Setting up an ESG strategy can seem daunting, but with the right approach, your company can effectively integrate ESG principles into its core values and operations.
In this comprehensive guide, we will explain the essential items to consider when setting up your company's ESG strategy.
1. Assess your company's current ESG performance
Conduct a comprehensive review of your company's current environmental, social, and governance practices. This will help you identify areas where you need to improve and set specific targets.
The outcome of conducting an internal assessment of a company for setting up an ESG strategy is to identify the gaps in the company's current ESG practices and to prioritize areas for improvement.
Here is a list of items that companies should evaluate themselves for when conducting an internal assessment for setting up an ESG strategy:
Governance: Evaluate the company's governance structure and processes to ensure that they align with ESG principles.
Environmental impact: Assess the company's environmental impact, including greenhouse gas emissions, water consumption, waste generation, and resource use.
Social impact: Evaluate the company's social impact, including employee well-being and diversity, labor practices, human rights, and community engagement.
Product and service quality: Assess the quality and safety of the company's products and services, including their impact on customers and society.
Supply chain management: Evaluate the company's supply chain management practices, including supplier selection, monitoring, and engagement.
Risk management: Assess the company's risk management practices, including identifying and mitigating ESG-related risks.
Stakeholder engagement: Evaluate the company's stakeholder engagement practices, including engagement with investors, customers, employees, and local communities, to ensure that their ESG concerns are being addressed.
Reporting and disclosure: Evaluate the company's reporting and disclosure practices, including the quality and transparency of ESG-related disclosures.
Innovation and technology: Assess the company's use of innovation and technology to improve its ESG performance, such as renewable energy, sustainable materials, and circular economy practices.
Strategy and goals: Evaluate the company's ESG strategy and goals, including their alignment with the company's overall business strategy and the SDGs.
2. Engage stakeholders:
Engage with your stakeholders, including investors, customers, employees, and suppliers, to understand their expectations and concerns about your company's ESG practices.
Identify key stakeholders: Companies should identify their key stakeholders, including investors, customers, employees, suppliers, and local communities, and understand their ESG concerns and expectations.
Conduct stakeholder engagement activities: Companies can conduct various stakeholder engagement activities, such as surveys, interviews, focus groups, and town hall meetings, to gather feedback and insights from stakeholders.
Collaborate with stakeholders: Companies should collaborate with stakeholders to co-create their ESG strategy and ensure that it aligns with their expectations and priorities.
Provide transparency and disclosure: Companies should provide transparency and disclosure on their ESG performance and progress towards their ESG goals to build trust and accountability with stakeholders.
Engage investors: Companies should engage with investors to ensure that their ESG strategy aligns with investor expectations and to attract responsible investment capital.
Engage employees: Companies can engage employees by providing opportunities for feedback on ESG issues and by creating a culture of sustainability and responsible business practices.
Engage customers: Companies can engage customers by providing information on their sustainability practices, offering sustainable products and services, and soliciting feedback on ESG issues.
Companies can refer to the following documents to get a comprehensive guide on stakeholder engagement:
Develop a clear policy that outlines your company's commitment to ESG and sets out specific goals and targets.
Follow these essentials to draft a forward-looking ESG ;
Define the purpose and scope of the policy including the company's commitment to ESG principles and the plan to integrate ESG considerations into its business operations.
Identify the ESG priorities that are most relevant to the company and prioritize them based on their impact and importance
Establish measurable targets and goals that align with the company's business strategy and stakeholder expectations
Define the roles and responsibilities of different stakeholders, including the board of directors, management, and employees
Provide guidance and training to employees on ESG principles, policies, and procedures,
Establish reporting and disclosure requirements for ESG performance, including the frequency and format of reporting
Review and update the policy regularly to ensure that it remains relevant and effective
By keeping these factors in mind, companies can create a clear and effective ESG policy document that guides their business operations and demonstrates their commitment to responsible and sustainable business practices.
4. Identify material ESG issues:
Identify the ESG issues that are most material to your company and its stakeholders. Prioritize the issues that have the most significant impact on your business and stakeholders.
Here is how you can identify material ESG issues most relevant to your business;
This step involves creating an actionable plan for the company based on the steps discussed above.
The goal of the sustainability strategy should be reducing your company's environmental footprint, promoting social responsibility, and improving governance practices.
Paypal has won several awards over the years, including an “A-” rating from CDP. Their ESG strategy takes into account a variety of steps toward mitigation and adaptation in the areas of environmental sustainability, employee & culture, responsible business practices, and social innovation.
Set specific, measurable targets for your company's ESG performance. These targets should be aligned with your company's overall strategic goals and objectives. After following the previous steps, a company should have information regarding the key ESG factors affecting their business, their stakeholder’s concerns, and the sustainability standards relevant to their business. The sixth step is the practical step of creating measurable goals.
Set targets that align with your company's overall strategic goals and objectives, and that are relevant to your business and stakeholders.
Ensure that targets are specific and measurable, with clear metrics and indicators to track progress and performance.
Prioritize targets based on their materiality and impact on your business and stakeholders, and establish a timeline for achieving them.
7. Implement and monitor:
Implementing and monitoring an ESG strategy is critical to ensuring that a company meets its sustainability goals.
This involves implementing the strategy across the organization, regularly monitoring performance against established ESG targets, reporting on performance, and continuously reviewing and updating the strategy to remain relevant and effective.
By doing so, a company can demonstrate its commitment to responsible and sustainable business practices, build trust and accountability with stakeholders, and contribute to a more sustainable future.