Building an ESG strategy: 3 essential tips for corporations

Over recent years, ESG (Environmental, Social, Governance) has become an important topic of discussion for corporations and their investors, providing a framework for evaluating a company’s efforts to create a positive impact on its people, communities, and the planet.

From meeting net-zero greenhouse gas emissions to diversity, equity, inclusion, and belonging (DEIB) initiatives, there’s a lot that goes into setting ESG objectives and reaching your goals. By implementing an effective ESG strategy, companies can appeal to evolving stakeholder priorities and set themselves up for long-term success.

Let’s explore the basics of crafting an ESG strategy and discuss where it can fit into your company’s existing corporate philanthropy efforts.

Key factors of ESG

Before developing your own ESG strategy, it’s essential to understand the three factors it encompasses:

• Environmental. From a corporation’s carbon footprint to its energy efficiency, this factor takes into account the environmental impact associated with its daily practices.
• Social. This factor is all about relationships, and how a company manages its connections with employees, customers, and the overall community. Workplace safety, DEIB, and customer satisfaction all fall under this umbrella.
• Governance. This final factor focuses on how a corporation operates internally and conducts its decision-making, taking areas such as board diversity and ethical practices into consideration.

Prioritizing ESG allows you to demonstrate to investors, employees, and community members that your company is conscious of its impact on big-picture issues such as the environment and social inequality.

3 tips for building an ESG strategy

According to a survey conducted by PwC, 83% of consumers believe that corporations should actively shape ESG best practices. However, it’s ultimately up to your company to decide how you’ll incorporate these practices into an overall strategy that fits into your long-term goals and priorities. Let’s take a look at some basic tips to guide your approach.

1. Make ESG a C-suite priority.

Experts from Kearney, a leading management consulting agency that provides support to leaders in the social impact space, have emphasized the importance of securing leadership buy-in and visibility when it comes to starting the conversation on ESG within your company.

It’s necessary to bridge any knowledge gaps and ensure key decision-makers are on the same page before setting attainable ESG objectives and implementing consistent reporting frameworks. With emerging reporting requirements from the Securities and Exchange Commission (SEC), now’s the time to start aligning leaders and stakeholders on how to approach ESG as a company.

2. Determine how to prioritize your ESG efforts.

Since there is so much that corporations can do in regard to ESG, it’s important to focus on the areas where your company can make a difference. To do this, consider Kearney’s 70:20:10 model and allocate:

• 70% of your efforts toward causes directly related to your company’s purpose or identity.
• 20% to community-based needs.
• 10% to causes your employees are passionate about.

This way, the resources you devote toward ESG will achieve the maximum impact across your company and within the community.

3. Focus on transparent and consistent reporting.

As ESG regulations and reporting requirements continue to crop up, ensure the long-term success of your company’s efforts by determining the most relevant metrics according to your overall goals and stakeholder opinions.

There’s no need to worry if you don’t have accurate baseline numbers from the get-go. Start by using percentages to illustrate how you increased or decreased in certain areas. Be transparent with what you know or don’t know. Then, by collecting accurate data and developing a consistent reporting framework, you’ll lay a solid foundation for reporting progress moving forward.

Refining your company’s ESG efforts

A well-thought-out ESG strategy can go a long way toward building more meaningful and positive relationships with your company’s stakeholders, customers, and community members. As with any initiative, remember to regularly evaluate your results to identify insights that will help you improve your efforts over time and stay at the forefront of corporate social responsibility.