The heightened awareness of climate change, racial and social equity issues and COVID-19 has changed the way many companies view environmental, social and governance (ESG) issues.
Recent events have exposed the vulnerabilities of our economic, political and social systems while illustrating the important role ESG plays, both in helping businesses stay competitive and in building a stronger global community.
Look no further than the United Nations Climate Change Conference last fall, where more global entities expressed tangible commitments to achieve carbon neutrality by 2050, an ESG effort with impact. felt in all companies all over the world.
This convergence of factors has made ESG a focal point for companies of all sizes. Well-integrated ESG strategies deliver real added value, helping companies succeed in the face of disruption while ensuring the common good of all stakeholders in the business.
Consumer pressures are also boosting ESG engagements, with younger consumers more likely to take ESG issues into account when making purchasing decisions. According to PwC, more than half of consumers believe that a company’s purpose and values play an important role in their decision-making.
Regardless of a company’s size and budget, there are ways to develop and implement an integrated ESG strategy that meets stakeholder expectations and produces meaningful results. Here are six steps to develop and advance ESG while supporting business goals.
Identify the important ESG issues for your stakeholders. Successful ESG strategies take into account the perspectives of multiple stakeholders. Businesses need to assess and rank the issues that are important to employees, customers, suppliers, investors, and other stakeholders.
As they identify core priorities, keep in mind that some issues like COVID-19, racial equity, and climate change often transcend businesses or industries, applying to all entities. engaged in systemic change.
Develop a reporting and measurement framework. What is measured is managed, so it is essential to create a measurement framework around ESG priorities. Consider checking out popular ESG frameworks and tools, such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), United Nations Sustainable Development Goals (UN SDG), United Nations Global Compact (UNGC) ), the CDP, the Climate Working Group -related Financial Disclosures (TCFD) or the International Business Council (IBC) of the World Economic Forum – to set goals and measure progress.
The metrics provided can be useful in helping companies track performance and communicate progress to stakeholders.
Take an intersectional approach. As you develop an ESG strategy, you will notice that many issues are related. Make sure your strategy recognizes the complexity and intersectionality of these issues and addresses the root causes, not just the symptoms. For example, lack of access to affordable housing may be correlated with intergenerational poverty and racial inequality. If your goal is to foster greater racial equality, affordable housing can be a key pillar of your strategy.
Look through your supply chain. Take advantage of the opportunities to work with third-party partners who share similar ESG commitments to create a wider impact in the industry. Think about how you can empower and empower partners throughout your supply chain.
Depending on the results of your stakeholder assessment, you may want to consider setting goals for reducing energy consumption, employee compensation from vendors, and board diversity.
For example, a Bank of America study found that over 75% of Nasdaq companies do not have a woman, under-represented minority, or LGBTQ + member on their board.
Companies can take meaningful steps to tackle under-representation in the workplace by doubling transparency and reporting, setting diversity goals for the company and suppliers, improving training and rethinking approaches recruitment.
Integrate your ESG strategy across the company. ESG initiatives must be deeply integrated across the company to produce meaningful results. ESG objectives allow managers to think about the long-term viability of the company.
Every business unit can support ESG initiatives, whether it’s developing a fair labor provider strategy, investing in sustainable and climate-resilient infrastructure, sourcing sustainable energy, or revamp HR policies to increase diverse recruiting, hiring and retention. ESG is end-to-end teamwork.
Remember the power of your people. Even without a big budget for ESG initiatives, you have the power of your people.
Empowering your employees to drive grassroots change in your community, with the support of your organization, can help inspire meaningful change. Every organization has something to contribute; it’s not always a question of money, but it’s always a question of action.
Grassroots change can be as simple as an internal paperless campaign or launching a network of employees dedicated to exploring ways to improve the sustainability of the service. The important thing is to create a channel of participation.
Team members who are empowered to take action on ESG initiatives that affect them are more likely to stay engaged and productive while improving value across the organization.
Companies with well-articulated and deeply integrated ESG goal strategies are more resilient and better positioned to create long-term value for stakeholders and meaningful results for the communities in which they operate.
With the support of each business unit, ESG objectives allow executives to think longer term about the viability of the company, its role in building a stronger and fairer world and help it to keep the promise of stakeholder capitalism.
• John Compernolle is Global Commercial Banking Market Manager for Bank of America Chicago.