Steps to Create and Implement an ESG Strategy

Today, ESG is essential to a corporate's long-term success and resilience, including ethical business practices, good governance, and environmental sustainability.

ESG -?Environmental,?Social?and?Governance. This covers all sustainability issues that affect companies, organizations, and society.

• Environment: Issues related to climate change, green electricity, emissions policies, e.g.
• Social: Includes equality, diversity, human rights and work environment
• Governance: Such as sustainability reporting, due diligence, strategies, handle whistleblowing, transformation and how the corporate complies with regulations.

Remember, it is unrealistic to expect that corporates do not have to make hard trade-offs among the ESG categories, or that they can lead on every topic. It is therefore important that corporates approach ESG in a strategy-driven way.

Why Companies Need a ESG Strategy

Using an ESG strategy is a good business practice, regardless of the requirements for the industry, location or business type. Some of the benefit:

• Ensuring compliance: Continued legislation to combat climate change may introduce regulations that will make environmental issues within ESG legal obligations. By integrating disclosure of ESG work, the future changes in requirements will make adapting easier.?
• Attracting investors: Investors pay more attention to factors outside the corporate’s bottom line when deciding whether to back the organisation.
• Business changes to combat climate change: Changing operations to meet ESG standards can promote a healthier environment for the business and its surrounding community. Becoming a greener corporate reduces utility costs.?
• Attract people: Talent may want to invest their time and talent with a corporate that makes a difference in social and environmental issues.
• Operating more efficiently: More efficient operation costs less while using less energy to get work done.

So, in this short guide I will first present steps to develop the ESG strategy and then it is time for realisation. Here I also suggest a step guide for implementation of the ESG strategy.

Steps to Create the ESG Strategy

Before implementation phase, ensure to have a clear strategy for the ESG:

Step 1: Engage Stakeholders

Engaging with stakeholders on ESG issues can help companies build trust and enhance their reputation.Engage stakeholders and find out how important specific ESG issues are to them. With these insights, you can guide your strategy so you can tell a meaningful story.?

This can be done with a materiality assessment – considering the financial perspective, and the environmental and social perspectives. Scale the assets meant to provide the level of insight you need to get started on theplanning. The materiality assessment should:

• Understanding of how important each ESG topic is to the business and investors.
• Provide insight into where your corporate stands on specific topics in comparison to your peers and competitors
• Guidance for emphasizing topics with the annual reports.
• Ways to define your priorities to take action.

Step 2: Establish a ESG policy

The next step in implementing ESG into a corporate governance framework is to have a clear policy for priorities, goals, and for measuring progress.

• What areas of sustainability need improvement??
• What is success for the ESG??
• What are competitors doing for sustainable practices??
• What ESG goals do the investors, suppliers or stakeholders have??
• Time for meeting the goals?

By ensuring the above, companies can ensure that their ESG strategy aligns with their stakeholders’ expectations.

Step 3: Integrate ESG into an overview

To effectively integrate ESG, companies should ensure that Management have the knowledge needed to assess ESG risks and opportunities.

This can include providing training on ESG issues, appointing Managers with ESG expertise, and establishing an ESG committee to control for risks and opportunities.

Step 4: Report on ESG performance

To build confidence with stakeholders, companies should report on their ESG performance regularly. This should be a combination of:

• Communicating the ESG strategy while demonstrating alignment to business objectives.
• Highlighting policies that are already in place.
• Evaluating progress and engagement in key areas.
• Sharing specific organisation goals and metrics

Disclose the information to ensure that you report on topics most material to your corporate. Because thestakeholders should easily access the ESG information. Have PDF report available on the website or a dedicated ESG page. Adding the information signals to those interested in ESG investing that you are committed to your initiatives and to providing clear communication.

Step 5: Integrate ESG into risk management

Integrating ESG considerations into risk management can help identify and mitigate related risks. This can include incorporating ESG factors into risk assessments. By considering ESG in risk management, companies can identify potential risks such as regulatory changes, reputational damage, or supply chain disruptions that could impact the success.

