ESG has recently become a catch-all phrase describing a firm's ethical considerations. However, the reality is more complex than it initially appears.
As businesses face increasing scrutiny from stakeholders, having a well-defined ESG (Environmental, Social, and Governance) policy is no longer optional. An effective ESG strategy not only enhances brand reputation but also drives sustainability, compliance, and long-term growth.
This guide consolidates the key aspects of ESG policy creation, reporting, and implementation alongside insights from Skillcast’s ESG Benchmarking Survey to help organisations navigate the complexities of ESG.
ESG encompasses three critical dimensions of corporate responsibility:
An ESG policy serves as the foundation for a business’s sustainability and ethical practices. It should align with the company’s values and long-term objectives while meeting stakeholder expectations. Here are the five key steps to developing a fit-for-purpose ESG policy:
- Identify priorities across environmental, social, and governance dimensions.
- Tailor objectives to the company’s industry, size, and geographic footprint.
- Consult with employees, investors, customers, and regulators to ensure alignment.
- Use surveys and focus groups to gather input and build consensus.
- Establish clear KPIs for areas like carbon reduction, DEI initiatives, and governance improvements.
- Align targets with recognised frameworks like the UN Sustainable Development Goals (SDGs).
- Assign ownership of ESG objectives to senior leaders.
- Form cross-functional committees to oversee implementation.
- Publish the ESG policy in a transparent manner, ensuring accessibility for stakeholders.
- Regularly update and refine the policy based on feedback and changing regulations.
Transparent ESG reporting is essential for building trust and demonstrating progress toward sustainability goals. Organisations must ensure that their reports are comprehensive, accurate, and aligned with regulatory requirements. The best practices for ESG reporting are:
Use frameworks like the Global Reporting Initiative (GRI), the Task Force on Climate-related Financial Disclosures (TCFD), or the Sustainability Accounting Standards Board (SASB). These frameworks provide consistency and comparability for stakeholders.
Quantify carbon emissions, energy consumption, water use, and waste reduction efforts. Highlight initiatives like renewable energy adoption and circular economy practices.
Include data on employee wellbeing, DEI metrics, and community engagement efforts. Showcase success stories that demonstrate social impact.
Report on board diversity, anti-corruption measures, and compliance with regulatory standards. Disclose executive compensation and alignment with ESG objectives.
Use ESG software to streamline data collection and analysis and automate reporting to improve accuracy and reduce manual errors.
While environmental metrics often dominate ESG conversations, the social pillar is equally critical. Prioritising social responsibility fosters a positive workplace culture, strengthens stakeholder relationships, and drives long-term value creation.
Skillcast’s ESG Benchmarking Survey (2022) highlighted key trends and challenges businesses face in implementing ESG initiatives. Here are some of the standout findings:
68% of surveyed companies have formal ESG strategies; however, less than half have communicated these with staff.
Over half of the respondents struggled with collecting reliable data for ESG metrics with only 50% regularly collecting ESG-related data.
66% of responding companies measured their carbon footprint but less than half had adopted a Net Zero target.
Only 32% of organisations collected data on race, gender, sexual orientation, etc., in employee surveys.
These findings underline the importance of continuous improvement and the role of benchmarking in identifying best practices.
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