Part 2 - Can You Look at ESG as an Equation?

I was asked a question by a long-time compliance colleague, Andra Popa, “Can you look at ESG as an equation?” I answered the question on a post for the Soul of ESG on Osprey’s website. I showed my first post to Andra and she said she looked at it a different way. I had said that running an ESG program is like running a compliance program, with a beginning middle and an end made up of the 7 elements of a compliance program… therefore it is like an equation. There will be a clear methodology (equation) for implementing and running an ESG program. I think ESG can be much easier as a result of it being formulaic and I want people to be encouraged. There is too much tension in ESG. Andra said that environmental, social and governance issues can be interpreted very differently depending on many factors such as the area of the country the company operates in, the industry the company belonged to, the size of the company, the stakeholders’ perspectives, the other ESG related issues the company was committed to, etc. I immediately thought, as is often the case, I was wrong. Then I showed my first draft of this post, admitting I was wrong, to my colleague Steve Alienello. Steve said I might be right, that even ESG issue selection/management can be an equation and gave me several examples of how ESG materiality selection and management can be achieved with a process. Then I thought he is right, that I was wrong about being wrong. Oh, the humanity… isn’t this a typical ESG conversation.

Andra is right that ESG issues are complicated. Water conservation is not typically an issue for software companies, however for software companies operating in dry climates… water conservation might be very important. CO2 data collection, for an individual company at this point in our history, is very complicated. Even if you think you can develop an equation for CO2 data collection in your organization, your suppliers’ CO2 data will likely be problematic, if not non-existent. Formulaic? Try getting a board full of strong-willed people to even agree on what ESG issues the company should focus on. Formulaic? What about meeting the expectations of the stakeholders??Employees are going to be for and against every social and political issue known to mankind. In my first draft of this post, I said that an ESG program can easily be formulaic but ESG issues are far from formulaic. However, Steve reminded me about all the tools available to help make selecting what ESG topics you are going to manage much easier.

First of all, there are ESG standards that identify the most relevant ESG topics for your industry. I would absolutely start and end with standards. I would grab your industry’s standards list every time someone walks up to you and tells you to focus on their favorite ESG issue… an issue that has nothing to do with your industry or your organization’s stated impact goals. Show them their ESG issues is not on the list developed by the standards body and point out that the list of relevant issues is long and barely manageable for your ESG team as is. If a board member goes off on an ESG issue tangent, pull out the list, tell them the ESG committee has adopted the list and has limited the number of ESG issues you can manage.

Yes, that’s right, another way to make managing ESG issues more formulaic is to have an ESG committee made of respected leaders with diverse backgrounds from your organization. Have them select a number of ESG issues that they think the company can take on simultaneously and use that number to deal with people who want to add another dozen ESG issues to your list. The committee can also help back you up when powerful people suggest doing things that will make the selection and management of ESG issues difficult. You can also have the committee set up 3 categories of ESG issues… immediate, intermediate and “if we have time.”?You can fight all day with everyone or you can put a system (equation) together to help with the ESG management process. There are many other ways to turn the chaos into a process.

One of the most important considerations to turn ESG issue management into an equation is to implement software that integrates with standards and automates the process of collecting ESG data from the employees responsible for that data. Osprey has developed an ESG software system to turn the ESG selection and management process into an equation. If you want to find out more about how that can be done check out ospreyesgsoftware.com.

Andra is right that the problems associated with managing ESG issues in an organization are significant. I dealt with this sort of thing as CEO all the time. When all hell broke loose, I herded the cats with a process. The more difficult things are the more you need an equation. Every time something came up that caused a ton of tension and distractions, I wrapped a process around it and kept the chaos and tension to a minimum. I was able to help guide leaders gently and mange bullies with a process. Andra is right that most organizations don’t implement an effective ESG process. In fact, companies often hire someone who has been in ESG related field for years and is so wound up about everything that they add chaos to the situation rather than add a process to keep the peace. It doesn’t need to be this way. There are a lot of overly emotional people involved in the ESG movement. They discourage leadership.?We need an equation/process to put all our potential ESG issues through to try to help get it right and keep the peace.

Much thanks to Andra and Steve for helping me sort through all this.