Delivering 360° situational awareness of ESG starts with a proper diagnosis

ESG – Environmental, Social & Governance – pressure is mounting from multiple fronts for organizations to implement ESG reporting in their organizations. ESG has the momentum and force to become a significant measurement of the organization's integrity. 

One thing to note, ESG is more than the E (environmental). Too often organizations lead with the E and perceive that ESG is just about environmental values and climate change. It is so much more than this. The S (social) and the G (governance) need to be addressed as well in ESG. 

• E = Environmental. Measures and reports on the values and commitment of the organization to stewardship of the natural world and environment. It includes reporting and monitoring of the organization’s environmental initiatives for climate change, waste management, pollution, resource use and depletion, greenhouse gasses, and more.

• S = Social. Measures and reports on the values and commitments on how the company treats people. This includes employee and customer/partner relations, human rights (e.g., anti-slavery), diversity and inclusion, anti-harassment and discrimination, the privacy of individuals (both employees and others), working conditions, and labor standards (e.g., child labor, forced labor, health and safety), and how the company participates and gives back to society and the communities it operates within.

• G = Governance. Measures and reports on the culture and behaviors of the organization in context and alignment to its values and commitment. This includes finance and tax strategies, whistleblower and reporting of issues, resiliency, anti-bribery and corruption, security, board/executive diversity and structure, and overall transparency and accountability.

While the individual elements of ESG will vary by industry and scope of ESG within organizations, the following common practical elements on delivering ESG come to the top-down approach of strategy, policy, process, and technology. Here are 5 practical elements of building a strong ESG proposition:

1. ESG Strategy. The organization needs to put someone in charge. What is critical is understanding that this is a collaborative effort across many departments, as the scope of ESG never falls to one department, role, or function because of its breadth. So, whoever is in charge needs to be a good facilitator and collaborator across departments of the organization. A charter should be in place as it is a collaborative effort across various functions in the organization.

2. ESG Objectives. It is then critical to define and map out your objectives for ESG. Each area under the E, S, and G has a series of objectives. Your environmental objectives could be to be carbon neutral, minimize emissions to a certain level, avoid pollution, responsible use of natural resources. Social objectives could include inclusivity, diversity, elimination/no-tolerance for human slavery in operations and supply chain, protect customer data. Governance objectives map to transparency, internal control, anti-bribery and corruption. These are just a sampling of topics. Each objective needs to be measurable. Some of these are Boolean (e.g., black and white, yes or no, true or false), and others are measured by numbers. 

3. ESG Policies. Objectives get defined in policies. The foundation of ESG is established in policies. This starts by understanding the scope of ESG in the organization, the regulations that need to be responded to, the expectations of investors and stakeholders, and what reporting standards (e.g., GRI, SASB) must be reported to. This then flows into the organization's policies such as code of conduct, harassment, discrimination, environmental policies, accounting policies, and much more. Policies establish the ESG commitments of the organization and what is to be measured.

4. ESG Risks. Once ESG objectives and policies are in place, then the organization can identify the ESG risks to the objectives. Too often, organizations start with identifying ESG risks before thinking of objectives if they ever do. But this puts the cart before the horse. ISO 31000, the international standard on risk management, defines risk as “the effect of uncertainty on objectives.” For there to be a risk, risk has to have a context. That context is the organization's objectives, in this case, the ESG objectives. What are the risks to each defined ESG objective?

5. ESG Process Automation. The next step is to define the ESG processes and reporting. This is where processes are built out to schedule ESG assessments, gather information on ESG objectives and risks, monitor controls related to ESG, and respond to and resolve ESG-related incidents. ESG processes should have scheduled assessments to filter information into ESG reporting processes with regularly scheduled assessments. This requires structured accountability, auditability, workflow, and tasks. ESG processes are delivered through technology. This is with solutions that can manage the forms, assessments, monitoring, incidents, and reporting on ESG across the organization and its third-party relationships. Technology streamlines the gathering of accurate information for ESG reporting while providing a robust system or record of ESG activities for greater assurance and auditability.

ESG is top of mind for forward-thinking enterprises that aspire to achieve their sustainability objectives. The right software platform enables these areas through an integrated information and technology architecture to automate social accountability processes and monitoring. With technology, organizations can deliver on 360° situational social accountability risk and awareness across and deliver on full ESG monitoring and reporting.