Charter a new course with ESG framework

Every few years, organizations have an opportunity to press pause, reflect, and charter a new course. Strategic planning provides this opportunity.

Best practices for strategic planning include assessing where your organization is today, aligning on a vision for the future, establishing key performance indicators to measure your success, and charting milestones to guide your actions.

The past two and a half years have illuminated new challenges to consider during the strategic planning process related to talent acquisition and retention, supply chain stability, business continuity, diversity and inclusion, and cyber security.

There is a new framework that serves as a common thread between the factors listed above, encompassing a business’ stewardship of the environment, social impact, and adherence to governance best practices. It is called ESG.

ESG stands for ‘Environmental’, ‘Social,’ and ‘Governance.’ The three terms are the pillars of corporate sustainability: a wider, forward-looking lens for evaluating risk and opportunities for operational improvement within a business.

Business factors that fall under each of the three categories include:

• E: energy usage, emissions, waste and recycling, use of natural resources, land use, and impact on biodiversity
• S: workforce engagement, community relations, diversity and inclusion, worker health and safety, customer relations, and product quality and safety
• G: shareholder engagement, board and management policies, business continuity planning, succession planning, and data protection

The framework asks you to think critically about what the next 10, 20, or 30 years might look like in your industry.

• Will your existing supply chain partners be around then?
• Will your raw materials be available? Will their cost be lower, stable, or higher?
• Is your business prepared for an increased volume and veracity of cyber-attacks?
• How much would you be affected if a carbon emissions tax is implemented?
• As millennials and Gen Z become the largest segment of purchasing power in the country, how will consumer preferences shift?

By considering these types of questions, you have the chance to make short-term improvements within your business while also preparing for the future—giving you an edge over your competitors.

Here are a few practical examples of how ESG can result in short and long-term business outcomes that drive sustainability in your company (and also happen to benefit the planet).

• ACTION: Integrate employee surveys or listening sessions to get feedback by using a tool like Officevibe
• SHORT-TERM RESULT: Understand your employees’ desires and challenges related to the workplace
• LONG-TERM RESULT: Improve talent retention, increase the number of referrals, and strengthen your employee value proposition

• ACTION: Assess the quality of your energy program using ENERGY STAR’s free resources
• SHORT-TERM RESULT: Establish a baseline to develop an effective energy management program from that improves your building’s efficiency
• LONG-TERM RESULT: Save on energy costs

• ACTION: Implement customer feedback surveys by using a tool like GetFeedback
• SHORT-TERM RESULT: Uncover product quality issues before they bubble up and validate your ideal customer persona
• LONG-TERM RESULT: Improve customer retention and enhance the return on investment of your marketing

Importantly, ESG is starting to become a larger consideration within capital markets. Private Equity International’s LP Perspectives 2022 Study found that ESG is a major part of due diligence for 57% of private equity investors. Fitch is now using ESG to help make determinations of credit ratings. It is predicted that banks will soon implement similar approaches as sustainable financing grows (see Fifth Third’s recent announcement of its intention to lend $100 billion towards environmental and social projects by 2030).

If ESG resonates with you, there are three main methods of implementation: self-sufficiency, getting some help to set the foundation, or having a trusted partner provide you with dedicated focus. Whichever you choose, successful adoption will take buy-in from your business’ leadership to set a positive tone for company-wide adoption that embeds ESG into your strategy and operations.