Thinking of developing an ESG strategy? An ESG strategy maps out the steps to follow for your business to meet its sustainability goals. Today, most companies invest in ESG to ensure profitability while upholding environmental and social responsibility.
With an effective ESG strategy, you can guarantee consistent growth, reduce legal and regulatory issues, cut down on costs, enhance worker productivity, and maximize capital expenditures.
So, what should you consider when developing your corporate ESG strategy? Here are the three key elements of ESG to guide your strategy:
An ESG strategy needs to address issues such as resource and energy conservation, waste reduction, climate change mitigation, carbon emissions, and any other issues to do with your company’s impact on the natural world. Businesses prioritizing environmental sustainability aim to minimize their adverse impact on the environment and enhance the conservation of natural resources.
This element relates to your business’s impact on people and the overall society. An effective corporate social strategy should take into account an array of social issues, including community engagement, human rights, worker welfare, inclusivity, and diversity. By prioritizing social responsibility, your business can positively impact society and promote ethical behavior in everyday operations.
As a result, your business can draw in more consumers, especially now that many people are increasingly becoming more conscious of the impact of their purchasing decisions on society. Unlike before, customers are more likely to seek out your products or services if they align with their social values.
Likewise, employees are increasingly seeking employers who are committed to social responsibility.
The third pillar of corporate ESG is governance. This aspect covers how a business handles its decision-making process and whether its actions are in the best interest of its shareholders. More specifically, it covers a company’s management structure as well as its practices and policies. For investors, governance is important as it ensures you invest in honest and transparent companies.
Good governance includes key aspects such as greater transparency in company disclosures, fair executive compensation, gender inclusivity in management, respect for stakeholders, and so on.
Qualities of an Effective Corporate ESG Strategy
For a successful ESG policy, ensure you:
- Take into account the needs/ input of all stakeholders: to be considered sustainable, an organization should assess whether they are generating value for its stakeholders.
- Align ESG goals with the company mission and vision: implementing ESG is not a separate initiative but practices you implement in day-to-day operations to make the organization more sustainable.
- Invest in the proper ESG training: a company should also ensure its employees have the necessary knowledge and skill to push its ESG initiatives.
- Measure, report, and improve: great ESG performance must include measuring and reporting progress. Regularly reporting on active initiatives to stakeholders can help increase transparency, build trust, and identify areas of improvement.
Consider All Three Pillars When Building Your ESG Strategy
Sustainable and responsible practices are quickly becoming a key part of how organizations do business. And investors, employees, as well as customers are gauging companies that they do business with on their performance on the ESG scale. So, to rank among the most sustainable organizations, it is important to take into account key points in the Environmental, Social, and Governance aspects.