Three suggestions for integrating ESG into company technique

This text is sponsored by ScottMadden, Inc.

Company duty isn’t just a buzzword; it’s a guideline that shapes the muse of an organization’s identification. Companies have a profound duty to positively have an effect on their staff, society and the surroundings. Embracing company duty means recognizing {that a} enterprise’s success is intertwined with the well-being of its stakeholders and the communities it serves.

Along with elevated strain from traders, corporations are dealing with rising expectations to take positions on ESG points which are necessary to clients. As organizations deal with these ESG points, they could discover themselves at completely different phases of the maturity curve from preliminary steps, akin to creating devoted sustainability positions or a sustainability division, to the main follow of integrating ESG objectives into company technique. Sustainability professionals seeking to combine ESG points into company technique ought to contemplate the next preliminary steps:

1. Combine ESG technique into your company technique and enterprise planning processes

Firms should first establish ESG materials points and develop ESG initiatives to deal with gaps within the enterprise technique:

• Conducting a materiality evaluation — If sustainability professionals shouldn’t have sturdy relationships with their C-suite or board, a beneficial device to construct that relationship is a materiality evaluation. A materiality evaluation is a structured train that helps an organization establish particular ESG points that want consideration by surveying or interviewing each inside and exterior stakeholders on their key priorities.
• Figuring out gaps to reaching ESG goals — As soon as materials ESG points and related indicators have been recognized by way of the materiality evaluation, establish gaps within the firm’s present efficiency and develop a method to shut these gaps. To make sure that ESG points usually are not addressed as standalone initiatives, it’s crucial that these methods are included into the corporate’s company technique and enterprise plans.
• Integrating ESG targets with monetary objectives — As soon as an ESG technique has been recognized and included into the corporate’s company technique, targets and metrics must be developed round these points, whereas guaranteeing these metrics are built-in into the corporate’s monetary objectives and addressed as a part of the annual planning cycle.
• Providing ESG-focused options to present challenges — Sustainability professionals must also be agile sufficient to rapidly suggest ESG-focused options or establish ESG challenges in response to present occasions (a latest and ongoing instance being the COVID-19 pandemic).

2. Guarantee organizational alignment all the way in which as much as the board

To raise ESG subjects to the very best ranges of the group, sustainability professionals should have interaction the proper stakeholders at numerous ranges of the corporate:

• Participating with the CFO — Bringing the CFO onboard previous to conversations with the board will probably be essential to bridging the hole between sustainability and monetary efficiency. As traders demand extra info round ESG danger administration, the CFO will probably be greatest positioned to talk worth creation related to ESG initiatives.
• Establishing communication channels — Creating sturdy communication channels between the sustainability staff and different necessary inside stakeholders, together with the CFO, chief danger officer, investor relations, and finance, will allow info sharing to tell company technique.
• Creating an ESG steering committee — Forming a committee for ESG points ensures that the correct quantity of time and experience is devoted to ESG initiatives. This committee ought to present formal steerage, oversee and drive the implementation of ESG methods and actions.
• Leveraging an exterior advisory council — Creating and managing an exterior advisory council, which brings specialists to the desk throughout numerous stakeholder teams akin to banks, NGOs and subject material specialists, can construct the board’s experience and luxury degree with the ESG staff whereas offering validation on the significance of ESG points from a 3rd get together.
• Integrating ESG points into board-level engagement — A simple means to make sure that ESG points are elevated to the board degree is to give attention to a subject that’s certain to be mentioned throughout board conferences (responses to present occasions akin to firm initiatives round worker well being and wellness or racial fairness insurance policies).

3. Leverage current reporting necessities to speak ESG points

• Whereas reporting is just not a brand new train for publicly traded corporations, sustainability teams usually discover they report in line with requirements separate from required SEC filings. Sustainability professionals have a tendency to search out themselves needing to elucidate numerous non-mandatory sustainability-reporting frameworks to others of their group as they conduct knowledge requests and interviews.
• Whereas there may be advantage to reporting in line with sustainability-specific frameworks, akin to World Reporting Initiative and Carbon Disclosure Challenge, integrating ESG points right into a danger administration lens is without doubt one of the quickest methods to raise these subjects to the board degree. Creating relationships with monetary or danger administration teams throughout the firm could also be a difficult process; nevertheless, sustainability teams can act as a beneficial supply of knowledge for non-financial materials info and assist corporations keep away from utilizing boilerplate language that won’t present traders with related perception.
• Reporting frameworks, such because the Sustainability Accounting Requirements Board (SASB), intention to develop clear steerage for corporations to establish and report materials ESG dangers instantly into SEC filings. Such built-in reporting would require complicated collaboration throughout group strains, however it can additionally guarantee stakeholders throughout corporations are talking the identical language in terms of ESG and total company danger.
• Sustainability professionals can begin by contemplating ESG-related dangers throughout the group’s total danger evaluation. Many corporations will discover that making use of frameworks supplied by SASB or others is a chance to assist establish these dangers and form the narrative right into a decision-useful format for traders and stakeholders.

Transferring past conventional silos and integrating ESG issues into company technique will allow corporations to be proactive in managing points materials to their enterprise. Integrating ESG technique into company technique requires sturdy collaboration and assist from numerous teams inside an organization, however it can show invaluable as corporations navigate the altering enterprise panorama.