Strategies for Championing ESG Within Your Organization
Environmental, Social, and Governance (ESG) strategy is a priority for companies to demonstrate their values, commitment to action, and transparency. ESG allows businesses to measure how they integrate environmental, social, and governance practices into operations, business models, impact, and sustainability.
Although it is not a new concept, 2023 sees the expansion of ESG regulations in Europe and beyond. KPMG's recent report showed that 96% of the world's 250 largest companies report publicly on ESG or sustainability matters. Similarly, regarding prominent ESG consultancy firms, Governance & Accountability Institute's report found that 96% of the companies in the S&P 500 and 81% in the Russell 1000 Index published sustainability reports in 2021.
'Sustainability' is often used as a synonym for ESG strategy, however, it is better to distinguish these two terms. Sustainability refers to a broad principle encompassing a range of responsible business practices. On the other hand, ESG offers tools for benchmarking and comparisons for businesses to measure the performance of their sustainability efforts.
Given the wide range of issues ESG tackles, covering the three pillars of sustainability: Environment, Social, and Governance, requires measures of a multitude of metrics. This inevitably indicates the need for truly holistic ESG strategies for organizations. In this article, we'll explore the path to true ESG and the importance and benefit of a successful ESG strategy.
Why is an ESG strategy important?
The expansion and growing popularity of ESG strategies for businesses are mainly due to the increasing number of people evaluating brands based on their environmental and social values. According to PWC's research, 76% of consumers tend to discontinue their relationships with companies that treat the environment, employees, or the community in which they operate poorly. Not only consumer expectations but also employee expectations around ESG are changing. According to the latest Bupa Wellbeing Index Report, workers are willing to take a significant 19% reduction in pay, rising to 23% among Gen Z, to work for a company that is taking action against climate change.
The increased demand from consumers to employees and investors also has a triggering effect on the evolution of ESG strategies. Considering that Gartner predicted sustainability metrics in investment plans will be standard practice by 2026, the need for well-crafted plans to achieve revenue targets and secure a competitive advantage is more critical than ever. Robust and holistic ESG strategies detail the company's intention to positively impact its environment and communities and fulfill its wider societal and governance obligations.
Considering stakeholders are keen on seeing more than monetary gain, businesses should implement a plan to present a positive impact on their surroundings. ESG strategies contribute to organizations' sustainability efforts and ensure commitment and accountability for responsible and ethical practice. However, there are also business benefits that companies can gain from successful ESG strategies. These benefits include:
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Gaining competitive advantages over business rivals
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Attracting more ESG-focused investors
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Demonstrating better financial performance
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Increasing customer loyalty
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Achieving flexibility in business operations
How to champion your ESG Strategy in 4 critical steps?
Given the growing importance of ESG, businesses don’t have any other option but to prioritize their sustainability efforts and champion their ESG strategy. However, building a robust ESG strategy takes work. Here we’ll dig into 4 critical steps that will put you on the right path while creating your company’s ESG strategy, which bolsters investor confidence as well as consumer and employee trust.
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Consider a long-term plan for your ESG strategy
Championing ESG strategy within your organization requires a sustained and strategic effort. To start with, it is essential to build a strong business case; this includes several steps as follows:
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Research: It is best to start by researching industry trends and gathering data on the financial and reputational benefits of ESG and sustainability practices. This will allow you to identify ESG best practices in different sectors. ESG strategies might look different and have other priorities at different stages. With a deep analysis, you'll see your ESG planning in a bigger frame and have a well-informed idea about what it will look like at different stages.
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Identify: At this stage, you should be aware that your organization's ESG strategy will be unique, what is suitable for another sector or even another company in the same industry might not be ideal for your company. So, it is essential to identify specific ESG issues your organization has; this will help you understand what your ESG strategy should address.
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Communicate: Understanding stakeholders' perspectives and priorities is another must-do before starting ESG planning. Consulting board members, C-level executives, employees, institutional investors, customers, suppliers, and community leaders - almost all of your stakeholders - about ESG issues is a must. Finding out what your stakeholders value most and how they feel about improvement areas of your company's sustainability efforts is an excellent way to determine your ESG priorities.
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Establish clear targets
Establishing clear goals and metrics is another crucial step for progression toward championing your ESG strategy. Knowing where you want to reach will keep your planning more result oriented, streamlined, and focused. To be able to do this, you first need to know your organization's current ESG performance, including policies and practices in place. This will provide you with a solid starting point for setting your targets and a baseline to evaluate your ESG performance in the future.
Identifying the direction you are going allows you to choose the best framework for your ESG strategy. These frameworks are excellent guides to identify the ESG metrics your company should track and report and also help you with structuring your ESG report and building your ESG strategy. This way, you'll be able to assemble the data and evidence you need to monitor, report, and communicate your ESG achievements.
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Be inclusive
Building a robust ESG strategy requires a team drawn from across your organization. The more diverse your team is, the better informed your ESG strategy will be, given that representation from a diverse cross-section of the business will provide you with multiple lenses to view your ESG performance and set objectives.
In addition to forming a diverse team, fostering a culture of sustainability within the organization is essential. This may involve providing training and education on ESG issues, encouraging employee engagement and participation in sustainability initiatives, and establishing policies and practices that support sustainable practices across the company.
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Measure and Re-evaluate
Measuring your ESG performance is vital to showcase your sustainability efforts. However, it is also essential to see if your strategy is still working. One thing to keep in mind is that ESG priorities are not static, and they will evolve. Therefore the frameworks, third-party assessment tools, and performance reports are also essential for you to reevaluate your ESG strategy and implement the required changes to ensure you are still on track and hitting your sustainability benchmarks.
Developing strong, effective ESG principles is a long-term effort involving various rigorous steps. You can use the 4 critical steps we mentioned here as a starting point to work on your organization's ESG strategy. If you need more guidance you can check Intengine’s website to find yourself a reliable partner to support you with their ESG expertise. The right sustainability & ESG strategy will not only help secure a sustainable and equitable future for upcoming generations but also be attractive to your company's socially and environmentally conscious investors, employees and consumers.
Tags: ESG, corporate sustainability, esg strategy, esg regulations, esg performance