Why Do Businesses Need an ESG Strategy?
An ESG plan is the key to achieving financial, efficiency and growth goals. It’s easy for a company to want to become more environmentally and socially conscious. That said, it can be much harder to know if companies are actually meeting these goals without a way to track them.
That’s where having a corporate ESG strategy makes all the difference. An ESG plan gives businesses a framework for seeing progress toward reaching sustainability goals. Companies get quantitative information that measures the value they’re getting back for their efforts, which can benefit them in the following ways:
- Keep up with competitors: Having a successful ESG strategy ensures businesses stay in step with competitors, who also have ESG strategies of their own. An ESG strategy can help companies look better to their clients and investors. This is a key factor in staying competitive and relevant within their industries.
- Align with stakeholder interests: An ESG strategy gives stakeholders an objective way to measure improvements in each fundamental area of the plan, showing them they’re investing their money in the right place.
- Prepare for long-term success: Leaders want their businesses to be successful for years to come. An ESG plan is an important part of vision casting and doing the right things now to ensure a long, prosperous future.
How to Create an ESG Strategy in 6 Steps
Now, it’s time to learn how to build and implement an ESG plan. By following the right steps, companies can see the beneficial results of an ESG plan as they grow in their environmental, social and governance responsibilities.
Here are six steps to implementing an ESG strategy:
- Consult with stakeholders: An ESG strategy must include items stakeholders care about. In today’s market, investors want to use their money to grow companies that have similar values to their own. Define the beliefs and values of stakeholders to start mapping out objectives with your ESG strategy.
- Choose the right ESG framework: Once businesses have the necessary information from their stakeholders, it’s time to choose the right ESG framework to guide their strategies. These guidances include the United Nations Sustainable Development Goals, the Global Reporting Initiative Standards and the Sustainability Accounting Standards Board Standards, to name a few.
- Conduct a materiality assessment: A materiality assessment is a crucial part of successful ESG strategy implementation because it reveals the relevant topics an ESG plan should focus on. These are the topics stakeholders, investors, employees, peers and competition care about. A materiality assessment like the ones TRC offers helps businesses prioritize the right actions to take to meet their goals.
- Appoint the right people for management: A company is only as good as the people who comprise it. Hire or appoint the right people to manage ESG efforts — people who devote themselves to the ESG strategy’s success.
- Collect data toward key performance indicators (KPIs): Once the ESG plan is up and running, it’s time to start collecting data. ESG processes benefit businesses because they provide objective metrics that prove the success of social responsibility efforts. Use the data you gather to track KPIs, measuring success along the way.
- Reassess over time: As companies continue gathering data related to ESG efforts and track KPIs, they have the benefit of being able to reassess their strategies over time. It’s OK for said strategies to change — businesses should strive to achieve new levels of success, but they can only do that by seeing the honest data and making necessary adjustments. Acknowledge strong areas and continue what’s been working. Note weaker areas, and take the next right steps to improve.
Measuring Progress of an ESG Strategy
A key factor of having an ESG strategy is measuring progress. ESG progress metrics give insight into how companies are performing compared to their individual goals and competition. Ideally, metrics will reveal that businesses are well on their way to meeting their goals and are keeping up with or even surpassing the competition in their ESG efforts.
Measuring progress is also crucial for reporting purposes. The main draw of an ESG strategy is that it provides objective statistics about the issues investors and stakeholders care about most. Simply telling investors to “take our word for it” when companies give progress updates is out of the question — businesses need to accurately measure their progress to provide real, raw data reports to their investors. Investors use these reports to know if they’re investing in a company that aligns with their goals and provides the least risk.
The best way to proceed is to hire an unbiased third party to measure ESG progress, handle materiality assessments and compile necessary reports. Having an unbiased, objective entity report on company progress automatically legitimizes the information. It also helps combat greenwashing, which is a company’s attempt to appear sustainable without taking any meaningful actions. Using an objective third party guarantees accuracy and honesty, which investors demand.
TRC Can Help Advise ESG Strategies
At TRC, we specialize in helping companies strategize and publish an ESG action plan that works in their best interests.
We’re ready to develop your corporate ESG strategy and handle all the reporting, giving you the benefits of working with an unbiased third party. Our ESG advisory services will help you reach your ESG goals and align with your investors’ values.
Contact us today to take the next step toward a successful ESG strategy for your business!