OKRs & ESG - how a more sustainable approach can benefit the bottom line and society
More than ever, businesses are coming under scrutiny for their environmental, social and governance practices. On the horizon in many of the world’s developed and emerging economies are regulatory standards, for example the European Sustainability Reporting Standards and the Task Force on Climate-Related Financial Disclosures, that will require uniform disclosures of critical information such as global emissions, but also the risks to the business from climate change.
Without being fully integrated into your organisation’s wider strategy, a big risk in adopting ESG principles is so-called ‘greenwashing’. This is the gap between what many companies say about climate change, and what they actually do, and in this developing era of regulatory, enforceable compliance, the need to match words with deeds will be increasingly important.
There is not only the impending legal threat of non-conformity, consumers are becoming much more savvy about climate change and social justice, and they are demanding that businesses become part of the solution. The idea of ‘business as a force for good’ is not just a trendy strapline or virtue signalling, it is simply good business.
If the moral argument isn’t strong enough already, then there is plenty of additional evidence that companies which have ESG as a core part of their strategy are generally more successful. Through applying robust ESG practices, companies can expand within existing markets whilst tapping into new ones. Moreover, there is likely to be improved climate and sustainability related risk mitigation, reduced likelihood of legal interventions, and a better chance of attracting investment. Employee satisfaction will also be higher, with ESG matters known to be particularly important for younger employees.
You may be asking ‘where do OKRs fit in with this?’ The answer is that OKRs help define and implement guiding principles, providing clarity on a company’s most important priorities, and aligning teams to ensure everyone is working towards the same goals. They help to find solutions, turning ideas into outcomes by mapping out the path to accomplishment.
There are lots of frameworks that can be used to integrate sustainability and good practice, but we believe that OKR is the best format because it engenders engagement, social purpose and alignment, both vertical and horizontal. What this means in practice is a shared set of objectives, in tune with the businesses high level ESG strategy, that can be implemented across an organisation and outside of traditional functional silos. Incorporating ESG principles into your business can feel daunting, but OKRs are the ideal framework for supporting your implementation.
Let’s take a simple example – a major finance institution wants to become more environmentally conscious. It sets itself an aspirational objective, for example to become carbon neutral by 2025, and identifies that one of the best places to start on this specific journey will be to ensure the property portfolio from which it operates is more sustainable. It decides to measure this through a number of the key results, one of which may be to “increase the number of green certified buildings within our portfolio from 25% to 95% by 2024”.
Clear, time bound and measurable outcomes are needed that will drive activity relating to energy efficiency, air and water quality, waste management, hybrid working, recycling bins, going paperless, and formal certification, etc. This can't be solely the domain of one jurisdiction, team or individual. It will require cross functional collaboration to be established, including the right staff expertise, resources, support services and data, all pulling in the same direction and aligned with the corporate objective of being carbon neutral.
At OKRAdvisory we always frame ESG in terms of opportunity, rather than cost. With the right OKRs framework in place a potentially overwhelming subject such as ESG strategy can be broken down into its component parts and driven forwards throughout the organisation, ensuring that actions are speaking louder than words. It can be a competitive advantage if done well, and the days of dismissing ESG as just rainbows and unicorns are long gone. Investors, staff and consumers want products and services that demonstrate more than just a passing nod to ethics and sustainability.