DEVELOPING AN ESG STRATEGY

SUNIL PAUL, MD OF FINESSE, EXPLAINS THE ROLE OF GRC IN DELIVERING ESG

Over the last few years, another three-letter acronym made its way into the hallowed ranks of corporate goals. ESG, which stands for Environmental, Social, and Governance, refers to a set of standards for a company’s operations that impact not only its financial performance but also the well-being of society and the environment.

ESG has been gaining importance because investors and stakeholders increasingly recognise that a company’s long-term financial success is tied to its ability to manage and mitigate ESG risks and create positive ESG impact.

Consumers and investors are increasingly looking for companies that align with their values, including considering environmental sustainability, treating employees and other stakeholders fairly, and having good governance practices. This has led to a growing demand for ESG data and disclosure and has increased the pressure on companies to improve their ESG performance.

In addition, governments and regulators are also increasingly taking steps to promote ESG and to require companies to report on their ESG performance.

With climate change affecting every inhabited region across the globe and memories of the recent COVID-19 pandemic still fresh, there is increased momentum for ESG disclosures.

The increasing attention on ESG has also been fueled by the growing recognition of the risks posed by climate change, social and political instability, and other global challenges and by the need for companies to adapt to a rapidly changing business environment.

So how should companies go about managing their ESG performance?

They could start with Governance, Risk, and Compliance (GRC). The G for Governance is the common component between ESG and GRC. Any good action plan will start with a strong and sustainable governance structure.

GRC refers to the processes and practices that organisations put in place to ensure that they are operating ethically, legally, and sustainably while also managing and mitigating risks and complying with relevant regulations and standards.

Many companies use GRC applications to define, implement, and monitor company-wide strategies for risk management. Extending the logic, companies can use their existing GRC applications to help manage their environmental and sustainability risks, identify areas for improvement, and implement policies and procedures that align with environmental sustainability goals.

Since ESG is a framework for assessing the sustainability and societal impact of companies and organisations, within this framework, environmental considerations, such as greenhouse gas emissions and other ecological impacts, play a critical role in evaluating an organisation’s sustainability. ESG analysis assesses an organisation’s exposure to the risks and opportunities associated with climate change.

By using GRC software, organisations can ensure that they are taking a systematic and comprehensive approach to addressing climate change and reducing their environmental impact. For example, GRC software can help organisations:

• Monitor and report their carbon emissions, water usage, and other sustainability metrics.

• Assess the environmental impact of their operations, supply chain, and products.

• Identify and manage environmental risks and regulatory compliance requirements.

• Implement and enforce sustainability policies and procedures, such as reducing energy usage, recycling, and waste.

• Facilitate collaboration and communication between different departments and stakeholders on sustainability initiatives.

These can improve the company’s overall sustainability performance, enhance its reputation, and potentially increase its financial performance. Other areas where GRC can help include enabling companies to monitor and manage their compliance with relevant laws and regulations related to ESG, providing a centralised platform to track the progress of ESG initiatives and goals, and facilitating process workflows in support of ESG objectives.

GRC solutions can serve as a way to manage and dashboard ESG objectives, monitor processes and activities that support those objectives, and unify ESG data to give insight into whether organisations are continuing to make good on their ESG statements.