In today’s modern world, it has become the hour of need to establish an ESG strategy for your business to prosper. An ESG strategy can give your company a direction to be responsible and sustainable at the same time. Why is every company rushing to develop ESG strategies? Why is it imperative for a business to thrive? Let’s clear out all the ambiguities and know the importance of ESG strategy for running a successful business.
Always remember, if your company fails to develop an ESG strategy, then it would become a tough row to hoe to establish a good position in the business industry.
An effective ESG strategy will not only help your company generate higher revenues but also mitigate the potential risks. By focusing on the ESG principles, you will be able to cope with the legal and compliance risks. Let’s explore the three elements of ESG.
- The environmental factor is responsible for the management of the environmental activities of a business such as pollution, sustainability, carbon emissions, etc.
- The Social aspect of ESG seeks to focus on the business’s relationships, customer relationships management (CRM), incorporation, and collaboration.
- The third aspect of ESG covers the Governance aspect. It includes authoritative, administrative, and management roles.
Foundation Of ESG Strategy
Your ESG strategy should be based on the following standards:
- The UN Sustainable Development Goals are 17 goals that are created for developing a sustainable business.
- The SASB Standards recognize the ESG challenges related to 77 distinctive areas. It is also described as a tool that is designed to Refer also to the SASB Materiality Map, a tool to estimate the financial materiality of ESG.
- The UN Guiding Principles are designed for companies and governments to fulfill their duties and take care of human rights and make sure that no human rights abuses take place.
How To Develop An ESG Strategy?
1. Develop A Materiality Assessment
The ESG strategy of every business depends on materiality analysis. It wouldn’t be wrong if we say that materiality analysis is the foundation of ESG strategy. Its main focus is to highlight those business problems that need to be addressed immediately. To implement the materiality analysis, you have to perform extensive research for collecting data from external as well as internal stakeholders.
Once you gather data, the next step is to place the data in the graphical representation. This visual representation of data illustrates and prioritizes the important issues that need to be addressed first.
2. Develop An Effective ESG Roadmap
An ESG strategy won’t work unless you develop a roadmap and framework. An ESG roadmap clearly highlights the company’s vision and mission and clarifies the company’s objectives and long-term goals.
3. Know Your Existing State
For developing an effective ESG strategy, you must first assess the current programs, policies, missions, metrics, and goals of the company. Because when you know the current state of your company, you would be able to develop policies and programs for the future. You can ask cross-functional stakeholders of your company who have enough knowledge about each priority ESG topic. You must set action plans to integrate ESG into your business operations.
4. Report Progress
Just like you set goals and objectives for your company, ESG reporting is not a standardized approach. Reporting involves communication. Make sure that you communicate ESG strategy and the company’s ESG goals to all the stakeholders so that everyone involved in the company should know how to align the strategy with business objectives.
