Looking to Build an ESG Program? Consider These 3 Tips

November 19, 2021

Contributor: Rob van der Meulen

In times of rapid social change, successful organizations develop ESG programs to shape corporate purpose and meet stakeholder expectations.

The term “ESG” (environmental, social, governance) is common parlance in today’s world, because thousands of organizations have made ESG commitments. Investors, consumers, governments and citizens expect action. It’s not enough to just have an ESG program — organizations need a program that understands stakeholder expectations and impacts corporate strategies and decision-making.

Social and environmental expectations of businesses have changed rapidly in the last 18 months,” says Abbott Martin, Gartner Research VP. “The law tells us what is necessary in terms of corporate behavior, but it doesn’t ensure a company’s social license to operate or the sustainability of revenue streams.”

It’s the general counsel’s (GC) role to ensure the company accounts for evolving societal expectations in corporate planning and governance, legal risk management and corporate disclosures. Here are three tips to keep in mind as you build and evolve your ESG program.

Download now: First Steps for Developing an ESG Program

Tip No. 1: Listen to the voice of society

The internet and social media have turbocharged the ability of the general public to mobilize around the issues that matter most to them. It can quickly become challenging to operate when a company is not meeting the expectations of wider society.

As a matter of survival, listen to the voice of society and respond to its expectations. 

“GC are often seen as the voice of the stakeholder in the boardroom,” says Martin. “In order for a business to navigate this new reality, GC will need to educate the board on what society expects of a business beyond simply what is written in law.”

Ensure that they are also aware of how expectations may change over time. Boards must understand the strength of societal concern and level of stakeholder agreement about emerging issues as they develop. 

Tip No. 2: Ensure clarity of governance

ESG is a dynamic collection of separate issues “owned” in silos by many different business functions. For example, diversity, equity and inclusion (DEI) may fall to HR, government affairs to legal, investor communications to the IR team and so on.

Gartner recommends that companies form an ESG executive committee composed of senior leaders (think: CHROs, heads of DEI, the GC and other functional leaders) as required by the type of industry a business operates in. While this is an important show of commitment, it also consolidates ESG reporting into a central authority. This provides a clear overall picture to the board of directors, ensuring strategic objectives become concrete action in the wider organization.

Here’s a sample ESG governance structure

Sample ESG Governance Structure

 

Download now: How to Brief a Board to Build an ESG Program

Tip No. 3: Own your ESG narrative 

To make it effective, it's imperative to clearly communicate an ESG program. At the moment, many investors and other stakeholders are not getting much of their ESG information from corporate disclosures, because they aren’t finding what they are looking for.

“Taking concrete action on ESG matters is clearly the bedrock of a good ESG program,” says Martin. “But failing to adequately communicate the steps a company is taking — to all stakeholders — will undermine the success of such a program and drive stakeholders to seek their information from other sources.”

Take steps to understand what information your stakeholders want, and identify the best channels to reach them. As with any corporate disclosures, stakeholders must view a business’s ESG reporting as timely, reliable and trustworthy. Build processes to validate the rigor and quality of ESG metrics and how they are disclosed to stakeholders.

Ultimately, GC has a critical role to play in how corporate purpose is defined in the boardroom and in ensuring all stakeholders interests are heard. Only then can you set a strategy that’s well informed and sustainable across the organization.

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