

(1.) Principle 1: Human centered design - empathising with end-users
(2.) Principle 2: Embrace ambiguity and diversity – accepting uncertainty as a reality
(3.) Principle 3: Openness to radical collaboration – learning from diverse perspectives
(4.) Principle 4: Co-create impactful solutions – promoting emotional engagement
(5.) Principle 5: Implement and iteratively improvise – proactively work on perceived shortcomings

Design thinking practices

Practices are actions, tools, techniques, or processes by which the expected outcomes of the principles are achieved. Few practices relevant to ESG are outlined below:

(1.) Practice 1: Empathy maps - a 2x2 matrix, which explores what the user is saying, doing, thinking, and feeling.
(2.) Practice 2: User personas - characterization of a user who represents a segment of the target audience.
(3.) Practice 3: How might we - crafting actionable statements by pre-fixing 'How Might We' [HMV].
(4.) Practice 4: Business model canvas - a visual chart that captures the key building blocks of an enterprise.
(5.) Practice 5: Value proposition canvas - describes how well an organisation's products and services fit the market.

Environmental, Social and Governance

Our world faces several global challenges: climate change, transitioning from a linear economy to a circular one, increasing inequality, and balancing economic needs with societal needs. Investors, regulators, as well as consumers and employees, are now increasingly demanding that companies should not only be good stewards of capital but also of natural and social capital and have the necessary governance framework, the result of which is ESG.

The 'E' in ESG stands for environmental factors and includes a company's impact on the environment, such as its carbon emissions, waste management practices, water usage, and other environmental risks. Investors are increasingly interested in a company's environmental performance, as climate change is becoming a pressing concern.

The 'S' in ESG stands for social factors and includes a company's impact on its stakeholders, such as employees, customers, suppliers, and the wider community. Social factors may include issues such as labor practices, human rights, product safety, customer privacy, diversity, and inclusion.

The 'G' in ESG stands for governance factors and includes a company's management and oversight practices, such as board composition, executive compensation, shareholder rights, and anti-corruption measures. Governance factors are important because they help ensure that companies are accountable to their stakeholders for operating in an ethical and transparent manner.

UN Sustainable Development Goals

The Sustainable Development Goals [SDGs] also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. Countries have committed to prioritize progress for those who are furthest behind.

The 17 SDGs are integrated—they recognize that action in one area will affect outcomes in others, and that development must balance social, economic, and environmental sustainability. The SDG Goals considered for E, S, and G are Quality Education [SDG #4], Clean Water and Sanitation [SDG #6}, Industry, Innovation, and Infrastructure respectively [SDG #9].

Design thinking in ESG
d-School Framework

Design Thinking, as a method is empirical in the sense that it is both experimental and experiential, thus giving rise to several frameworks. One such framework is Stanford's d-School framework which comprises of five modes – Empathize, Define, Ideate, Prototype and Test.

(a.) EMPATHY

Relevant principle: Human centered design
Related practice - Empathy maps

Key activity - Needs assessment

(1.) Environmental [SDG 4] - Understand education needs of boys and girls in the community by drawing up Empathy Maps with participation from Parents, Teachers, and Community Leaders.
(2.) Social [SDG 6] – Understand availability of clean water and general health conditions. Prepare Empathy Maps for Men, Women and Senior Citizens.
(3.) Governance [SDG 9] – Understand existing SMEs in the community, their economic activity including affordable credit. Prepare Empathy Maps for SME Owners, Financial Service Providers.

FIGURE 1: Conceptual Framework for Design Thinking in ESG

(b.) DEFINE

Relevant principle - Embrace ambiguity and diversity
Related practice - User personas
Key activity – Baseline current situation

(1.) Environmental [SDG 4] – Baseline education levels of boys and girls in the community and develop User Personas that would meet the aspirations of the community.
(2.) Social [SDG 6] – Baseline sources of clean water and accessibility across the community by defining User Personas for women in different age groups.
(3.) Governance [SDG 9] – Baseline current economic activity of SMEs across their respective value chains. Prepare user personas for all stakeholders.

(c.) IDEATE

Relevant principle - Openness to radical collaboration
Related practice - How might we
Key activity - Brainstorm on Interventions.

(1.) Environmental [SDG 4] – Ideate on interventions needed to increase organised learning amongst boys and girls and potential impact if extended to adults.
(2.) Social [SDG 6] – Ideate on storage options, how might we ensure easy and quick access to clean water.
(3.) Governance [SDG 9] – Ideate on how might we increase line of credit to SMEs.

(d.) PROTOTYPE

Relevant principle – Co-create impactful solutions
Related practice – Business model canvas
Key activity – Evaluate outcomes

(1.) Environmental [SDG 4] – Evaluate outcomes of select interventions across all nine dimensions of Business Model Canvas.
(2.) Social [SDG 6] – Evaluate each storage option in terms of water retention and cleanliness for the defined personas.
(3.) Governance [SDG 9] – Evaluate big picture of business model canvas that includes all stakeholder across the value chain.

(e.) TEST

Relevant principle – Implement and iteratively improvise
Related practice - Value proposition canvas
Key activity – Measure and monitor

(1.) Environmental [SDG 4] – Measure and monitor the education levels for boys and girls pre and post education enhancement interventions.
(2.) Social [SDG 6] – Measure the intended outcomes and monitor for any unintended outcomes as well.
(3.) Governance [SDG 9] – Implement and iteratively improvise financial interventions and measure gains in economic activity.

Conclusion

Design Thinking in ESG, the conceptual framework developed in line with the d-School framework, demonstrated the applicability of Design Thinking Principles and Practices for select SDGs. The framework can be replicated for all the other SDGs and is strongly recommended for ESG initiatives across enterprises for sustainable value creation.

Author


Dr. Mohan Kancharla

Dr. Mohan Kancharla

He holds a Doctorate of Business Administration from SSBMGeneva and brings in thirty-five years of experience in Information Technology & Consulting. Author of two books, 'Consulting - A Practitioner's Perspective' & 'Design Thinking in Consulting'.

Owned by: Institute of Directors, India

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