ESG, DEI, CSR, sustainability, carbon literacy, UN SDGs… We’ve all heard of these seemingly interchangeable three letter acronyms and nods to environmentalism. But what do they really mean, why are they attracting so much attention, and why are they relevant to every organisation on the planet? And perhaps, most importantly, what does your organisation need to do about it, and how?
For simplicity, we’ll refer to all the above as ESG, which emphasises the consideration of factors pertaining to:
Environment - the preservation of our natural world, e.g., climate change and deforestation.
Social - the consideration of humans and our interdependencies, e.g., gender and diversity inclusion and social responsibility.
Governance – defined processes for running an organisation, e.g., boards of directors and their socio demographic makeup.
Dig deeper though and you’ll find any number of alternative descriptions, and similar numbers of sustainability reporting frameworks (over 600 and counting by latest estimates!). Essentially all, at their core, have the same objective: to make organisations and individuals more aware of the impact they are having on the planet.
Here are some of the key drivers pushing organisations to start out on this ESG journey:
Legislation - an organisation may be directly targeted by incoming legislation, thereby requiring a demonstration of ESG compliance via specific reporting standards to avoid sanction.
Supply chain - B2B organisations, whose end client falls under the obligations above, may be required to demonstrate their own ESG compliance to secure their place in the supply chain and allow the end client to meet its broader obligations for certification.
Consumer demand - the organisation’s target market has a growing or well-established awareness of ESG, and to attract and retain customers it is imperative that sustainability considerations are clearly embedded in everything they do.
Shareholder value - individuals or equity firms may be considering an exit from a business who isn’t taking ESG compliance and its incorporation into the wider strategic ambitions of the organisation seriously. ESG is becoming increasingly important in the calculation of value, alongside more traditional factors such as a healthy balance sheet, a clear growth strategy and a comprehensive understanding of risk.
So, an organisation may be aware that it needs to act on ESG, but what steps does it need to take and how does it go about taking them? This is typically the point at which we are approached, and one of the first questions we ask is in relation to the objectives the client is looking to achieve.
Education - we see many clients who know they need to do something but have no idea where to start and what specifically to do. We ensure a level of understanding that sets them on the right path to achieving their ESG goals.
Compliance - the client may have a higher level of ESG maturity and understands the core principles of what they need to achieve but doesn’t know how to put this knowledge into practice or how to demonstrate their compliance. We can provide guidance on what they need to measure, how to measure it, what reporting standards would be most relevant to them, and how to become compliant.
Integration - the client may be well informed and has achieved some of the tactical steps required to achieve their ESG goals but wants to take this further and embed the true essence of ESG into their day-to-day operations. In these cases, we will help them to develop and implement an explicit ESG strategy to sit alongside their corporate strategic priorities. Or better still, develop an overarching corporate strategy that fully incorporates and embeds the fundamental principles of ESG.
We are uniquely placed to be able to provide a comprehensive, end-to-end service for our clients. Take this example - a B2B organisation approaches us having been informed by a corporate client that, to continue to provide their products or services, they must demonstrate a recognition of ESG principles and specifically, provide metrics around their carbon usage. This is to allow the corporate client to demonstrate an in-depth understanding of the ESG characteristics of their entire supply chain, for regulatory reporting purposes. The organisation approaches us because they simply don’t know what they should be doing. Some steps we may typically take include:
As a first step we provide some high-level education based around the specifics of their corporate client’s request. This is often pertaining to the standards they may be trying to comply with, the fundamentals of ESG, and a breakdown of the kinds of activities that may be required to meet their client’s wishes.
We then conduct an audit to gain a full understanding of our client, their current ESG maturity level, and all the elements of their operations that will be subject to the request.
After, we establish baseline metrics around core elements of ESG such as carbon usage. We also recommend and implement tools to allow the recording and tracking of these metrics and agree thresholds and performance targets.
Step four may be the completion of a report or standard forms for the benefit of the corporate client, depending upon whether a formal submission has been requested. This will allow us to demonstrate the status quo, any steps being taken to improve the position, and perhaps also predict the likely future state of the organisation in relation to carbon usage specifically, or ESG more generally.
Having completed the initial request from the corporate client to provide metrics and a clear demonstration of an understanding of ESG principles, the organisation may then decide that these practices should be fully embedded into their current and future operations. This is likely to take one of two forms - the development of an independent, explicit ESG strategy to sit alongside their existing corporate strategic priorities. Or a fully integrated corporate strategy that embeds ESG considerations into the entire strategy setting process, removing the distinction between corporate and ESG goals. By doing the latter, they would no longer have an independent sustainability strategy, and would instead focus on a sustainable business strategy.
But there’s no point in developing a great strategy if the organisation doesn’t have the tools, framework, or capabilities to implement it. Strategy doesn’t happen simply because it’s been written down - and this is often the final step in our support. We are specialists in the implementation of OKRs - an agile methodology for the implementation of strategic goals and which is particularly effective at overcoming challenges around cross functional collaboration a key component in implementing ESG strategies. So, we’re perfectly placed to assist with this final piece of the puzzle.