5 Tips for Building an ESG Strategy

Environmental, Social and Governance, or ESG, issues are an increasingly common topic in corporate circles, and for good reason. Beyond the fundamentally good ethics underpinning adherence to ESG principles, consumers, shareholders, employees, and other stakeholders today often expect organizations to strive to make the world a better place and embrace sustainability.

Ignoring ESG can cost organizations credibility, talented employees and ultimately customers. If you don’t have a clear ESG strategy today, it’s time to build one. It can help you to run the company more efficiently, with better governance and with a more forward-looking perspective. In that sense, engaging in ESG can provide a strong foundation for a company.

Building a culture of ESG can sound daunting, but it’s worth making the effort. And while it requires a sincere commitment from leadership on down, it is doable. Here are five tips to get started on building a credible and effective ESG strategy:

1. There Are No Shortcuts

Whatever you claim to do with ESG, you must do. Given the upsides to presenting a strong ESG front, it might be tempting to talk the talk, but claiming to be big about ESG, but not doing anything is not only cynical, it’s also disingenuous and the opposite of good governance. Don’t risk your reputation. If you say ESG, be ready to back up your talk with hard facts.

2. Understand Why ESG Matters

Once you’ve committed to making ESG an integral part of your organization’s culture and practices, be sure that all stakeholders understand how and why it makes business sense.

Everyone in your organization needs to recognize that ESG is all about creating value and mitigating risks. ESG reduces costs, increases productivity, minimizes legal repercussions, and might drive top-line growth. As just one example, companies committed to sustainable practices are today feeling much less pain from skyrocketing energy and input costs. Doing the right thing is making their companies more profitable and effective.

3. ESG Is Not Rocket Science

You do not need to hire an expensive ESG consultant to do the work for you. ESG is not really complicated and there are many free resources to illuminate the topic. Plus, many companies have already considered ESG topics to some extent because they make business sense.

Assigning ESG to a high-priced consultant can cost more than fees. You are likely going to end up with:

• Higher integration costs –ESG is not a standalone topic but needs to be woven into other business activities.
• Fancy ESG tools, processes, and measures that you most likely do not need.
• Lack of organizational buy-in because leadership is not committed enough to manage ESG themselves. This will mean lots of advice that never gets implemented.

4. Focus on Relevant Topics

You don’t have to include every aspect of ESG in your plan to produce a meaningful ESG strategy. For software companies, they can focus on the six ESG topics that are relevant for their sector:

1. Energy management of data centers and other hardware.
2. Data Privacy of customer data.
3. Data Security.
4. Recruiting & Managing a Global, Diverse & Skilled Workforce.
5. IP Protection.
6. Managing systemic risks from tech disruptions.

By the way, this is based on the Sustainability Accounting Standards Board (SASB) framework which is the global framework to identify, measure, and manage the subset of ESG topics that can directly impact long-term enterprise value creation. More details on these topics on the SASB website.

5. Draft Your ESG Strategy and Plan

Start with these six material ESG topics and put them into the context of your business operations.

It can be a simple PowerPoint. For each topic create a slide and briefly outline why the topic is meaningful for your business. Then, add a second section of the presentation where you again dedicate one slide to each material topic. Outline how you will address each topic, which will become the basis for an action plan.

The real key to building an effective ESG strategy is to ensure your action plan has concrete, measurable steps that you will take to address each topic. And back that plan by holding individuals accountable for it across your organization.

Remember that great ESG is great business, so getting started can be a first step to building a more effective and sustainable company.