4 Crucial Tips to Develop a Workable ESG Strategy

In recent years, environmental and social sustainability concerns have risen dramatically in prominence. This is why we talked so much about the steps businesses can take to be greener. Parties on all sides, from consumers to investors, are holding businesses to higher and higher standards, making it important that businesses take a well thought out approach to the matter.

Incorporating ESG into a company’s structure is crucial. We’ve provided guidance on integrating ESG into enterprise architecture and executive compensation. We also recommend appointing a Chief Sustainability Officer to drive sustainability efforts and reduce carbon emissions. By integrating ESG into the company’s foundation, it sets the stage for a successful transformation. Check out this ESG report from PwC to learn more about the steps you can take to achieve their ESG and climate goals.

ESG investing considers a company’s environmental, social, and corporate governance performance. It has become more popular due to factors like climate change and social justice.

However, there is skepticism in North America about its effectiveness. On the one hand, it is encouraging to find out that 88% of Many investors believe that asset managers use ESG as a marketing tool. In Europe, only 6% of investors are not convinced about ESG, compared to 20% in North America.

As a result of this shifting attitude, ESG (environmental, social and governance) strategies have gained traction as a way for businesses to manage sustainability-related issues. Let’s explore what you need to know about an ESG strategy, from development to implementation. 

Understanding ESGs

First, what exactly is an ESG? The term ESG is purposefully quite broad, in order for it to be equally applicable to all businesses. Environmental factors include issues such as a business’s approach to reducing overall emissions and resource consumption. Social issues include ensuring diversity and broader community engagement.

Governance refers to the way in which the business in question is organized, including leadership structures and transparency concerns. All of these issues often tend to tie together somewhat, making it important that they’re not dealt with entirely separately. 

Conducting a materiality assessment

We previously outlined some important steps that you should take when creating an ESG Strategy. One of the most important things that you can do is conduct an assessment of your stakeholder needs.

Before developing an ESG strategy that will likely have a significant impact on the future of the organization, it’s important to carry out a materiality assessment. 

This process consists of engaging with various stakeholders, to see what elements they would hope to see in an ESG strategy. This is a vital step in the process and helps to ensure that the strategy that you come up with remains as relevant as possible to the organization.

Setting goals

Once you know what it is that your business should focus on in its ESG strategy, you can start coming up with goals in that area. These should be ambitious but achievable, and ideally easily measurable with some clear metrics to gather data on.

An example of this could be setting a goal to increase gender diversity at every level of the company, with an overall time frame of five years and then smaller incremental goals that can be met each year. 

Clear goals make it easier to actually work towards something, ensuring that your ESG strategy is highly actionable rather than just a symbolic statement.

Ongoing action

It’s important to realize that an ESG strategy isn’t something that will ever be completed. While you may meet the goals and targets you set in the strategy, once those have been met, you need to set additional goals to ensure that the business doesn’t stagnate.

Part of the reason for implementing an ESG is to ensure the long term sustainable growth of a business. They should encourage adaptability in the long run, but they’re not magic – they require a lot of work, and you can’t take your eyes off the ball.

This should leave you feeling slightly more prepared to develop and implement an ESG strategy that’s perfect for your business. Make sure that you involve a broad range of stakeholders in every step of the process, to make it as inclusive and impactful as possible.