On April 13, 2022, the FiscalNote Executive Institute hosted “Creating and Implementing Your ESG Strategy,” a discussion group with executives working on ESG initiatives. The conversation was a follow-up to FNEI’s Feb. 24 virtual roundtable, “Build Business and Mitigate Risk by Integrating ESG Throughout Your Organization.” Participants talked about internal communication efforts, how to prioritize ESG initiatives and more.
The following are some highlights and best practices drawn from the discussion.
Securing organizational buy-in for ESG
- It’s okay to be late to the party. Though early arrivers may have short-term accolades, companies will ultimately be judged on their long-term results.
- Empower ESG officers. At many businesses, especially smaller ones, ESG hires are relatively new and may, at times, be greeted skeptically by colleagues. Firms must give their ESG officers the authority and resources needed to carry out their duties.
- Acknowledge tradeoffs. ESG is important, but it’s not the only priority that companies face. Engaging in rigorous cost-benefit analysis can help elucidate the tradeoffs that businesses inevitably confront, thereby helping firms make more informed decisions.
- Avoid the “Tower of Babel.” To get the whole organization to speak the same “language” about ESG (including rallying behind shared goals and strategies), it’s helpful to regularly disseminate ESG data and other information to employees, as well as create formal mechanisms for dialogue and the sharing of best practices, such as through an ESG “operations council” and/or regular internal ESG newsletter.
Deciding what – and how – to measure
- Get real with your great expectations. Progress on ESG requires striking the right balance between ambition and pragmatism. Too little of the former and you won’t change the status quo; too little of the latter and you won’t meet your promises, while risking accusations of “greenwashing” toward your company.
- Favor hard evidence. Initiatives like the UN-sponsored “science-based targets” can help guide companies to actions that deliver the biggest bang for their buck.
- Seek the input of stakeholders. Don’t assume that customers aren’t willing to pay more for, say, sustainable packaging; better, instead, to simply ask them. Likewise, take note if, at and investor-relations day, the vast majority of questions to your C-suite touch on ESG issues.
- Anticipate legal and regulatory changes. The SEC’s proposed new rule on climate disclosures is the latest example to pay attention to.
- Don’t forget non-CO2 targets. Many companies are rightly focused on their Scope 1-3 emissions, as well as when they’ll reach “net zero.” But there are other vital ESG targets that shouldn’t be neglected.
- Communicate targets effectively to the public. Strong ESG performance must be matched by strong PR performance, which will boost a firm’s share price, enhance its ability to recruit and retain younger workers, and encourage other firms to double down on their ESG efforts.
Acquiring, storing, and processing data
- Be patient. Chasing down relevant data – such as for complete and accurate energy-consumption statistics – is often arduous. As the field of ESG matures, however, so too will the availability and quality of the data.
- Harness technology. Take advantage of cloud-based, ESG-focused platforms that can help with the heavy lifting in storing and processing ESG data.
- Deeply engage the board. Obtaining the full support of a company’s board for ESG efforts may take time and persuasion. But without that support, a company’s ESG performance will suffer in the long run.
- Choose external auditors wisely. Non-profit, non-partisan groups, such as CDP, tend to have fewer conflicts of interest with clients than do many older, for-profit auditors.
- Be transparent. Publish your progress regularly, use comparable metrics when doing so, and readily acknowledge shortcomings.