The business landscape has greatly evolved over the years, with more and more key stakeholders including regulators, investors, and clients demanding transparent environmental, social, and governance (ESG) disclosures from corporations. Consequently, in-house legal teams have found themselves in the middle of this ESG conundrum, with ever-rising responsibilities and expectations. In addressing this challenge, three steps can serve as a guideline towards creating an ESG gap assessment, forming the cornerstone of your business case and action plan.
The first step involves creating a master list of ESG Actions. Your company is undoubtedly being asked to meet certain ESG criteria. Identifying and organizing these demands is crucial. From requests for ESG data received from clients and investors, commitments made in contracts, necessities for third-party ESG assessments, to requirements from new or upcoming regulations – these constitute your key sources. This information can be validated and supplemented with the insights provided in this article on “8 Elements Every ESG Program Must Have“.
Following the creation of your master list, the second step involves taking an inventory of your current practices using this list. This entails reaching out to the relevant departments across your organization for information related to each item. In the process, you’ll likely find that your ESG efforts are scattered across the organization. This discovery phase serves as an opportunity to consolidate relevant information to respond to future inquiries.
Upon determining your ESG gaps, the third step is to prioritize potential ESG actions. Distilling them into four categories – Completed, Quick wins, Strategic considerations, and Items for the future, simplifies the process. Quick wins refer to easy tasks that augur well with stakeholders and tasks that must be completed to foster responsible conduct. Strategic considerations depend heavily on executive decisions about directions on issues like climate and diversity and inclusion (DEI). “Items for the future”, as the term suggests, refers to requests that are not immediately relevant to your business.
Upon completion of this ESG gap assessment, you will be furnished with specific actions and decisions to draw up an ESG plan. Furthermore, you will also be in a position to deny external requests that are not in tune with the broader perspective. For more insights into how to proceed further, consider exploring this ” 12-Month ESG Roadmap For In-House Counsel” to guide you from ESG assessment to reporting within a year.
Article adapted from “3 Steps For Completing An ESG Gap Assessment“