ESG Strategies - Building Advantage Without the Controversy
The new question I’ve been getting from leaders over the last few months is, “How do we continue to build on our ESG momentum without overstepping and inviting controversy.”
This query fits well with something I heard an experienced ESG lawyer share several months ago at a conference, “Sometimes it’s about trying to step in the smaller pile of…”
The regulatory scene moves so quickly and with so much noise that it can be hard to understand what’s happening. (If you’d like to go deeper and learn more, I found this article by Brad Rosen at Wolters Kluwer to be an insightful, factual and easy-ish read.)
In particular, I appreciate the insight into how the Security and Exchange Commission is considering ESG: “The staff applies time-tested principles concerning materiality, accuracy of disclosures, and fiduciary duty, as codified in federal statutes, regulations, and case law.”
To translate: the SEC is asking you to run your business according to the law, meeting all regulations. Pay attention to the external risks that are relevant to your business. Be honest and accurate in your reporting. And continue to meet the fiduciary expectations of your business.
Yes, this work requires a lot of tradeoffs.
But it’s not any different than what you’ve always been asked to do as a business leader.
So what do you do, as a leader, trying to continue on your strategic path, avoid external risks, do your best for your stakeholders and create profit?
Stick to the basics:
Align ALL of your ESG efforts within your broader organizational strategy.
Complete a Materiality Matrix so you can understand, justify, and communicate your investment decisions to all stakeholders (SASB is a great starting point if you’re just getting started.
Know which standards are most widely used in your industry (TCFD, GHG or GRI)
Start gathering quantitative metrics to set benchmarks and document your processes, regardless of whether you disclose them publicly.
Engage cross-functionally to invite dialogue and discussion to prioritize and make the best decision for all stakeholders.
Consider (and even document) environmental, social, governance and financial impact for all of your investment decisions.
ESG is a market-driven activity, and pro-ESG legislation is advancing across the globe. Regardless of your comfort level in engaging with politics, there are still ways for leaders to leverage the revenue-creating, cost-reducing, risk-avoiding opportunities that a proper ESG strategy can bring to the table.
Here with you,
Dora