For general counsels across the globe, one key strategic objective in the annual docket is to build an effective Environmental, Social, and Governance (ESG) program. With over 50% of general counsels identifying ESG as a top five risk for their respective companies, the urgency of implementing an ESG program is ramping up, particularly as ESG transitions from a voluntary to a mandatory requirement in many jurisdictions.
Given its rapidly evolving nature, crafting a well-structured ESG program might appear daunting. This step-by-step guide will equip you with the foundational steps for building a comprehensive ESG program.
The first critical step is securing executive buy-in. A successful ESG program is heavily reliant on the commitment and dedication of senior leadership. Establishing an informed and compelling business case for ESG, covering broad aspects such as regulatory compliance, cost savings, competitive positioning, branding, and talent recruitment-retention, is instrumental.
Next, the program needs a robust governance structure. ESG is increasingly recognized as a material risk on investors’ radar and they expect this risk to be appropriately managed. Arrange for ESG training for the executive team and the board to enable informed decision-making and effective communication on ESG risks with stakeholders.
The third step involves setting up a cross-functional ESG team, including senior representatives from different departments like sustainability, finance, legal/compliance, risk, strategy, sales, operations, and human resources. This team will lay the groundwork for ESG integration into your company’s operations, identifying ongoing ESG efforts, potential ESG-related challenges, and opportunities for performance improvement.
Sometimes, the breadth of expertise required in ESG programs demands external assistance in domains like regulatory compliance, supply chain management, carbon reduction, and technology.
Of course, a program built on strategy alone is insufficient. You have to act. Many fundamental areas need attention, such as carbon reduction, biodiversity, and diversity, equity, and inclusion (DEI).
Subsequently, line up your Key Performance Indicators (KPIs) and ascertain your reporting framework(s). From the EU Corporate Sustainability Reporting Directive to the Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), UN Global Compact, and IFRS Sustainability Disclosure Standards, you have plenty to choose from.
The last step is to adopt an improvement-based mindset. ESG isn’t a one-and-done project; it needs to permeate your company’s daily operations and processes to improve year-on-year.
ESG programs are as urgent as they are important in today’s commercial context. Any action, no matter how small, is a step forward. As you embark on this journey, remember: “Small steps over time lead to big results.”
For more on building a business case for an ESG initiative, read this post. The entire detailed blueprint can be found in the original article here.