Implement the ESG Strategy

Here I also suggest a step guide for implementation of the ESG strategy:

Step 1: Establish the Baseline

Without an assessment of your current situation, ensure focus and attention on the right priorities. All ESG issues are important, but the corporate can’t assign them all the same priority for a real progress.

Use the materiality assessment to determine the topics to prioritize. Gather information from policies, data systems, and reports. Conducting this assessment allows you to get a overview of your corporate’s current state and gauge how much are your ESG strategy is across the organisation as a whole.?

Step 2: Determine Objectives and Goals

Time to start setting your objectives and goals so that you know how to focus in the implementation phase. The objective and goals could be:

• What to maintain:?Are there things you’re already doing well that need to be maintained? Something as complying with applicable safety regulations as this is considered important for the business to maintain, but not something you have to prioritize resources for to get the ESG value. Then it’s best to maintain the current efforts to remain compliant.
• What to improve:?Are there any areas where you can make improvements to better align with your competition, demonstrate ESG, and meet expectations from stakeholders? You may have internal inclusion and diversity programs but there isn’t much communication of this fact to external audiences. As such, a strategic objective may be to include inclusion and diversity metrics in external reports and start setting your goals.
• What to optimise:?Are there any areas where to move toward becoming an Industry leader in ESG? Maybe the corporate already calculated carbon footprint so you add a strategic objective to complete a decarbonization plan.

Once your objectives are in place, it makes sense to set goals. Goals measure the impact of the activities while also improving corporate performance and positioning your corporate well against the competition. When setting goals, consider:

• What context is needed for these goals?
• How will you assess performance?
• How ambitious are the corporate with target dates?
• What needs to be done??

ESG goals need to be tailored specifically for your business and the impact. Consider what the goal drivers are when you decide when and how to communicate those goals externally. Present a draft of your goals to the Management team.?

Step 3: Gap Analysis

To make sure that all the potential issues your organization may encounter as you would try to achieve your goals. Conduct a gap analysis between the current state and the objectives to identify what is missing.

Make it a point to understand the gaps between now and 5 years from now as this can help to find the level of ambition. then it’s easier to realistically achieve the goals and allows for better strategic guidance.

Step 4. Create a Budget?

Establishing a budget will ensure the project remains financially possible. Budgeting plans should include considerations of cost, returns and savings.?

The cost of implementing changes may include the creation of an ESG team, certification and training for specific ESG standards and upgrades to equipment. Changes to goals, timelines and returns may happen during the budget creation process.?Additionally, calculating the length of time for a return on investment becomes part of the budgeting process to see how quickly the input produces results.?

Step 5. Gather a Guidance Team?

A sustainability guidance team will ensure the organization keeps on pace to meet the established ESG goals within its framework. Team members could be employees or externals. This group’s aim is the continued pursual of the ESG framework set by the strategy.?

The guidance team may include an investor representative, an executive, a sustainability-focused employee. This team will have the varied perspectives and connections needed to keep the organisation moving forward with ESG goals.?

Step 6: Develop the ESG Roadmap and Framework

No ESC program without a framework that outlines where the organisations vision and purpose meet the strategy.?

Developing a roadmap ensures everyone remains accountable for key actions and a compelling framework gives shareholders and stakeholders a clear picture of goals and strength. Set a reasonable plan in motion so you can commit to it with a phased plan that is measured at predetermined points along the way.

Step 7: Set the ESG Roadmap into action

Integrate ESG into your business practices and processes. Create a Project to ensure progress and overview:

• Identify a set of clear and measurable outcomes to define what success looks like for your corporate.
• Use the Project to easily track your key metrics in performance.
• Set up regular communications and updates for key stakeholders. By constantly monitoring the plans you can stay on top of adjustments to stay on course to reach your goals.

Good luck and speed ahead