W Power 2024

ESG Strategies: Development and implementation guide

Having established ESG strategies can increase customer loyalty and aid in employee retention. There may also be financial benefits

Published: Apr 7, 2023 10:26:19 AM IST
Updated: Apr 7, 2023 11:04:22 AM IST

Developing an overall ESG strategy  can help guide your organization’s actions in a manner that supports other initiatives and commitments.
Image: ShutterstockDeveloping an overall ESG strategy can help guide your organization’s actions in a manner that supports other initiatives and commitments. Image: Shutterstock

Businesses today are expected to take on more responsibility than simply generating profit. That’s especially true in the impact businesses have on the world around them. One way to demonstrate an elevated commitment to social responsibility is to have an environmental, social, and corporate governance (ESG) strategy in place.

Learn why ESG strategies are important to an organization and tips for developing and successfully implementing them.

6 Tips for Crafting an ESG Strategy

Developing an overall ESG strategy can be a major undertaking. It is a model type that can help guide your organization’s actions in a manner that supports other initiatives and commitments.

The type of ESG strategy to develop depends on your:

  •     Industry
  •     Organizational goals
  •     Areas in which you are most passionate about having a positive influence

The following actionable tips can help you create an ESG strategy for your business.

1. Conduct a Materiality Assessment

A materiality assessment helps identify which ESG issues are most important to your business and stakeholders. It can help you understand the impact ESG initiatives may have on your business.

The first step in a materiality assessment is to collect data and evaluate various areas of your business, such as your operations and supply chain. This information can then be used to identify relevant issues and their priority of them.

2. Set Measurable ESG Goals

Establishing clear, measurable goals for each ESG issue is crucial to the success of your strategy. The goals should be:

  •     Specific
  •     Measurable
  •     Achievable
  •     Relevant

Set a timeline
Determine a timeline for goal completion. Build-in checkpoints to review progress and to pivot, if needed.

The United Nations’ Sustainable Development Goals (SDGs) offer ideas on developing and structuring your ESG goals.

Also read: Is ESG at the risk of becoming a smokescreen?

3. Align Your ESG and Business Strategy

Ensure that your ESG strategy aligns with your overall business strategy and values. This helps ensure that your strategy complements and reinforces your business goals.

To understand expectations, concerns, and priorities, engage with your:

  •     Stakeholders
  •     Community leaders
  •     Internal experts
  •     Internal business executives

4. Develop Policies and Procedures

When you have a clear understanding of your current state and the goals of all involved, develop policies and procedures that align with your ESG goals. This could include creating sustainability, human rights, or anti-corruption policies.

The objective is to ensure that your ESG goals are integrated into your operations and decision-making processes.

5. Measure and Monitor Performance

Consider how you will measure goals while you are developing policies around them.

Measuring and monitoring performance against your ESG goals is critical to your ESG strategy success. Use performance metrics and key performance indicators (KPIs) to track progress and report on performance at regular intervals.

6. Continuously Review and Improve

Continuously review and improve your ESG strategy to ensure it remains effective and relevant. Regularly assess your ESG goals, policies, and procedures, and adjust them as needed.

Review them with consideration to:

  •     Stakeholder feedback
  •     Regulation changes and emerging issues
Also read:  Why investors may need mandatory certification of firms' ESG claims

Implementing an ESG strategy

As you know, implementing any new strategy has its challenges.

The following actions can help ensure the ongoing success of your ESG strategy implementation.

  •     Clearly communicate your strategy and goals to your organization and listen closely to positive and negative feedback.
  •     Assign clear roles and responsibilities for the implementation of your ESG strategy.
  •     Provide training to employees to help them understand their role in achieving goals. This can include workshops, conferences, and formal education.
  •     Allocate enough resources to support your ESG goals and overall strategy.
  •     Monitor and report on progress on a regular basis, both internally and externally.
  •     Engage with stakeholders to gather feedback on your ESG performance and to identify areas for improvement.
  •     Continuously review and update your ESG strategy to ensure it remains relevant and effective.
  •     Be prepared to pivot as needed based on feedback and metrics gathered during the implementation of your strategy.

Organizational thinking shift

In some organizations, implementing these strategies may only require making a few small changes. For other businesses, implementation can require significant changes to:

  •     Operations
  •     Policies
  •     Procedures                                                          
It may also require an organizational shift in thinking about the responsibilities a company has to its employees and the community.

[This article has been reproduced with permission from Knowledge Network, the online thought leadership platform for Thunderbird School of Global Management https://thunderbird.asu.edu/knowledge-network/]