If you have a company or business, it is not acceptable to passively address environmental, social, and governance (ESG). Every stakeholder wants to feel part of the efforts being used to help address the planet’s challenges, including global warming. Having a good ESG strategy comes with a long list of benefits for your company, but you need to develop it first.
This post is a comprehensive guide for developing a good ESG strategy for your company. Keep reading to learn more about ESG meaning and specific steps to use to craft the strategy for promoting sustainability.
ESG, a shortening for environmental, social, and governance, is a combination of standards that assess an organisation's sustainability impacts and accountability of its management. About two-thirds of investors check for companies' ESG rating or performance before deciding to work with it. Customers and even partners also carry out due diligence to pinpoint the businesses with higher ESG scores to work with.
An ESG strategy is used as a roadmap for a company to reduce the negative impacts of its processes on the environment and society. It helps to internalise the concept of sustainability and communicate the impacts to stakeholders so that they can compare with others.
The first step to developing a good ESG strategy is to appreciate what it is. This point is very important because it helps managers, investors, and entrepreneurs appreciate the associated benefits. It also helps them link crucial points of reference, such as the requirements set by regulatory authorities. So, here are the main steps to follow when crafting an ESG strategy:
Before you can get started, the first step is establishing the status of your company. Therefore, you need to do a comprehensive evaluation of your company's operations. Whether your business is in the hospitality or financial niches, among other areas, check things such as waste management, emissions, staff remuneration, and board constitution. Try to be as comprehensive as possible.
The core goal of sustainability or ESG in a company or business is to give stakeholders the correct view of the efforts adopted to operate sustainably. Therefore, you have to involve the stakeholders from an early stage. By involving them, it is possible to identify what they prefer and stick to it. For example, there are people who prefer to only work with companies that focus on, say, wildlife conservation, fighting hunger, or countering global warming.
Some of the stakeholders to consider include investors, customers, and partners. The neighbours in your company’s location are also part of the stakeholders and should be involved to make your strategy more sustainable.
When stakeholders give their focus areas, you need to refine them further in order to determine the most important areas of company action. This is referred to as materiality assessment. It is used to carefully assess the sustainability needs of an organisation so that only the areas with the highest impacts are considered. For example, most companies put cutting down their carbon footprint as the first priority of ESG strategy and reporting because of the current complex problem of global warming. Other areas of focus might include empowering the communities, conservation, and supply chains.
A good ESG strategy should have a clear plan for implementation. Therefore, you should start with a clear objective on the goal of your company's sustainability efforts. Remember that this should be integrated with your company's operations so that it is reflected in every part of the operation. For example, suppose you target to address global warming. In that case, efforts in every department should be channelled towards areas such as improved efficiency of the machines, shifting to energy-efficient lighting, and green energy sources.
Make sure also to include key performance indicators that can be reviewed along the way to determine the progress of the company's ESG efforts. For example, if one of the targets is to achieve net-zero carbon emissions, it should be broken into small achievable bits, such as cutting greenhouse gases (GHG) by something such as 30% in the next two years and 70% in the subsequent five years.
To make your plan complete, you need to have two more components: an implementation framework and appropriate software. The framework acts as a guide, helping you to follow internationally accredited practices in ESG management. The frameworks are developed by accredited international standards organisations and come in handy in giving your organisation's ESG efforts credibility. Some of the best frameworks to consider are the Task-force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiatives (GRI).
The entire ESG process, from business assessment to planning and implementation, is mainly about data. Therefore, it is not advisable to work on it manually because the work will be overwhelming. Instead, you should look for good environmental, social, and governance (ESG) management software to help with data gathering, analysis, and reporting. With the right app, it is possible to even automate some parts of the ESG process and follow different attributes in real-time. Some of the best applications that you should consider include diginexESG and diginexCLIMATE.
The last step of your ESG strategy is reporting the impacts of your company to stakeholders. After collecting data using the right software, it should be analysed and a report generated for stakeholders to read. Remember that although the reporting comes at the last part, it should, in reality, begin the moment you make a decision for sustainability. This means that if you say the company managed to cut emissions by 50%, the origin of the concept will be easy to track.
The report should be comprehensive, accurate and comparable. This will make it easy for stakeholders to read and appreciate the efforts made by your company. Again, you should capture all the impacts, including the negatives and explain the efforts being made to address them. Once the report of the ESG efforts is prepared, it should form the basis for the next ESG actions and reporting phase.
This post has demonstrated the six most important steps that you should follow to craft a good ESG strategy. The plan helps you to follow emerging trends and convince stakeholders to become part of your organisation. If you find crafting sustainability goals and implementing an ESG strategy challenging, consider seeking the help of an agency of experts. Contact Diginex.com for the best expert assistance and top-rated ESG apps.
Women comprise 41 per cent of the supply chain workforce, yet unequal opportunities for women continue to exist around the world.
Cotton, tomatoes and polysilicon, what do they have in common? All three are classified as high-risk commodities for forced labour by the US CBP - Read more!