Building Your ESG Strategy: The Complete Guide

ESG stands for Environmental, Social, and Governance. It is a framework that helps stakeholders know how an organization is managing risks and opportunities related to environmental, social, and governance standards. In this context, stakeholders are defined as not simply investors. It also includes employees, customers, and suppliers of a company. These stakeholders increasingly have an interest in the sustainability of an organization’s activities.

Environmental Criteria

This is how a corporation behaves as a protector of the environment. Environmental criteria include the energy your company consumes, the waste it emits, the resources it requires, and the effects on living things as a result. It covers a variety of elements that illustrates the effects of a company’s activities on the earth in both positive and negative ways. It is also used to analyze the environmental risks of a company and how the company is managing the risks.

Examples of issues that are considered under environmental criteria in ESG strategy include waste and pollution, resource depletion, usage of renewable resources, greenhouse gas emission, and deforestation.

Social Criteria

This is how the company supports relationships with its labor force, suppliers, customers, and the communities in which it operates. In effect, they examine what impact it has on people at each stage of its operation. Social criteria focus on the relationships the company has and the reputation it nurtures with people and organizations in the communities where they do business. It examines the company’s relationships with other businesses and communities, as well as how the companies treat their employees.

Examples of social issues in the ESG strategy include working conditions, employee relations & diversity, health and safety, and stances on public issues

Governance Criteria

This is concerned with the leadership of a corporation, executive compensation, audits, internal controls, and shareholder rights. Governance is the internal system of practices, controls, and procedures a company adopts to manage itself, make good decisions, conform with the law, and satisfy the requirements of external stakeholders. It covers everything related to how corporate management and boards relate to different stakeholders and how companies are run. It refers to a set of rules, systems, structures, and policies governing a corporation.

Examples of governance issues include the diversity of the board of directors & management, corporate risk management, corruption & bribery, etc.

How are ESG Guidelines and Standards Determined?

Over time, an ESG ecosystem for ESG reporting and integration has been developed by a wide variety of organizations. These organizations develop guidelines and set standards for companies that report sustainability information. Some of them also rate and rank companies according to these guidelines and standards. The World Economic Forum has produced an ESG Ecosystem Map to better illustrate this.

What is an ESG Strategy?

ESG Strategy Definition

An ESG Strategy illustrates how a company operates regarding environmental issues and social responsibility. Investors often think about a company’s ESG strategy to assess investment risk. ESG factors and scores are used as investment screening tools. Developing an ESG strategy helps the company brand, by demonstrating a socially conscious business approach and values to consumers, employees, and suppliers.

Producing a solid ESG strategy will help stakeholders to understand that your company is dedicated to a more sustainable future. A company’s ESG performance is examined by employees, prospective investors, journalists, partners, and the general public. The processes, data, and significance assigned to certain aspects might range from one institution to another, resulting in sizable variations in ESG ratings and results.

How Do You Develop an ESG Strategy?

When developing an ESG strategy, it’s vital to ensure that it is adapted specifically to your company and its industry. It can’t be developed apart from your corporate objectives or without considering the commercial environment.

Your priorities need to be in line with your business strategy, your sector’s overall trends, and the priorities of your stakeholders. Your ESG strategy also needs to take into consideration external factors. This could include the introduction of new regulations or laws. Another example would be pressure on your industry from investors or the news media.

The first step is to determine which new ESG-related regulations and reporting standards may be relevant to your company. Stay current with regulatory compliance by consulting the following frameworks:sv

• United Nations Sustainable Development Goals (SDG) – This is a collection of 17 interred global goals designed to be a “blueprint to achieve a better and more sustainable future for all”.
• Sustainability Accounting Standards Board (SASB) – These standards highlight ESG issues that are applicable to 77 industries.
  United Natihttps://www.unglobalcompachttps://sasb.org/t.org/library/ons Guiding Principles on Business and Human Rights – This is a framework regarding the issue of human rights and transnational corporations.
• Looking at what others are doing is another good place to start. Different sectors are at different stages of their ESG journeys and will have varying priorities. Study their approaches, and you will take away some actionable tips for your own business.

Engage with Stakeholders

• Stakeholders today include not just shareholders or investors but also employees and consumers. Determine the stakeholder opinion around your strategy. Establish what they value and where their priorities lie. Identifying stakeholder ESG priorities is an excellent way to determine your own.
• Developing and improving your ESG strategy should be guided by the stakeholders that your company affects.
• Decide which stakeholders to prioritize by assessing each group’s influence on the organization from the outside in.

Build a Roadmap and Framework

• Build a framework that states your company’s aspirations, objectives, and milestones. A strong ESG framework provides stakeholders with a thorough view of your company’s strengths and goals.
• Get buy-in from stakeholders, employees, the public, and investors by building a clear roadmap for implementation. Explain targets, milestones, and rationale. This requires a team represented throughout your organization.