How to Build an ESG Program

Environmental, Social, and Governance – ESG – programs are gaining popularity for corporations, businesses, and non-profit organizations. In our effort to provide information on cutting-edge practices, PBO Advisory Group recently hosted a webinar to provide an overview of ESG and to announce our strategic alliance with SustainabilityNext to provide ESG services.

Sometimes compared to sustainability or corporate social responsibility (CSR) programs, ESG is unique in that it evaluates environmental, social, and governance non-financial performance factors of a company or non-profit organization. In the corporate sector, ESG is often associated with investing.

The scope of topics covered by ESG are wide and will vary depending upon an organization’s priorities.

Who is concerned with ESG?

Multiple stakeholders, who are affected by the activities of an organization, care about ESG issues.

Customers may not buy from companies that don’t share their values. Studies show these customers are happy to pay more for goods and services if the values of a business align with theirs.

Employees, especially younger workers, seek out employers who care about ESG issues. Having an ESG program can instill a sense of purpose that inspires employees.

Suppliers want to be treated fairly and ethically. It is in their best interest to engage in ESG programs to help their customers meet ESG objectives.

Communities seek organizations that honor the people in the community and protect the environment with sustainable practices.

Shareholders want the businesses they invest in to make a positive impact on society. In 2019, $30 trillion global sustainable investments were made. Research shows that ESG companies financially perform better.

What are the benefits of ESG reporting and where does one start?

When an organization reports on its ESG measures and progress, there are multiple benefits.

Internal – From a high-level perspective, a company’s vision and strategy can be communicated though its ESG measures. ESG helps performance management by identifying efficiencies and cost savings. It is also becoming increasingly important from a recruiting and retention perspective. Innovation and risk management also benefit from ESG reporting.

External – Compliance and ESG reporting go hand-in-hand. ESG can improve an organization’s brand and reputation. Investors like ESG programs and are looking for more companies with an ESG perspective to invest in. Stakeholder engagement can increase through ESG. All these factors provide an organization with significant competitive advantage.

Finding the framework in which your organization can report its ESG measures can be overwhelming. Luckily there are multiple resources that provide voluntary frameworks that an organization can adapt to its specific needs.

8 Steps to Developing an ESG Reporting Program

  1. Build a team that include people passionate about ESG issues who are diverse, represent a cross-section of departments, and are self-motivated.
  2. Research and benchmark what programs and activities you may already have in place and what internal data is available, what you must do to be compliant within your industry standards (as applicable), what other organizations are doing, and where your gaps are.
  3. Identify impact potential by mapping out business goals from the perspective of economic, environmental and social impact and what the positive/negative effects of ESG activities would be.

At this point, you should have the topics on which you will place your concern and focus.

  1. Determine your stakeholders by mapping out the people and entities who impact your organization’s success and vice versa. Discuss strategies to engage them in your ESG topics.
  2. Prioritize your ESG topics by taking all of your research and planning to date and determine the most important topics that you can take action and report on.
  3. Set smart goals that are specific, measurable, achievable, realistic, and time bound. The reporting frameworks mentioned above have metrics you can use.
  4. Identify projects and actions where there are the greatest opportunities to have an impact, save money, be a leader, and will interest your customers and stakeholders.
  5. Evaluate – Report – Communicate.

There is no set timeline for developing and implementing an ESG program. Finding your topics may take a few weeks while publishing an ESG report could take months. Remember, it is a process and a journey.

PBO Advisory Group and SustainabilityNext are here to help you analyze your ESG opportunities and build an ESG reporting program. Please contact Francesca San Diego for more information.