This text is sponsored by ScottMadden, Inc.

Company duty is not only a buzzword; it’s a tenet that shapes the muse of an organization’s identification. Companies have a profound duty to positively have an effect on their staff, society and the surroundings. Embracing company duty means recognizing {that a} enterprise’s success is intertwined with the well-being of its stakeholders and the communities it serves.

Along with elevated stress from traders, corporations are going through rising expectations to take positions on ESG points which might be essential to prospects. As organizations sort out these ESG points, they might discover themselves at totally different phases of the maturity curve from preliminary steps, comparable to creating devoted sustainability positions or a sustainability division, to the main observe of integrating ESG objectives into company technique. Sustainability professionals seeking to combine ESG points into company technique ought to take into account the next preliminary steps:

1. Combine ESG technique into your company technique and enterprise planning processes

Corporations should first determine ESG materials points and develop ESG initiatives to deal with gaps within the enterprise technique:

• Conducting a materiality evaluation — If sustainability professionals shouldn’t have robust relationships with their C-suite or board, a useful software to construct that relationship is a materiality evaluation. A materiality evaluation is a structured train that helps an organization determine particular ESG points that want consideration by surveying or interviewing each inside and exterior stakeholders on their key priorities.
• Figuring out gaps to attaining ESG goals — As soon as materials ESG points and related indicators have been recognized by the materiality evaluation, determine gaps within the firm’s present efficiency and develop a method to shut these gaps. To make sure that ESG points usually are not addressed as standalone initiatives, it’s crucial that these methods are integrated into the corporate’s company technique and enterprise plans.
• Integrating ESG targets with monetary objectives — As soon as an ESG technique has been recognized and integrated into the corporate’s company technique, targets and metrics must be developed round these points, whereas making certain these metrics are built-in into the corporate’s monetary objectives and addressed as a part of the annual planning cycle.
• Providing ESG-focused options to present challenges — Sustainability professionals also needs to be agile sufficient to rapidly suggest ESG-focused options or determine ESG challenges in response to present occasions (a current and ongoing instance being the COVID-19 pandemic).

2. Guarantee organizational alignment all the way in which as much as the board

To raise ESG matters to the very best ranges of the group, sustainability professionals should interact the best stakeholders at numerous ranges of the corporate:

• Participating with the CFO — Bringing the CFO onboard previous to conversations with the board will likely be important to bridging the hole between sustainability and monetary efficiency. As traders demand extra info round ESG threat administration, the CFO will likely be finest positioned to talk worth creation related to ESG initiatives.
• Establishing communication channels — Creating robust communication channels between the sustainability group and different essential inside stakeholders, together with the CFO, chief threat officer, investor relations, and finance, will allow info sharing to tell company technique.
• Creating an ESG steering committee — Forming a committee for ESG points ensures that the correct amount of time and experience is devoted to ESG initiatives. This committee ought to present formal steerage, oversee and drive the implementation of ESG methods and actions.
• Leveraging an exterior advisory council — Creating and managing an exterior advisory council, which brings consultants to the desk throughout numerous stakeholder teams comparable to banks, NGOs and subject material consultants, can construct the board’s experience and luxury degree with the ESG group whereas offering validation on the significance of ESG points from a 3rd occasion.
• Integrating ESG points into board-level engagement — A simple manner to make sure that ESG points are elevated to the board degree is to give attention to a subject that’s certain to be mentioned throughout board conferences (responses to present occasions comparable to firm initiatives round worker well being and wellness or racial fairness insurance policies).

3. Leverage current reporting necessities to speak ESG points

• Whereas reporting isn’t a brand new train for publicly traded corporations, sustainability teams typically discover they report in response to requirements separate from required SEC filings. Sustainability professionals have a tendency to seek out themselves needing to clarify numerous non-mandatory sustainability-reporting frameworks to others of their group as they conduct information requests and interviews.
• Whereas there’s benefit to reporting in response to sustainability-specific frameworks, comparable to World Reporting Initiative and Carbon Disclosure Undertaking, integrating ESG points right into a threat administration lens is likely one of the quickest methods to raise these matters to the board degree. Creating relationships with monetary or threat administration teams inside the firm could also be a difficult job; nonetheless, sustainability teams can act as a useful supply of knowledge for non-financial materials info and assist corporations keep away from utilizing boilerplate language that will not present traders with related perception.
• Reporting frameworks, such because the Sustainability Accounting Requirements Board (SASB), intention to develop clear steerage for corporations to determine and report materials ESG dangers immediately into SEC filings. Such built-in reporting would require advanced collaboration throughout group strains, however it’ll additionally guarantee stakeholders throughout corporations are talking the identical language in terms of ESG and general company threat.
• Sustainability professionals can begin by contemplating ESG-related dangers inside the group’s general threat evaluation. Many corporations will discover that making use of frameworks supplied by SASB or others is a chance to assist determine these dangers and form the narrative right into a decision-useful format for traders and stakeholders.

Shifting past conventional silos and integrating ESG issues into company technique will allow corporations to be proactive in managing points materials to their enterprise. Integrating ESG technique into company technique requires robust collaboration and help from numerous teams inside an organization, however it’ll show invaluable as corporations navigate the altering enterprise panorama.