You have probably asked this question before, if not on ESG then on other compliance issues.
As a lawyer, I am often described as a person who has a very structured mind. This supports the concept of building governance and compliance but if you are a lawyer reading this, I challenge you to broaden your mind a bit. Because ESG policies and strategy is more than just a legal framework that needs to be implemented.
Environmental Social Governance is becoming increasingly popular - not only among investors but also in general. We are seeing multiple directives and regulations coming from the EU and several other global jurisdictions have drafted similar legislations. Companies have to abide by certain ESG criteria and report on their progress. Even outside the legislative frameworks, trends are emerging: for instance some lenders have implemented loan facilities that lower interest for companies that reach the ESG KPIs set by the lenders.
One size fits all does not exist in this scenario, but I once had the pleasure of working with highly dedicated individuals from HG Capital who introduced me to a way of creating an ESG strategy that fits quite well with how I have implemented other compliance strategies and policies. Looking at it from the outside, it seems quite simple but I can assure you: it requires a lot of dedicated work and understanding of the business you represent.
A solid project framework starting with defining the purpose and scope is key to getting a good kick off. You need to be able to set expectations from the beginning and make sure that you have the buy-in from senior management. No policy or strategy has ever been successful without backing from the top. Make sure you have defined how your materiality assessment will be used. Thereafter moving it into a key stakeholder mapping, which in all likelihood would include employees, senior management, customers, local government and competitors in order to best scope the targets that the company should set for the future. This is not unlike any other compliance policy or risk assessment for that matter. If you do not know who will influence your strategy, it will be a purely subjective strategy, that in all likelihood will not have the intended effect. There are several ways to do this. Our approach has been to interview senior management and key customers to get their insights and conduct anonymous surveys for employees. When it comes to governmental involvement and competitors, a lot of information is available online so this was conducted via a desktop exercise.
When interacting with key stakeholders and asking the right questions, this should result in an analysis where a materiality matrix and mapped topics that guide the company for the future will emerge. I will suggest creating a scoring methodology where you clearly define the metrics and priorities that are important for your company and your industry. A few items to consider would be climate change, business culture and ethics, diversity and inclusion, customer satisfaction, employee engagement and wellbeing and product quality. There are of course a multitude of different items that might fit better to your industry. Just be aware that you will need to be able to measure it in some way and benchmark it against others in your industry or a global standard.
When implementing the results in the ESG policy and strategy, a few other considerations should be discussed. Which standard and at what level do we wish to measure and report? Most people are familiar with the 17 UN development goals, UN Global Compact or Science Based Target initiative which are all great ways of defining your targets for the strategy and create the possibility of benchmarking against similar companies.
Now, each company is of course different. You have different purposes, values and strategies and this should also be reflected in the ESG strategy. I would advise to keep a record of already achieved initiatives within each E, S and G, alongside current initiatives and future initiatives that align to the targets. And please remember that everything matters. If you have just rolled out a gender diversity recruitment policy, or you have changed your trash collection to be sorted and recycled, or if you simply switched to sustainable straws in your beverages, it all can and should be included in your metrics and help support your targets.
This is of course all just a suggestion on how to get started on the ESG journey. It will be an experience that is exhausting at times and very rewarding at other times. You will gain a greater insight into the business you represent and dare I say, you maybe even become a better lawyer in the process. I will encourage you to be curious about the topics and not just regard it as a task that needs to get done so you have numbers to put in a report. This is truly an opportunity to impact not only the company you represent but also the society, community and environment around you.
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