Why Your ESG Plan Can't Wait
Updated: Aug 11, 2022
With a second, uncomfortable heatwave looming over the UK in as many months, two English counties being declared drought-zones, and news of planned blackouts in the face of a possible energy shortfall, it’s impossible not to talk about climate change.
But it’s not just the UK reporting record-low rainfall and unseasonably hot temperatures; our neighbors to the East report that the Rhine, the major river way for German, Dutch and Swiss economies is forecasted to drop so low as to become impassable for vital commodities including energy resources like oil and coal. Add to this the dramatically reduced oil exports from Russia, and you have the making of a truly bad winter ahead.
So it’s little wonder that ESG has been center-stage of many government and big corporate agendas lately – and rightly so. Climate change, energy security, and supply chain safeguards are paramount for running countries, managing business operations, and forestalling catastrophic drought and famine.
The time for seeing an ESG plan as a nice-to-have, do-that-next-year strategy is truly over. Virtually every business – small and large – is being impacted by energy shortfalls, supply chain disruption, and people matters. The fallout is a hit to a business’s bottom line, among other consequences.
And even if you decide to start your ESG plan now, government mandated GHG compliance metrics and reporting legislation are ahead of you and coming hard and fast from all corners of the globe.
Yet standardization where you would expect it to be – such as in the US and EU – isn’t there yet leaving companies to muddle through the mire of confusion on their own.
So what should a CEO do? Here are the Top 5 Actions to fast-track your ESG plan:
- Establish a governance structure & set realistic ESG Goals
- Hire an expert to fast-track your plan
It’s not all bad news though. Especially if you consider that companies with active ESG programs see faster growth, 10-20% higher valuation, and 5-10% lower operating costs (2021 McKinsey).
Adding to that is the proliferation of green energy and e-transport initiatives (iEA.org), the shift by market leaders where now more than 90% of S&P 500 companies publish ESG reports, for example, and sustainability investor funds have skyrocketed from $5 billion a mere three years ago to $70 billion in 2021.
1. Start with what you know
Silence the noise about other businesses – just for now, we’ll revisit this in another blog – and focus on what’s in front of you. This is a mindset thing, the rest of the detail is below, but you need to get this right or the plan won’t make any difference.
Don’t try to establish an ESG plan fit for the likes of GM, American Airlines or Pepsi.
It needs to be size-appropriate, relevant, and above all – measurable. Heard of Greenwashing? Well, we’ll cover that in another blog, too. But the best way to avoid that and getting in trouble with the government is by making your ESG program measurable. Keep it simple, don’t try to boil the ocean, and I promise it will pay you back.
2. Establish your Governance and Set Goals
This is equally important and will set you up for success. Appoint a board (it can be an existing board of three people, for example, don’t let size worry you), align your definition of ESG for your company, measure your current Scope 1-3 GHG footprint, and set targets.
And make sure you have the right talent onboard to help you. Successful organizations invest in an ESG Officer. This can be a dedicated role (if you have a large organization), or it can form part of an existing board member’s role.
3. Review and Tighten Your Supply Chain
For most companies, Scope 3 greenhouse gases make up the lion-share of their emissions. These are almost always purchased, 3rd party goods and services - think IT capital, travel, company commuting, facilities services, etc. So your procurement manager should be your best friend here.
Once you’ve classified your Tier 1 and 2 suppliers, engage with them – formally – to ensure you have adequate commitments and reporting baked into your contract relating to carbonized consumption including continuous efforts to move toward green energy, sustainable supply, and ongoing fair labor (anti-slavery) practices.
It doesn’t stop there, though. Make sure you hold suppliers accountable via annual performance and scorecard reviews.
4. Engage and Promote
You’re on the home stretch, but the hard work isn’t over. You’ve done the necessary to get the governance in place, you’ve measured your current footprint and established your targets, you’ve appointed an ESG Officer. Now what?
It takes a village as the saying goes. It’s the same here.
o Engage your employees: mandate basic but relevant training on ESG, make it fun and interactive, attach compliance to annual performance, reward volunteer days
o Engage your suppliers: see point 3 above, consider an annual supplier summit, reward suppliers who go the extra mile to beat your targets.
o Promote to investors: keep them informed of your progress, check what other investments are doing for them (if linked to sustainability funds), venture if you could be a case study in exchange for more investment.
o Promote to your customers: most importantly, tell your prospects and customers what you’ve done. Your customers are people at the end of the day, and studies show that 70% of consumers will spend more on goods and services that are good for the planet or use fair labor practices
5. Hire an Expert to Fast-Track Your Plan
Now is the perfect time to be outlining your ESG plan – budget season! If you have surplus budget to burn for Q4 – don’t wait - get started now, and you can have an ESG plan in place before December. What a headline for your January sales kick off! If not, make sure you set aside annual funding for your ESG program hereafter.
Need help? At Spring CPO, we run a systematic, proven ESG Sprint to get you there (done and out of your hair in 90-days). As a boutique advisory, we are fast, more affordable than you think, and we deliver results. Don’t wait – get in touch today!
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