Developing And Implementing An Effective ESG Strategy In Your Business Model

• With the business landscape everchanging, organizations will need to anticipate the future of their business models against the backdrop of developing consumer trends and stakeholder interest. 
• In recent years, Environmental, Sustainability, and Governance (ESG) efforts have ensured organizations and investors can support a more carbon-neutral or carbon-free future. 
• With changing regulatory factors that aim to support the further development of ESG concepts within the corporate arena, business leaders and executives are now more willing to guide their companies on a more sustainable path. 

For companies looking to court new investors and shareholders, ESG reporting is now a leading priority. In an ESG study by the Harvard Law School Forum on Corporate Governance around 59% of global investors require emissions data, and ESG analysis or reporting to assist with their sustainable investing strategies. 

Seeing as both investors and consumers are becoming increasingly interested and supportive of companies, brands, and organizations that effectively carry out ESG standards, and frameworks; every business must have the right strategy to help them achieve more sustainable goals. 

As part of his efforts to drive climate action, Nishant Tiwary, Officer on Special Duty to the Union Cabinet Minister of Power and Renewable Energy of India shares how companies should take more interest to invest in ESG models that align with their business goals. 

“While government entities may enforce major reporting standards, companies should recognize this as an opportunity to adopt and modernize their business goals, as it enables them to remain compliant, while at the same time harvesting the potential of groundbreaking sustainable technology,” tells Tiwary. 

As a John. F. Kennedy Fellow at Harvard and a BOLD Fellow at Stanford Graduate School of Business (GSB), Tiwary shares a passion for sustainable finance and impact investing to help promote climate change and national investment strategies for a more eco-conscious future. 

Organize a materiality assessment

A materiality assessment typically involves both internal and external stakeholders of the company. Assessing these branches of the business will enable you to identify key metrics of how the business is currently performing and where it can improve. 

Internal assessments involve members of the HR, finance, operations, or legal teams, while corporate executives could also fall under this branch. For external investors, lenders, suppliers, and often customers are assessed, giving a better indication of where ESG elements are missing and what is needed to build a better strategy. 

Understand company performance 

The next step would be to see how the company performs in matters of ESG, and whether existing systems have helped or enhanced the transition from standard practice to a more modern framework. 

Tiwary says that a lot of the time companies want to improve their existing systems without having done a full baseline assessment. “It’s better to create a detailed picture of where you currently are, to understand where you’re going,” he says. “Be compliant to do a thorough investigation, and see how data compares to those of competitors, and determine what the following actionable steps may be for the organization.”

Determine targets and goals 

The third step would be to determine any targets and goals you might have, and how these will line up with your ESG model. While the business may have an existing strategy that looks to achieve these goals, it’s often misguided when not operating in parallel with the ESG framework. 

When you uncover more of the business, the clients, the market, and competitors, you will better understand how your ESG practices will work for your business and with your future targets. 

“Make the process as efficient as possible. Use data, analytics, technology, and software to compile the right information for you,” shares Tiwary. Nishant has been a contributor to the energy transition, infrastructure finance, and climate action. Helping to raise more awareness and innovation in the field, Tiwary has led a national investment strategy and programs on hydrogen, electric vehicles (EVs), and renewable energy, directly impacting 1.4 billion citizens. 

Decide on an ESG framework 

Once you’ve established a clear assessment of the business system, it’s time to decide on an ESG integration strategy and reporting framework. There are currently several different options, and depending on the industry your business may be operating in, you may be required to follow specific industry-standard guidelines. 

Ensure that the ESG strategy has both a short and long-term narrative, that consists of key performance indicators (KPIs) and actions that can be measured using achievable data. 

Discuss ESG strategies with stakeholders

Following the assessment, and deciding on the right framework, it’s now time to discuss the outcomes with stakeholders to ensure everyone has the necessary insights about the chosen strategy. Additionally, it’s important to post drafts, strategic development strategies, long-term goals, and potential outcomes to help keep individuals informed at every level of the organization. 

According to Tiwary, it’s during this step that companies can properly inform their employees about potential changes, and how new models of reporting or standardizations will impact their work. At first, it’s best to get everyone on the same page, and gradually help them become more comfortable with the changes as you implement them over time. 

Track performance

“Don’t forget to circle back, and see whether the ESG strategy is working or not. More than often executives underestimate how important it can be to track the performance of their strategies, thinking it’s doing the business well, when in fact it’s only doing more harm, or not meeting targets or achieving goals.”

Using the right software and tools will ensure that your business has access to consistent ESG reporting information and that stakeholders can be informed, both on short and long-term guidance. 

Make adjustments 

Perhaps more appropriate with our previous step, making adjustments to the current strategy, only after reviewing its performance and reading the analytics, it’s then possible for teams to make adjustments where needed. 

“I think people underestimate the power of technology when it comes to ESG reporting and how companies can leverage the available software infrastructure to become more sustainable,” tells Tiwary. “There is so much useful software out there and executives can leverage it to their advantage in the best possible way, helping to develop more progressive ESG models, and adhering to compliance standards.” 

While there are a lot of challenges that come with adapting an ESG strategy, a business can harness technology and software to help them promote efforts of innovation within their business and industry. 

Ongoing ESG trends such as investor and consumer interest have made it increasingly important for businesses to adhere to ESG standards and compliance principles. Not only do these help businesses adopt more sustainable practices, but for the long-term, it ensure their direct contribution for a more continual future.

Written by Jacob Wolinsky.
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