Malta Council for Economic and Social Development (MCESD) Chairman David Xuereb has called for family businesses to embrace environmental, social and governance (ESG) as a tool, rather than as something which is academic and regulatory.

His comments came during the Family Business Forum, an event co-hosted by Ganado Advocates and Zampa Debattista last week. The forum brought together a number of professionals and governance specialists to discuss different perspectives on how important strong governance is when it comes to establishing value for family businesses. One of the panels, moderated by Zampa Debattista Partner Mark Wirth, featured Ganado Advocates Partner Annalise Papa, Alberta Group Director Liz Barbaro Sant, Perit Xuereb, and APS Bank Senior ESG Manager Matthew Swain.

Mr Wirth started off the panel by asking Perit Xuereb, who heads Malta’s ESG Alliance, about how he would rate the level of corporate governance within local family businesses, to which he replied that it would not be a number that is “very high”, possibly “in the region of five out of 10 or slightly lower”.

Zampa Debattista Partner Mark Wirth, Ganado Advocates Partner Annalise Papa, Alberta Group Director Liz Barbaro Sant, MCESD Chairman David Xuereb, and APS Bank Senior ESG Manager Matthew Swain / Rene Rossignaud

“But we’re on a journey, that’s clear. There are quite a lot of sensitivities, exploration, and discovery as we go. The intention here is to carry on with understanding risk,” he said.

Perit Xuereb remarked that ESG could become a “very academic conversation”, and some people tend to make it so, focusing on turning it in an academic and regulatory device. However, he explained that it was not actually intended for that.

“It was meant to be a tool that is personalised, valuable, and meant to reduce risk, whether you’re a large business, or a small family business. When you look at it that way, then ESG should really be transformed so that family businesses understand what they’re facing, in a bid to increase that score,” he outlined.

In order to do this, there needs to be collaboration, Perit Xuereb stressed.

“Ultimately, as people living in a country in competition with other countries, we really need to make this transition as fast as possible. As we hopefully tally and tandem on, we start to work better, personalise a bit more, and look at things from the perspective of how something affects our niche,” he continued.

“If we look at ESG as a tool in an environment which is collaborative, then it’s a journey we’ll enjoy and reduce our risk. A journey which gives us the opportunity to benefit,” he highlighted.

Dr Papa said that it is unfair to compare local family businesses to international ones, as there is a “big leap”, primarily due to more resources. She noted that many family businesses fail to “take the leap”, leaving them to “get stuck in start-up mode”.

Ganado Advocates Partner Annalise Papa / Ganado Advocates

As an experienced lawyer, she has seen international businesses “falter in the same way as Maltese businesses”.

“ESG is a buzzword, but it’s not hype. All things are off the balance sheet, but they have a major impact on it. Without governance, if you are very clear on environmental and social practices, you might not have the ability and resources to imbue the business with that space,” she added.

In a bid to improve ESG in Malta, 13 businesses joined forces last year to act as founding members of the Malta ESG Alliance, a private sector initiative that aims to tackle the country’s ESG issues by enabling the members to share insights, expertise, and best practices.

Perit Xuereb explained that the alliance is a “reflection of other practices” which have happened in other countries.

He said that these 13 businesses – “quite a large number to start off with” – decided to come together and address “what would be the elephant in the room in their own business”.

“The ambition is to be ahead of the curve and lead, and so they’re after being joined by other leaders. As we motivate the whole landscape to happen, then the better it is going to be for the businesses of Malta and its citizens,” he affirmed.

Perit Xuereb remarked that the aim is to keep making ESG more mainstream, and not an “academic acronym”, but as a “way of doing things differently”.

“We want the whole country to transform into an ESG world. We want to see a country that is truly competitive and doing well with the aspirations of future generations as well,” he emphasised.