Environmental, social, and governance (ESG) regulations are rapidly gaining momentum around the world. Regardless of what sector or industry you work in, effective ESG reporting is becoming a critical element of an organization’s core business activities. Companies that are proactive in ESG reporting can seize the moment and get ahead now.
What exactly is ESG?
ESG is a self-regulating model that helps an organization be accountable to both itself and its key stakeholders, including investors, customers, and employees. The three components of ESG represent the risks and opportunities that impact a company’s ability to create long-term enterprise value.
- Environmental – encompasses such issues as climate change and greenhouse gas emissions, biodiversity loss, natural resource scarcity, water management, waste management, and energy usage.
- Social – pertains to diversity, equity, inclusion, human rights, labor practices, supply chain management, political movements, culture, safety, training, product safety, and data security.
- Governance – refers to how companies conduct their business, staff and govern their boards, compensate executive management, hold executives accountable, deploy and enforce policies, and publicly disclose relevant company data.
As ESG regulations and disclosure rules increase globally, companies have a unique opportunity to do good for society and the environment, while also positioning themselves for long-term success. In fact, according to PwC’s 2021 Global Investors Survey, 79% of investors consider ESG risks and opportunities an important factor in investment decision-making. As disclosed in the same report, only one-third of investors believe that the quality of current ESG reporting, on average, is good.
So, where do we go from here?
Navigating the complexities of ESG can be challenging. Here are some guiding principles as you work to build a successful ESG strategy at your company.
1. Understand where you’re starting
The first step is to identify which topics are most important to your company and assess what data your organization is already tracking. Companies should ensure they’re aligned with three types of ESG metrics:
- Universal metrics — all companies, no matter their size or country of origin, should be measuring and reporting on topics such as governance, climate, and diversity.
- Industry-specific metrics — data privacy, water use, and fair labor, among others.
- Company-specific metrics — the topics most material to your specific business.
2. Set targets and make a plan
Publishing a comprehensive ESG report isn’t something that can be achieved without invested time. You can break down what you believe by being consistent, starting small, setting targets, and listening to your stakeholders. Transparency gains trust.
3. Leverage Technology
The effective use of technology can help you manage ESG data in real time, streamline the reporting process, and increase efficiency. Improving your technology allows you to expand your capabilities and align to global standards.
Businesses need to read the room
ESG is rapidly becoming a priority for both investors and consumers, making now the perfect time for businesses to act. By prioritizing ESG compliance, companies can meet the expectations of their stakeholders, gain a competitive advantage, and make a positive impact that will last for generations to come.
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Intriguing indeed
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Very interesting, all companies have to get onboard or they will be left on the side of the road!
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I love how this article focuses on how sharpening up on ESG is actually a great business opportunity.
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"Businesses need to read the room" – Love this!
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Word is getting around that improving your ESG reporting now can help you reach your climate and financial targets. I hope companies around the globe listen up, because that will help tremendously in our journey towards a climate friendly future!
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You're right. Businesses need to read the room. ESG regulations have been on the horizon for some time, but I think they're getting closer to shore. I also like how Salesforce points out small targets as an ingredient in making an ESG plan.