How to Develop and Implement ESG Strategy

One thing is for sure, an ESG plan is no more a subject to be ignored or given less importance. In fact, the environmental, social, and governance or ESG factors are equally responsible for a company’s growth as the quality of products. While ESG is not really about profits and was merely an idea a few years back, it has evolved into an essentiality for a company to function well and be considered a credible one. It is more about the way a company functions, the way it expects a company to treat its workers, its approach toward the current market, and its overall impact on society.

Once we have understood the importance of ESG practices, the next thing that we must be knowledgeable of is developing an ESG strategy, and eventually, how to implement it.  An ESG framework not only confirms the return on investments but primarily looks after an organization’s risk factors based on environmental, social, and government concerns.

In this blog, we will discuss the steps required to develop and implement an ESG strategy in an organization.

 

The steps to develop and implement an ESG strategy

 

Step One: Assessing the Materiality factor

The first thing that needs to be considered to understand the materiality factor of a business, is the detection of key stakeholders. The materiality assessment is supposed to highlight the ESG priorities of a company.

It is a formal exercise that determines the importance of ESG issues to the stakeholders by explicitly engaging them in the process. This produces some valuable insights to design your strategy and build a better brand image promoting sustainability.

The materiality assessment must produce:

1. Define and target stakeholders important for the business based on ESG factors.
2. An understanding of the importance of ESG initiatives to your business and its stakeholders.
3. Valuable insights to analyze the position of a company considering certain ESG aspects compared to other competitors.
4. Define the current ESG priorities under the company policies.
5. Sustainability reports and disclosures to highlight future actions and topics.

 

Step Two: Establishing the baseline

The next step to how to develop an ESG strategy is to assess your current situation. Without evaluating your current situation, you will not be able to take the next step toward progress. While the materiality assessment is there to highlight areas of focus for your company, it is essential to remember the measurement aspect of ESG initiatives.

This will help you understand the existing programs. This may involve directly working with your cross-functional shareholders, and gathering information from reports, data systems, policies, and others. The evaluation of your baseline situation will help you to determine better future ESG goals.

 

Step Three: Setting clear objectives and goals

Once you have learned about your baseline measurement, it is time for you to set clear objectives and ESG goals to move forward. These goals may include being more productive, attending to weak areas, and optimizing overall performance. Some of the goals which may involve:

1. Environmental goals:

These goals will mainly focus on lesser carbon footprint, waste reduction, and minimizing water usage. They may also focus on implementing sustainable energy systems, enhanced operations, and improvement of overall efficiency.

2. Social goals:

Social goals primarily deal with building a better work environment for employees. It may include closing wage gaps, revising employee benefits, improvement in work conditions, safer work environment, growth opportunities, and CEO pay.

3. Governance goals:

The major factors in governance goals are data storage, security, and maintenance. Oher main focuses are financial transparency, good accounting practices, and credible business ethics.

Related Post: How to Reduce Your Carbon Footprint

 

Step Four: Evaluating the performance gap

At every step of business operation, it is always essential to evaluate the policies which are working and which are not. A successful ESG performance does not necessarily mean being right the very first time. It is more about producing continuous growth and extracting the right set of opportunities. Analyzing performance gaps in ESG reporting brings forth the potential risk factors for the company to face during the implementation of ESG business strategy.

The gap analysis will help you to understand the time and execution plan required by the company to reach the targets of ESG integration. This will help you to set optimal time frames and reasonable expectations from the ESG implementation.

 

Step Five: Developing an ESG strategy

The next and very important step is to create a roadmap for ESG issues. No matter whether your ESG strategy is small or big, it will not be a sustainable one if not set with a clearly defined ESG roadmap and framework. The framework must clearly outline the purpose and priorities of the business.

The roadmap ensures that every working professional under this plan is accountable for each action taken against it. Also, the ESG framework is meant to give stakeholders and shareholders a clear picture of the entire ESG strategy. Once the bar is set, plan a reasonable motion and commit to it to achieve your goals.

Here, it must be remembered that developing an ESG strategy is not a one-time development, execution, and assessment plan. It is a continuous process of nurturing your ESG strategies to make your business grow.

Related Post: The Importance of ESG Strategy

 

Step Six: Implementing the ESG strategy and measuring KPIs

This step will answer the question of how you can implement an ESG strategy.  Integrate ESG policies into your business practices and operations to effectively implement the ESG framework. Some of the best implementation practices are:

1. Defining a clear set of measurable outcomes to predict success.
2. Maintaining a centralized management system or any other software so that the key performance metrics can be tracked.
3. Establishing regular communication and setting up updates for the key stakeholders so that there is a constant evaluation of goals and comparison of best practices.

Also, you must remember that your team is the primary player in the execution plan. You must ensure detailed recommendations and guidance for your team to achieve the goals.

 

Step Seven: Regular tracking of ESG reporting

Though for sustainability and ESG reporting, there is no definite approach, it is important to communicate the information in a structured and distinct manner.

To develop the report, you must focus on certain areas to extract the highest goal:

1. While establishing alignment with the objectives, clearly communicate your ESG strategies to your shareholders and stakeholders.
2. Some of the policies might already be successful, highlight them to display your company’s credibility.
3. Keep constant track of the progress and engagement in certain key areas.
4. Share the organization-specific goals and metrics with your stakeholders.

 

Conclusion

Developing an ESG framework is important to assuring a competitive advantage over other companies. The investment at the initial stage may seem unnecessary. However, in the long run, developing and implementing an ESG strategy will bear fruits for your company, given the scenario of a steep rise in the demand for sustainability.