Building a sustainable, ethical and well-governed business might be driving your operations and strategy plans, but what specific actions can you take to help? Whether you’re a smaller business or a larger corporation, having an ESG strategy can benefit your stakeholders, employees, society and the environment. So, what does this mean, and how can you implement it within your business? Our ESG strategy guide will go through the definition, individual factors, benefits and the implementation process, alongside providing you with your own ESG audit checklist.
What is ESG?
ESG – short for Environmental, Social and Governance – is a framework that measures the transparency and accountability of a business alongside tracking your impact on the environment and society. Its purpose is to show investors, employees, and customers that a business is acting in the best interests of the planet and society.
The ESG framework is split into three subsections, which we’ll explain in more detail below.
Environmental
With an ESG strategy, the aim is to reduce the environmental impact your business is having. Environmental factors include natural resource use, carbon emissions, energy efficiency, environmental opportunities, pollution and wastage.
By adopting the ESG strategy and meeting environmental goals, businesses can keep an eye on how they impact the planet and gain a better understanding of the actions they can take to minimise this.
Social
The social subsection of ESG relates to how well your business supports its staff and the local community. From wellbeing provisions and charity to equal opportunities and employee diversity, factors within this area are focused on the way your business impacts people.
Under the framework, businesses are encouraged to improve support for people within the business and outside of it. Not only does this hold the business accountable for its impact on the local community, but it also pushes leaders to improve staff support across the board.
Governance
The final section of the framework relates to governance, which covers accountability, ethics, risk and performance management. This mostly relates to the way the business is conducted by shareholders, senior leadership, management and anybody else overseeing processes and operations.
Governance is an important part of the framework because it monitors any government risks in a company, no matter how big or small.
Why should businesses adopt an ESG approach?
Adopting an ESG approach can be advantageous for many reasons and for various people. Here, we’ll explain why businesses should be embracing this approach.
Attract investment opportunities
Shareholders and investors are increasingly aware of the importance of ESG, which is why they’re more likely to entertain investments in businesses actively following this approach. This can bring in more money for your business, which can even be allocated to help you meet further ESG goals.
Improve your business’ reputation
Businesses adopting this approach can be given an ESG score based on the success of their initiative. A higher score, provided by independent rating agencies, can improve your overall reputation.
Plus, by following this approach, you can make claims about your sustainability in reference to this well-known strategy when speaking to suppliers, stakeholders and even customers in some industries.
In industries like education and healthcare, an improved reputation for being sustainable, ethical and well-governed can help set the standard for how businesses in these sectors should be operating. It also helps your business meet stricter regulations falling into these categories.
Boosted sustainability
Making businesses more sustainable can future-proof your operations for years to come. With sustainability becoming a key focus for businesses, this framework makes it easier to make gradual changes that push you in the right direction without too much strain on resources or time.
In a catering business, for instance, reducing food waste is likely to already be one of your top priorities. By looking at the actions you could be taking to improve your environmental impact, such as measuring your waste at each stage of food production and cutting it down wherever possible, you can support a more sustainable future for the catering industry as a whole.
Supports supplier relationships
Similarly to how this approach can attract investment, suppliers might also prefer to nurture relationships with ESG-focused businesses. Communicating with your suppliers about how this fits into your strategy can also help you work together to action changes that could improve your environmental, social or governing impact.
How to implement ESG into your business
Incorporating ESG into your business, whatever your sector, boils down to four main areas: strategic planning, training, technology and reporting.
Starting with strategic planning, it’s important to look at your overarching business goals and assess where the ESG framework could fit into these. If your business has a plan to cut down on waste or carbon emissions over the next two years, for example, this will fit in with an ESG strategy since it would reduce your environmental impact. But you shouldn’t just focus on the bigger picture – your smaller goals can also be adapted to help you meet specific factors falling under one or more of the three sections in this framework. For instance, creating a strategy for how your business will improve diversity in the hiring process for employees can support the overarching social goals within ESG.
Once you’ve assessed the relationship between your strategic goals and the ESG standards, you should have a better understanding of the areas requiring attention or improvement. But you might hit a roadblock when it comes to achieving these goals if your business doesn’t have technology that can provide the support you need. Using tools like automated reporting and analytics, you can assess your impact on the environment, audit your employment processes and oversee operations for greater accountability and transparency.
This leads us to evaluation, which is necessary because it enables businesses to review where they currently stand with reliable and up-to-date reporting such as audits. Seeing where your processes and operations fit into the ESG framework and having a checklist to hand with the key factors and actions to take can be helpful.
Another crucial step to implementing an ESG strategy is providing staff with relevant training opportunities. Staff training should be centred around ESG standards, including the major benefits of the framework and how day-to-day operations will change to meet goals within it.
Download your free ESG audit checklist
To help you implement ESG and evaluate how much of your approach follows this strategy, we’ve created our handy ESG audit checklist covering the main factors falling under each of the three categories. Using this, you can check off anything your business already does and use our action suggestions to steer your operations and processes in the right direction for following the ESG framework.
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