Drive value for your business with an ESG Strategy

KIRSTY CARNEGY, PRINCIPAL CONSULTANT, SAC CONSULTING

An Environmental, Social, and Governance (ESG) strategy might seem like a concept reserved for large organisations with extensive resources and budgets. However, ESG strategies are designed to measure an organisations impact on people’s lives and the environment and an organisation of any size and sector can adopt and benefit from an ESG strategy.

In today’s climate, sustainability strategies are imperative for businesses. Legislative pressures, stakeholder expectations, and customer demands mean that businesses must integrate ESG into their agendas to remain competitive. ESG considerations are now a primary focus for business leaders, investors, and board members.

By integrating ESG principles, even smaller businesses or organisations can enhance their sustainability, improve their social impact, and establish stronger governance practices, which can lead to long-term business success, increased investment and positive community contributions.

An effective strategy supports growth, ensures compliance in a fast-paced regulatory environment, and future-proofs organisations. It encompasses three core elements that should be intertwined for a robust strategy.

Firstly, the environmental aspect examines a business’s impact on the environment and the environmental risks it faces. This includes direct operations and supply chains, with considerations such as emissions, biodiversity, packaging, and waste management.

The social component looks at how a business manages people and interactions, including human rights, working conditions, and stakeholder relationships. Recruitment, retention, community impact, and employee welfare are critical areas under this umbrella.

Lastly, governance addresses internal practices and systems, focusing on how a business governs itself and makes decisions. Key topics include corruption, audits, transparency, accountability, and ethical behaviour.

An ESG strategy, appropriate for any organisation regardless of size or industry, offers significant value. Starting with a basic framework, businesses can develop their ESG strategies as they grow. There are many ways in which an ESG strategy can support crucial business aims.

Efficient management of overheads and resource use can lead to significant cost savings. ESG strategies can enhance operating efficiencies, improve product formulations, and ensure preventative maintenance, reducing production downtime and operational costs. Reviewing procurement practices and resource consumption can also reduce costs and highlight potential risks that can be mitigated at an early stage.

A clear ESG strategy can significantly enhance recruitment and retention by giving employees a strong sense of purpose, an increasingly high priority in a competitive employment market. This can lead to increased job satisfaction and a more motivated workforce.

Businesses are increasingly targeted by legislators to meet environmental and social commitments. Proactive ESG strategies ensure compliance, avoid penalties, and enhance reputational benefits, ultimately reducing the costs and stress of meeting regulatory requirements.

A robust ESG strategy can facilitate growth by navigating procurement systems, export regulations, and customer requirements more effectively. It also attracts investors and lenders who prioritise responsible business practices, making it easier to secure funding.

It can seem an overwhelming thought, pulling together an ESG strategy, especially with so many aspects that you may wish to consider as part of your approach.

Making sure that the strategy is woven through the rest of your business is key – it shouldn’t be standalone and should easily integrate with your operational and sales plans.

The important thing to remember is that even starting with a basic strategy can get you on your way, working to develop this as your ambitions grow. A great place to start is an evaluation of your current position – what are we doing well? Where could we improve? What are our ambitions?

Buy-in from your stakeholders is key for a successful implementation and including them at the start of this process is an easy way to ensure engagement. Insights from your employees, board members or business partner is crucial – don’t spring it on them and expect them to get on board!

Using your evaluation and insights you can create your strategy, including goals and targets – making them appropriate and achievable for your business. Thinking locally can be a good place to start if your business is small and growing.

A good implementation will ultimately drive success of your strategy and ensuring that you clearly communicate the strategy to your stakeholders is the most fundamental requirement. How can they all get on board if they don’t know the plan? A degree of change management may be required dependent on the maturity of your business.

Creating your ESG strategy can offer significant value for your business. In an extremely competitive local, national and global marketplace, competing on price or being first to market are short term solutions. Environmental, social and governmental concerns now sit at the forefront of decision making and those businesses set up to address or mitigate those concerns, will be the ones with long term viability, highly attractive to customers, investors and legislators.