Have you ever tried to assemble something with instructions that seem to go from “Take the pieces out of the box” to “You’re done!” without any comprehensible explanation in between? Even if you have everything you need right in front of you, it’s going to be a long, painful, and potentially hazardous undertaking if you don’t know how to move from start to finish.
Sustainability programs can be just as vague and just as frustrating. Sustainability is a priority for many businesses but it’s an open-ended concept that sometimes doesn’t adhere to practical solutions or goals. Sustainability strategies are historically focused heavily on environmental stewardship with some sprinkling in of social considerations. Businesses that want to create a more environmentally, socially, and commercially sustainable culture need to have a full set of instructions. In this post, we’ll offer practical advice about how to move from the dream of achieving a sustainable business to a clearer path towards enacting meaningful change and all the key interim steps, through the lens of rising ESG criteria.
Sustainability vs. Environmental, Social, and Governance (ESG)
Sustainability and ESG are sometimes used interchangeably but they aren’t the same thing. Sustainability is a very broad concept that doesn’t point to any specific criteria or actions while ESG is designed to be a practical, umbrella framework for defining a resilient and stakeholder expectation-aligned business. As with the distinction between Corporate Social Responsibility (CSR) and ESG, achieving sustainability is the end goal and ESG is the plan of action. To put it another way, ESG is the set of instructions you use to achieve and measure a sustainable business.
The purpose of ESG is to provide a holistic framework for risk evaluation and goal achievement relating to environmental, social and governance practices within a business. ESG strategies enable investors and customers to evaluate how well a business is managing the most material ESG topics currently and what their plans are for embedding future resiliency. You can find a more comprehensive overview of ESG here but below, a quick breakdown:
- Environmental: What are the environmental impacts of your business and what are your goals for improvement? Areas of interest include: greenhouse gas emissions, pollution, material disposal, resource management, efficiency, and future environmental goals.
- Social: How does your business impact people and how do you give back socially? Areas of interest include: employee safety and well-being, relationships with local communities, interactions with customers, suppliers, and vendors.
- Governance: How is your business run? Areas of interest include: executive compensation, bribery and corruption, conflicts of interest, and overall governance transparency.
ESG at Work: Goal-Setting, Measurement, Documentation
ESG strategies are made up of specific, measurable steps with actionable goals and key performance indicators (KPI). ESG also does double duty as a language to communicate your goals and progress to potential investors, customers and other stakeholders. What makes ESG strategies so effective is that they are rooted in demonstrable accountability.
Getting started with ESG should include the following at a minimum:
- Conduct a materiality assessment to get a handle on what ESG topics are most important to YOUR business
- Understand the current state of how your organization manages priority topics
- Set objectives and goals: where can you maintain, improve, and optimize?
- Analyze gaps and roadblocks to achieving your desired future state
- Develop a strategic ESG roadmap and framework (and document it!)
- Set action plans and KPIs
- Report, evaluate, and communicate progress
Financial Benefits of ESG as a Sustainability Model
Whether you’re starting from scratch or refining your ESG strategy, it’s important to consider the financial impacts and rewards. ESG is an investment in your company’s future and will reap financial rewards when approached properly. The financial upside of ESG can be organized into three buckets: risk reduction, efficiency, and growth.
- Risk Reduction: Identify and prepare for physical, transitional and financial risks such as fees and regulatory pressures or climate-related events. Your industry may have climate-change specific challenges or opportunities or a particular vulnerability such as reliance on a process or substance that is being phased out. ESG risk reduction and preparation forces your business to think more broadly about risk mitigation.
- Efficiency: Review company operations from core facilities to supply chain management with an eye towards reducing your carbon imprint and investing in efficiencies. Waste reduction, material management and waste disposal are key areas to investigate.
- Growth: Share your ESG journey and champion responsible practices. Spreading the word not only highlights important issues we all need to be addressing, it bolsters your reputation and can help capture greater market share. Investors are increasingly interested in ESG assessments and are on the lookout for promising initiatives.
An ESG Framework for Sustainability
ESG strategies are complex and it isn’t always clear how to create the framework, set goals, measure progress, document processes and procedures and then communicate it all. Because ESG frameworks touch all aspects of your business, it can be challenging to get started and lay a lasting foundation. But it’s increasingly vital.
Many companies have taken steps toward sustainability, but do themselves a disservice if they aren’t orchestrating around an ESG framework to derive the most benefit possible using a holistic perspective. Don’t approach ESG without a complete set of instructions; reach out to Antea Group for more information about our ESG Advisory services. Our ESG experts can guide you through the process from self-evaluation to spreading the word about your success.
Whether you are brand new to ESG or have already developed a strategy, Antea Group can help you optimize your ESG framework and get the most out of your ESG investment.