In economic and broader societal discussions, ESG strategy is becoming increasingly significant. We can break down the process of developing a sustainable strategy into 10 basic phases.

1. Focus on the best strategy

The starting point is to recognize that every business is different. What works for companies that you perceive as similar to yours will ultimately not work to the same extent for you. Every company has different internal stakeholders, external stakeholders, supply chains, locations, budgets, and goals. Your ESG strategy must be personalized to be effective.

2. Set your goals, top to bottom

Setting an overall goal early on will help define your strategy and keep your approaches optimized. The commitment of the company’s top executives is crucial, and the board must believe in those goals. Think about what you are setting out to achieve and keep this broad goal in the early stages. Company-specific goals and objectives can be designed once a proper audit has been performed. The best way to do this is to conduct a materiality analysis.

it is playing an increasingly important role in broader economic and social debates.

10 steps to create an ESG strategy for your business

3. Carry out a materiality analysis

Materiality analysis is at the heart of every ESG strategy for a company. Through two lenses: relevance to external stakeholders and importance to the firm and its internal stakeholders, it assesses the challenges that organizations must prioritize and identifies where to invest time and money. Conducting a materiality analysis requires extensive data collection from internal and external stakeholders.

By putting this information into a graph called a materiality matrix, a visual representation is constructed that shows which concerns are most essential to both parties and, as a result, where to focus. Your research will identify ESG goals and establish any overarching strategy that are specific to your company.

The following two points are very important for a materiality analysis to have maximum effect:

4. Use an objective third party

Whether conducting a materiality analysis or auditing a company’s ESG credentials for another purpose, it is always best to use a professional third party, as an unbiased perspective legitimizes the results. Objectivity is particularly important with allegations of greenwashing and increasing public scrutiny.

5. Interact with all stakeholders

This is an important stage to get right, especially when considering the “governance” aspect of ESG. A bottom-up approach is favorable; Data should be collected from all employees. Beyond a materiality analysis, having structures that create feedback loops within your company from the bottom up can drive company culture and shed light on potential issues before they materialize. A good strategy results from a mix between a top-down and a bottom-up approach.

It is also important to drive collaboration from external stakeholders. Businesses can sometimes be reluctant to do this, but it is critical to a successful and fully informed analysis.

6. Evaluate the costs

You need to consider your budget and assess the cost of inaction with the risk it would pose to your business.

Although perhaps daunting, strategies with higher upfront costs can generate significant savings over their lifespan, in the same way that a higher initial expense on insulation leads to savings on heating bills. As with any financial investment, expert advice should be sought so that the results are as efficient as possible.

7. Build an ESG team within your company.

Hiring sustainability professionals is essential for any business that is serious about its ESG results. Strategies need maintenance, and internal stakeholders can provide this consistency, while maintaining a vested interest in the company they work for.

8. Ensure third party verification to demonstrate robustness

It is not enough to say how responsible a company is, it is about demonstrating it. The best way to show accountability and transparency is through a third-party verification and validation mechanism, such as corporate or fund-wide certifications.

It is a fantastic tool to support green bond financing and other value-added green financing tools. With greenwashing stories continuing to make headlines on a regular basis, having such a certification allows you to stand your ground in the face of such claims.

9. Manage your supply chain

When looking to expand any supply chain, it is important to have a sustainable policy in place to ensure ESGs are integrated into the procurement process. The procurement policy should reflect your company’s values ​​and include a commitment to progressive improvement. A good starting point is to consider existing frameworks like the UN Sustainable Development Goals and build from there. At the same time, companies must carry out due diligence within their existing supply chains to avoid being associated with companies with bad values ​​and potential reputational damage, especially linked to human rights violations.

10. Recognize that the process is dynamic.

The most important part of a successful ESG strategy is recognizing that it is not a one-time assessment. Strategies must evolve with any business, stakeholder expectations and, not least, the changing regulatory landscape. This doesn’t have to be constant, but reassessing your company’s ESG strategy every three years is a viable benchmark, while checking strategy progress on an annual basis.

By Editors