Your ESG strategy is only as good as your ability to execute it
Hasan Hamdan, PhD
Manager and Group Leader | PhD in Industrial Economics & Technology Management
Is having a good ESG strategy enough? The answer is no. A lack of execution could render a good strategy useless.
Failing to deliver can be worse than not having a strategy in the first place.
For years, companies have been investing money and directing resources into strategy planning and development. This involves materiality assessment, stakeholder engagement, and a lot of workshops, seminars, and meetings. The result is usually a nice-looking document that companies share on their websites, often crafted with the assistance of consulting companies specializing in communication.
The issue lies in the fact that many of these strategies fail to translate into tangible impact or change. The proliferation of ESG strategies is further fueled by the introduction of new, more stringent ESG regulations. Many companies have decided to offer services in this realm to get a piece of the cake. Then, after the market is flooded with new, nice-looking, and future-proofed strategies, one thing remains undone: execution and implementation.
A new trend indicates that companies are now shifting ESG funds from planning to execution.
In a recent Financial Times article, a major trend has emerged in corporate sustainability work and the way companies spend their sustainability budgets. Companies have started to reallocate their resources towards integration and execution. This shows that companies tend to hire consultancies specializing in the implementation of sustainability measures and digital solutions. One reason for this is the challenges of the new evolving regulatory landscape, which makes "Management-by-Spreadsheets" not an option anymore.
In today's dynamic business landscape, the implementation of ESG has become equally (if not more) important as embedding it into corporate strategy.
The Link Between ESG Strategy and Execution
As companies navigate complex challenges and stakeholder expectations, a strategic approach that aligns ESG principles with execution capability is essential for long-term success. To illuminate the critical relationship between ESG strategy and execution, I have developed the below matrix, comprising four distinct quadrants. Each quadrant represents a unique intersection of ESG focus and execution capability.
1. Strategic Integration
In this quadrant, companies prioritize strategic integration, leveraging ESG principles as a cornerstone for creating sustainable value. The main goal is to harness sustainability initiatives as drivers for competitive advantage, market expansion, and overall growth. By deeply integrating ESG considerations into strategic decision-making and structured governance processes, these companies not only foster innovation and climate-based solutions but also establish themselves as leaders in sustainable business practices.
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2. Strategic Paralysis
Contrary to strategic integration, companies falling into this quadrant emphasize marketing value over genuine engagement in ESG initiatives. Their primary focus lies in enhancing marketing and reputation value without substantive involvement in social or environmental projects. Despite portraying an image of corporate responsibility, these companies may struggle to demonstrate tangible ESG outcomes, potentially facing greenwashing and reputational risks, and credibility challenges over time.
3. Operational Integration
In the operational integration quadrant, companies prioritize operational efficiency and cost reduction while concurrently pursuing some social and environmental goals. By integrating ESG considerations into day-to-day operations, these companies aim to mitigate risks, reduce waste, and optimize operations. Through a concerted effort to align operational activities with sustainability goals, they strive to build a culture of efficiency and improve stakeholder trust.
4. Operational Paralysis
Lastly, companies in the operational paralysis quadrant exhibit a reactive approach, focusing primarily on compliance and mitigating legal liabilities. Their emphasis lies in addressing immediate challenges to maintain a "license to operate". While this approach may provide short-term relief, it neither understands/captures the value of sustainability nor the strategic benefits of integrating it into operational practices, potentially exposing the organization to long-term risks and missed opportunities for value creation - and in some cases, business loss.
Execution Capability and Project Management
Sustainability and ESG initiatives often involve complex and extensive challenges that require careful planning, coordination, and implementation. By their very nature, these initiatives are essentially projects. As a result, they should be governed by the principles and laws of project management. Expertise in project management will play a decisive role in realizing the companies’ sustainability ambitions and ESG goals.
In conclusion, as companies pivot towards sustainable practices, professionals who work in sustainability and ESG domains need to elevate their game and start acting like project managers to ensure effective execution. This also opens the door for new business opportunities. For example, project management firms have a unique opportunity to position themselves as indispensable partners in driving successful sustainability and ESG initiatives. By leveraging insights from evolving spending patterns and technological advancements, project management services can play a pivotal role in facilitating the seamless integration of sustainability principles into business operations.