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Insight Article: 10 Things You Need to Know About ESG in Your Business

ESG and Business Digitalization

1. ESG Strategy includes the whole company

This may seem daunting but it allows for a spread of the work across department, rather than landing on one desk. The added benefit of this is allowing teams to become aligned, report on their own fields of expertise and focus in on what is most important.

2. “Data, Data, Data”

To make ESG part of your business you need to collect data, and lots of it. But it must be good data, that is meaningful and comparable. Before you start collecting data make sure that you fully understand why it is being collected, whether it is accurate and whether it is measurable. There are many software packages that collect the useful data for you so, much of the thinking has been done already.

3. Investor Relations

Investors are increasingly interested in ESG, and many won’t go near any company that is not addressing ESG or likes to green wash. Investors are also keen to give feedback on what is important to them, so involve them. Reach out and ask how their other companies are active in ESG. They want you to succeed.

4. Communication

Tell your story, don’t let someone else write it. It doesn’t matter where you are on the path of sustainability, tell your stakeholders where you want to go. If you are at the bottom of the ESG scale, this is good to know, because the only way is up! Make public your ambitions, why you believe in it, why ESG is essential and then keep reporting on this. If you get bad press this is what you will be remembered for. Get the good news out.

5. Alphabet soup

The conundrum of which ESG framework to use? There are many to choose from – CDP, GRI, SBTi, SASB, TCFD1 ……and the list goes on. Do not worry. Choose one that other companies in your industry use so you can compare like for like; or choose one that seems to be the best fit. Starting to record your ESG is what really counts. Currently, the most popular is the GRI and several companies actually use more than one to cover specific aspects of their operations. Other companies have created their own frameworks which work best for them. They report only on the issues relevant to them and explain why they don’t report on others.

6. ESG impact happens over time

You may be able to win immediately on the low hanging fruit, but the big wins are far away, unless you have very deep pockets. What gets more attention the E, the S or the G? Pre COVID it was G at 60%, (20/20/60 for E/S/G) but now surveys indicate that because of the pandemic, there is more interest in the E and S with 40/40/20 split. Mid-pandemic it was thought that ESG would fall to the wayside and profitability would override everything as the lockdowns came in. However, this was not the case, as companies that had strong social policies with embedded ESG fared better than those that hadn’t, as they cared more about the protection of their staff, than their profits.

7. The obligation of regulation is coming

With the government’s pledge of becoming Carbon Net Zero by 2050 and with events like the United Nations COP 26 taking place in November this year, mandatory obligations are forthcoming. Even without legal obligation, many stakeholders are already demanding that ESG is reported on. Unfortunately, ESG reporting is not standardised, which can allow for misunderstanding and perhaps, the dreaded ‘green washing’. The accounting profession is suggesting greater harmonisation of reporting and ability to compare data from different frameworks; and in the UK we have the we have Government requirement for larger companies to report to SECR (Streamlined Energy and Carbon Reporting).

8. Keep it simple

You may think that ESG is a minefield, but it isn’t. Many companies are leading the way and have been doing this for years. Don’t try to imitate them from day one. Start with what you can and set your own pace. For the first year set your direction, find your purpose, lay your mark in the sand. Don’t set a target as you won’t know what is achievable, just set the direction. In your second year, you can then compare against your first, identify your gains and see where you need to add more focus. Now set a target. It is all about looking forward. You can’t change the past.

9. Top level buy in

This is key to greater gains in ESG. Without the drive from the C-Suite, you will be restricted by a glass ceiling. However, with buy in from the Board, budgets, manpower and time will be allocated and allow for greater gains in ESG. If the C-suite doesn’t buy into ESG, then is this the right company to work for?

10. Just start

Do something. There is nothing to fear by starting your ESG pathway. It doesn’t need to cost a lot of money or much time to start. The best thing to do is to start measuring where you are, then you can work out where you need to go. Take that first step.

 

1Carbon Disclosure Project (CDP), Global Reporting Initiative (GRI), Science Based Targets initiative (SBTi), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD)

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