What elements should an effective ESG strategy contain?

An effective ESG strategy is part of the sustainable development of any company. Implementing Environmental, Social, Governance, will not only improve the organization's image, but also build its long-term success. In this article, we will explain what elements of an ESG strategy are needed to measure the effects of actions, the role of leaders in ESG, and what business objectives should look like in the process.

Key elements of an ESG strategy

Any effective ESG strategy should be tailored to the type of business and the specifics of the industry. Nevertheless, the elements of an ESG strategy are as follows:

1. Situation assessment - this analysis of the company's environmental impact and management practices is the starting point. This identifies any areas for improvement and reprioritizes them.
2. Strategic goals - they must be measurable, realistic, and in line with the company's values. An example would be to reduce CO2 emissions by 30% in 3 years.
3. Stakeholder engagement - to achieve real market success, business partners, customers and local communities must be involved in the company's activities. This helps the company gain support and better respond to the needs of the environment.
4. Action plan - the strategy should include a schedule of actions in the environmental, social and management areas. These activities must be transparent and easy to monitor.
5. Reporting - regular prepared reports, in accordance with international standards, e.g. SASB, allows to assess progress and builds trust among stakeholders. SASB's Sustainability Accounting Standards Board is a model in the world for ESG reporting standards. Its emphasis is on filling the space between non-financial information and the financial value of the company.
6. ESG staff - ESG implementation requires trained staff, individuals or entire departments to coordinate the implementation of the strategy within the company.

How to measure the success of an ESG strategy?

What does measuring ESG success look like? Companies should use methods and indicators to get the full picture. Accordingly, for each area, key performance indicators, or KPIs, can be set:

• Environmental - reduction in greenhouse gas emissions, reduction in electricity consumption, minimization of carbon footprint, increase in renewable energy sources.
• Human - number of projects that support local communities, level of employee satisfaction, diversity of employment structure, (women, people with disabilities, foreigners, seniors).
• Management - number of management training courses, level of regulatory compliance, transparency in reporting.

To achieve these indicators, companies should use external audits and internal audits to be sure that the implemented measures have had the intended effect. Publishing ESG reports increases business transparency and boosts trust in the company.

Measuring ESG success also requires benchmarking against competitors. Such benchmarking makes it possible to assess whether a company continues to maintain its sustainability edge.

The role of leaders in implementing ESG strategies

The effective role of ESG leaders is to set the direction and engage the entire organization in the change process. It is the leaders who play a strategic role in creating a culture of sustainability. On their shoulders lies the responsibility for developing these areas. Consequently, leaders must define precisely what needs to be done.

Business goals and ESG need not be at all mutually exclusive, they should complement each other. The leaders' vision should be understandable and clear enough to pull all employees along. Motivating the team is one of the most important tasks of leaders. A good leader is able to make employees feel part of the change and thus their commitment will increase.

Leaders should make decisions based on concrete data and take responsibility for the results of implementing ESG strategies. They are the face of change in front of employees, contractors and external institutions.

Constant oversight of the implementation of activities allows leaders to respond to emerging challenges and adapt the strategy to changing conditions, as the role of leaders is not only to manage the entire process, but also to create a lasting cultural change within the company.

Integrating ESG strategy with business goals

ESG implementation requires linking the strategy to the company's business goals. Absolutely do not treat ESG as a separate area, rather it should be an integral part of corporate strategy.

As we wrote earlier, business goals and ESG must not be mutually exclusive. Activities in this area should support the implementation of long-term plans. For example, environmental goals, i.e. reducing energy consumption, can simultaneously reduce a company's operating costs.

Companies that effectively combine business goals with ESG quickly gain an advantage in the market, so ESG implementation should apply to all areas of the business, from supply chain to customer service to risk management.

An effective ESG strategy must also be evaluated in terms of its impact on business metrics, such as net profit or changes in customer volumes.

Examples of effective ESG strategies

It can all be a bit complicated, but we will prove that it can all be done. We will show examples of companies that have implemented an ESG strategy to demonstrate that it is possible to combine business goals and ESG.

Unilever has for years pursued a strategy, titled "Sustainable Living Plan. Sustainable Living Plan, which combines the principles of sustainability with operations, thanks to which the introduction of eco-packaging and reduction of Co2, allowed the corporation to reduce costs, but also to increase the loyalty of customers who care about the environment.

Automaker Tesla has set its sights on innovation in the areas of sustainable transportation and energy. Its investments in green technology and in electric and autonomous cars are attracting both customers and investors, making its ESG strategy literally part of the company's financial success.

Outdoor and sports apparel company Patagonia is a model in the ESG area thanks to its commitment to ESG and social activities. Its move away from mass production and use of recycling is a masterful example of how an effective ESG strategy can support a company's mission and enhance its financial performance.

AnESG strategy is a complex process that requires leadership commitment, integration with business goals, and ongoing monitoring of progress. A well-implemented ESG supports the financial success o long-term growth of the company. If you want your company to benefit from these measures as well, we encourage you to contact us. We can help spread the wings of any company. Find out how!