I recently spoke to the Association of Corporate Counsels on the topic of how to develop and advance an environmental, social and governance (ESG) program. ESG is one of the hottest topics for lawyers and C-suite leaders right now, with investors and employees pushing organizations to become better corporate citizens in the broadest possible sense.
With Boldsquare regularly helping businesses to implement ESG programs as well as address key individual issues around sustainability, societal problems and corporate governance, we’ve established six key criteria that are critical to success in this area:
Set unambiguous and achievable goals
Be absolutely clear as a company with what you are trying to achieve. Whether you’re addressing past issues such as pollution or diversity problems, or you’re simply trying to build a more responsible business, draw up a specific charter for your program. There are a huge number of issues and opportunities that sit in the container known as ESG, and addressing every single one of them head on is going to be difficult. Be intentional about how you want to move the needle forward, which specific initiatives are most important to you, and what ultimate success looks like. ESG isn’t just a box to be ticked, it’s about changing your business for the better and for the long term.
Establish clear ownership, and dedicate specific resource
We have all had that sinking feeling when the boss comes and gives us another responsibility to add to our existing ones. All of us are ridiculously busy already and then we have to take our eyes off the core job and pay some attention to a new bright shiny object like ESG. The reality is that ESG is not a side hustle. It’s not the project that fills the 20 of Google’s 80/20 rule. You have to dedicate resource to it – either internal or external or both – and you have to make it a fully fledged part of what you do on a day to day basis. Someone has to be responsible and accountable, and make sure all the teams play well together if you’re going to succeed.
Engage your board
Put simply, this process will not work unless your board regards ESG as good business practice and the right thing to do. The next generation of investors are just as focused on social-impact results as they are on financial results, and outcome-based, socially impactful policies are increasingly driving them. That can sometimes be difficult for some more traditional board members to get their heads around, when they have spent the whole of their careers focused on financial returns above everything else. Alignment around the changing nature of investors is critical here.
Align the management team
Getting the whole management team on board is just as important. You have to practice what you preach. There’s no point talking about the importance of a progressive approach to hiring women in the workplace and then having a seat on the board come up and hiring another white male in his 60s. If you are going to put an ESG program in place, the CEO ultimately has to own it, and has to be prepared to use it as a filter in decision making and as a regular talking point in all communications.
Engage employees to drive bottom-up thinking
While endorsement must come from the top, you need to build tools to enable employees to participate in the program and to tell you what is important to them. Some companies are reluctant to speak out on topics such as the social unrest around the murders of George Floyd and Breonna Taylor last year, but those that are listening to younger employees recognized that silence was not an option. Employees are more engaged than ever when they know that their company hears them.
Analyze, Benchmark, Communicate & Develop
Finally, a simple ABCD to help you remember what’s important as you build your own programs. Analyze what it is that the market expects to hear from you, where your competitors have an edge, and what is on the mind of your biggest stakeholders. Benchmark your performance in those areas and set an expectation of where you want to be in a year, in two years or three years. Communicate what you are doing and why it is important and take ownership of your message. And finally develop – keep iterating. ESG strategy isn’t written on tablets of stone, but must be constantly changing to reflect market and world realities.
The focus on ESG isn’t going away, so even if you’re not ready to implement a program today or you’re only ready to take on one issue at a time, now is the moment to think through next steps. Always feel free to reach out to the Boldsquare ESG team (firstname.lastname@example.org) if you have any questions.