What does ESG look like for high-growth companies?

For smaller high-growth companies, implementing ESG practices can be challenging and overwhelming. Despite the difficulties, it is crucial for these companies to start their sustainability journeys.

By Sam RileyThu Jun 22 2023CEO-CFO, Environmental Social and Governance

There is growing awareness and recognition of the importance of Environmental, Social, and Governance (ESG) factors in the business world. ESG encompasses an enormous range of issues, from climate change and resource management to employee welfare and corporate transparency.
For smaller high-growth companies, implementing ESG practices can be challenging and overwhelming. Despite the difficulties, it is crucial for these companies to start their sustainability journeys. The cost of inaction is significantly higher.  

Establishing foundations requires commitment

To get started, high-growth companies need to commit to a journey of increasing ESG maturity. This commitment involves outlining a path to higher levels of ESG integration into the company's operations and decision-making processes.
Initially, this might look like setting a goal to release the company’s first sustainability report within a year. This provides a concrete timeline to work backwards from and serves as a guide for developing strategies and action plans.
One of the most crucial first steps is conducting a Materiality Assessment to identify the most significant ESG issues that are material to the company. This assessment involves engaging internal and external stakeholders to get their views on the ESG priorities that will have the greatest impact on the business.

The journey towards ESG maturity is a progressive process that takes time. As companies become more ESG mature, they build trust with stakeholders and reap the benefits of improved sustainability practices. Notably, customers, especially in the business-to-business (B2B) sector, are increasingly mandating sustainability requirements and seeking partners with high levels of sustainability maturity. By addressing ESG issues, high-growth companies can access new opportunities and gain a competitive edge in the market. Conversely, neglecting sustainability can lead to lost business and increased risks.
Investors expect companies to have a plan in place for ESG improvement. While investors may not expect smaller companies to be world-class in ESG practices, they want to see a credible plan that demonstrates progress and a commitment to sustainability. Investors place trust in companies with a clear trajectory toward ESG improvement, and will anticipate that the company will be in a much better position in the coming years.

Putting ESG plans into practice

One common misconception is that implementing sustainability measures will cost more money. In reality, focusing on material issues such as energy use and waste management can lead to increased operational efficiency and reduced expenditure. 

Sustainability goals can be aligned with cost-saving measures, resulting in a win-win situation for the company. Moreover, by outlining a clear commitment to sustainability when competitors fail to do so, high-growth companies can build trust and resonate with customers, thereby gaining a competitive advantage. Below are examples of ESG initiatives that can help high-growth companies save costs while moving the needle on sustainability objectives.

1. Environmental initiatives

  • Energy efficiency: Implement energy-efficient practices such as using LED lighting, optimizing heating and cooling systems, and adopting energy-saving appliances. Conduct energy audits to identify areas for improvement.
  • Waste management: Establish recycling programs, reduce waste generation, and promote responsible waste disposal. Encourage employees to use reusable products and engage in proper recycling practices.
  • Sustainable procurement: Prioritize suppliers that adhere to sustainable practices, such as using environmentally friendly materials or implementing responsible sourcing. Consider the life cycle impacts of products and services.

2. Social engagement

  • Employee wellbeing: Foster a supportive and inclusive work environment that promotes employee wellbeing. Offer competitive benefits, provide opportunities for professional development, and encourage work-life balance.
  • Community involvement: Engage with local communities by supporting local charities, participating in volunteer programs, or sponsoring community events. Contribute to the social and economic development of the areas where the business operates.
  • Diversity and inclusion: Promote diversity and inclusion within the organization. Implement policies and practices that ensure equal opportunities for employees, irrespective of gender, race, ethnicity, or other backgrounds.

3. Governance practices

  • Transparent communication: Maintain open and transparent communication channels with stakeholders, including employees, customers, suppliers, and investors. Share information regarding company policies, performance, and ESG initiatives regularly.
  • Ethical business conduct: Establish a strong code of ethics and integrity that guides business practices. Encourage ethical behavior, prevent conflicts of interest, and maintain compliance with applicable laws and regulations.
  • Board diversity and independence: Promote a diverse and independent board of directors. Consider individuals with varied backgrounds and experiences to bring different perspectives and expertise to board discussions.

What ESG should not look like

High-growth companies should avoid jumping to address a single ESG issue, such as carbon emissions, without consulting their stakeholders and establishing the necessary foundations. 

While there may be urgency and temptation to tackle a specific issue, it is crucial to have a comprehensive understanding of the company's materiality. A Materiality Assessment will help identify the top 5-7 ESG issues that stakeholders agree are most impactful and material to the business. 

Nobody can tackle every ESG issue at once; a structured plan is critical for progress.

By prioritizing these issues, companies can focus their efforts and improve in a more structured manner. Engaging advisors, such as accounting and legal firms, becomes more efficient when they understand the company's material issues and can provide targeted advice and support. 

Establishing ESG alignment

The ESG landscape is complex and can be confusing. While most companies agree that ESG change needs to happen, they are less clear on how to make it happen.
To effectively integrate ESG practices, high-growth companies need to establish a common language among their founders, management team, investors, and board members. It is crucial to ensure that everyone involved in the company's decision-making processes understands and shares the same understanding of ESG priorities and steps. This alignment can only be achieved through proper diagnosis and reporting.
Without a proper diagnosis of the company's ESG performance and priorities, stakeholders may have different expectations and perspectives on what the company should focus on. Conducting a materiality assessment helps create a unified view by identifying the most significant ESG issues that require improvement. This assessment allows the company to align its efforts and resources towards addressing these material issues, enhancing transparency and stakeholder engagement.
Establishing a common language and understanding of ESG principles is essential for effective communication both internally and externally. When employees, investors, and other stakeholders consistently hear the same priorities and steps regarding ESG, it fosters a sense of unity and collective purpose. This shared language and understanding contribute to improved alignment and collaboration within the company.

Start a progressive sustainability journey with Ansarada

ESG implementation for high-growth companies should begin with a commitment to a progressive journey of increasing ESG maturity. This involves setting goals, conducting Materiality Assessments, and aligning stakeholders around common priorities and steps. 

High-growth companies should avoid addressing ESG issues in isolation or without proper stakeholder engagement. By establishing a strong foundation and a unified understanding of ESG principles, these companies can reap the benefits of improved sustainability practices, gain a competitive advantage, and mitigate risks in an increasingly ESG-focused business environment.

Ansarada’s vision is around seeing thousands of businesses putting down the foundations that are going to strengthen their sustainability, enabling them to create and deliver more value to their stakeholders and the planet. Our role is in providing a software platform that helps bring order to the chaos people face in managing the information and processes required to run a truly sustainable business.
In partnership with ESG experts, Ansarada has released a state-of-the-art digital Materiality Assessment so organizations can start their ESG journey at a fraction of the traditional time and cost. Designed with leading practice structure and processes built in, the Materiality Assessment builds on recognized ESG frameworks. The output is a comprehensive, Board-ready report, with clear next steps to take and a blueprint for an integrated ESG strategy moving forward.

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