Key elements of an effective ESG strategy
An effective environmental, social and governance (ESG) strategy is an increasingly important factor for stakeholders when deciding to engage a business or associate with an organisation.
An ESG strategy clearly outlines all steps a company should follow while operating in a way that is good for profits, people and the planet. When boards invest in an effective strategy, they also invest in a strategy that compounds over time to include top-line growth, minimised legal and regulatory risks, reduced costs, improved employee productivity and optimised capital expenditures.
To create an effective ESG strategy, boards must first understand the inner workings of each category and how they interconnect.
An ESG policy should consider environmental concerns like climate, pollution, animal treatment, energy use, natural resource conservation, and waste management by ensuring projects and operations pose minimal environmental risks. For example, companies can combat climate change by reducing greenhouse gas emissions, complying with environmental regulations, and properly managing toxic waste.
Social impacts come from a company’s relationships with workers, customers, suppliers, and the community. For example, a company may practice social responsibility by purchasing goods from ethical suppliers or paying its workers a fair rate.
Governance refers to how a business operates to ensure sound and fair decisions are made. Good governance procedures are open and agile in nature, thus arming boards with tools that meet myriad challenges in an increasingly dynamic business landscape.
Elements of an effective ESG strategy
With ESG-washing on the increase, boards must faithfully invest in an ESG strategy that is transparent and impactful. One complaint boards face when tackling ESG in their organisations is their tendency to over-focus on reporting, creating the illusion that action has been taken, when nothing has been achieved on the ground. So how can boards break this cycle and master ESG?
Firstly, boards must consider all members of the organisation’s approach to ESG: An effective ESG methodology ensures the needs of all stakeholders are satisfied. Sustainable organisations consider whether they create value for everyone.
Modern science and data must also be incorporated into the strategy. Making room for scientific and data-oriented decision-making, especially when it comes to environmental policies, will help boards stay on track and stay accountable.
Online document management allows boards to manage and execute their ESG strategy in a secure and collaborative environment while helping ensure corporate governance best-practice is adhered to and board accountability is achievable.
Serving as the single source of truth is the third element of an effective ESG strategy. Dedication to truth should guide decision-making for everyone in the organisation.
An effective ESG strategy sets clear and concrete goals, and should align with a company’s vision and mission, and include clear, measurable goals.
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