Launching your ESG Journey: A Guide to Corporate Sustainability Transformation
Is your company ready to start on its ESG journey? Andries Verschelden, Good.Lab’s CEO, shares insight, tips, and tools for facilitating the corporate sustainability transformation.
Why Companies Are Accelerating Their ESG Journey Now
Staying ahead in the ever-evolving sustainability landscape has quickly become the next durable competitive advantage and trend of our era. In his groundbreaking letter to CEOs earlier this year, Blackrock’s Larry Fink reinforced the value of robust ESG performance, naming “purpose as the engine of long-term profitability.” A growing number of executive teams echoed this sentiment and a recent survey reported that 63% of executives claimed that ESG was a very important or critical factor in their company’s long-term success, up from 36% when asked the same question two years ago.
With increasing demand for transparency from the companies we do busines with, invest in, and live near, ESG performance is no longer optional and even more than a box checking or feel-good exercise, companies with superior ESG performance are benefitting from a “sustainability premium.” Last year, 81% of a globally representative selection of sustainable indexes outperformed their parent benchmarks, with the outperformance even more pronounced during the first quarter downturn. When it comes to attracting and retaining talent, a poll found that 71%of professionals would be willing to take a pay cut to work for a company that has a mission they believe in and shared values. Integrating ESG can also drive efficiency with research revealing that companies that have set science-based targets to reduce their emissions achieve a 27% better financial return on low carbon investment relative to their peers.
Embedding ESG into a company’s structure provides a strong foundation for long-term profitability. ESG can also be an effective tool for connecting with shareholders, building brand affinity, attracting, and retaining top talent, and positioning companies for the future.
“It’s time for a shift from sustainability platitudes to data-driven action. Companies can no longer approach ESG as a box-ticking exercise, which is why at Good.Lab we’re focused on helping companies supercharge their impact, faster, with data-backed solutions to set sustainability goals with tangible value for all stakeholders.”
Right now, there is a wide spectrum in terms of where companies can be in their ESG journey. The majority of privately held companies are just getting started with an ESG program and likely have questions about where to begin. Others may have already initiated some sustainability programming or are among the 90% of Fortune 500 companies voluntarily disclosing ESG metrics. Even those, however, may need assistance putting a new plan into action or engaging the right leaders in their organization. And ESG uptake varies across org charts; even if you work for a Fortune 500 company with a net zero target, you may not be maximizing your opportunity to engage more closely with your supply chain or improve how your department gathers and manages ESG data.
Wherever you are in this spectrum, integrating ESG throughout your company’s operations isn’t yet a simple task. For too long, the prevailing narrative has been that too many competing standards, frameworks and initiatives compounded by the fact that it’s a rapidly evolving industry make it difficult to navigate this landscape. Further, for companies earlier in their ESG adoption journey, there may be a skillset or resources gap in-house and if no one is internally responsible, ESG can get shifted to the back burner. Unsurprisingly, given this rapidly evolving space, many companies aren’t sure where to begin. The ESG journey will look different for each company, depending on the industry, geography, business partners, customers, however, there are some common steps that can help any company confidently scale up on ESG.
Your ESG Journey Begins Here
When just starting out, one of the most important things to know about implementing a robust ESG strategy is to truly understand your current position relative to ESG progress made to date — and where to go from there. At Good.Lab we recommend a three-step approach for starting your ESG journey:
1) Diagnose – define the ESG areas that matter most to your company
The first step is defining what are the impact areas that matter most to your company and where should you focus. For example, ESG reporting requirements for public companies now include over 400 sustainability instruments in 64 countries, so it can be difficult to know where to really focus with ESG/Sustainability dominating the business news cycle. It’s essential to take the time to consider your function, what you do and what you make, and evaluate the impact of each stage in the process to move toward determining what are the most realistic challenge to address.
If transportation logistics factors in large part of your supply chain, you may focus on energy reduction or conversion to renewables. But if you provide digital services, the emphasis may be on diversity and inclusion, or ways to optimize your intellectual capital in the long term. Identifying which issues are a priority for your company and more broadly what benchmarks within your industry you want to prioritize will help you begin to the lay the groundwork for a transformative ESG program.
2) Benchmark – assess your company’s current ESG baseline
The next step for your company is to take stock of where you are today and establish your current ESG baseline. If you understand where you stand in each of the key ESG impact areas, you’ll be positioned for transparently monitoring and evaluating progress on the ESG issues that really matter most to your business and drive towards improved performance without wasting resources. Tracking progress from your baseline with an ESG progress scorecard allows you to identify what is working and areas that need improvement and uncover recommended action items for each impact area.
3) Improve – create a plan for setting measurable and achievable ESG goals
The third step of the process is to determine what goals and targets you should realistically set and a prioritized set of actions to help you achieve that ambition. One way to determine how ambitious you should be is to learn from sustainability leaders in your industry. Understanding peer best practice benchmarks and leveraging trusted resources, playbooks, toolkits enable you to identify what it takes to be an industry leader. Armed with the right knowledge is the time to set targets, a plan to get there, and most importantly start tracking your progress to ensure that you are staying on course towards meeting your current targets and updating routinely in line with business developments and expectations from your stakeholders.
Evaluating progress is critical to understanding your path forward. To ensure full transparency for all stakeholders you will need the right tools. Since you can’t manage what you don’t measure, it’s imperative that you are able to benchmark, track, and calculate your ESG progress.
Good.Lab’s ESG Calculator provides an easy-to-use, software assessment that guides you in defining, prioritizing, and articulating what the most material ESG issues are facing your company, while also allowing you to benchmark progress against industry peers and sustainability leaders to see where you stand. Instead of being stuck wondering where to start, output from the ESG calculator helps you determine which targets make the most sense to pursue. Baselining and tracking functionality give you further insights into performance all with a set of customized action items for each ESG impact area. Companies can then also automate some of the preliminary work behind setting accurate, meaningful, and achievable ESG targets prior to implementing an overall ESG strategy.
Working towards your ESG targets, requires near constant looking for more ways to run your business in more sustainable ways. Your ESG journey can feel overwhelming, however, Good.Lab’s ESG Calculator can help you prepare for the next chapter.
Disclaimer: Good.Lab does not provide tax, legal, or accounting advice through this website. Our goal is to provide timely, research-informed material prepared by subject-matter experts and is for informational purposes only. All external references are linked directly in the text to trusted third-party sources.
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