A 3-step Approach Towards an ESG-driven Business Strategy

Sustainability and ESG certifications, labels and frameworks have gained in popularity as transparency and stakeholder expectations become more important. A comprehensive approach in ESG driven organisation and strategy, should take into account all 3 of these pillars.

Pillar 1 Materiality and Strategy Setting

For a company to establish and delivery its sustainability journey, several key activities need to be conducted first as they present prerequisites for a clear and coherent strategy.

Carbon Footprint Assessment

All players should know their environmental footprint to assess their impact on climate and the society. A scope 3 analysis will present emission heavy aspects and will thus provide reduction indicators. Many tools and providers on the market offer GHG accounting services.

Materiality Matrix

The materiality assessment helps stakeholders to find out how important specific environmental, social or governance issues are to them. The assessment combines this view with an understanding of the impact of these issues to the organisation’s financial and strategic success. A double materiality assessment can also be conducted to further consider the impact of these issues to the society.

SDG Prioritization and Target Setting

To develop an ESG strategy a company needs to determine its main priority areas and goals in line with its values and its materiality. Here, the UN Sustainable Development Goals present an internationally recognized framework, with specific targets, that the organisation can work towards – including other key mandates that the organisation specifically contributes to.

Pillar 2 Reporting

Sustainability reporting becomes mandatory for organisations in all sectors and sizes. The public and private sector demand for transparency and some organizations offer third party accreditation services to avoid greenwashing and promote collaborative action. Some of these organizations are SBTi, CDP, Ecovadis, ACT, GRI, etc.

Pillar 3 Accreditation

To take the sustainability accreditation even further some companies, mainly stock exchange companies also aim for ESG recognition. This gives investors additional confidence of the organisation’s management capabilities and commitments in line with the rating agencies ESG guidelines and standards.

ESG ratings are based on environmental, social and governance pillars which are all covered and step 1 and 2 of the recommendations. The most popular ESG rating companies are MSCI, Sustainalytics, etc.