There's no escaping the increasing importance of the environmental, social and governance (ESG) agenda to organisations. Businesses are under pressure to 'walk the talk' as boards, employees, customers, funders, and investors prioritise ESG concerns. In our latest article in the Making Best Informed Decisions series, you'll find out how to go beyond once-a-year reporting or press releases to embed ESG into your everyday decision-making processes.
ESG is a broad topic with a wide range of stakeholders. But when organisations value ESG priorities and execute them successfully, it can lead to creating significant value or avoiding losses.
Defining and executing initiatives successfully can be tough, however. Decision making in a business can't focus solely on ESG impacts but it does need to bear these in mind when appropriate.
To work out how and when to 'think ESG', we use two frameworks that help define and execute your priorities:
The Scoping Pyramid will help you to set priorities and get the 'Goldilocks porridge' just right by identifying the following mix of considerations.
Explore your purpose and business model, tackle what your organisation does and think about how you want to be known, including by your own internal stakeholders such as employees.
Consider what your external stakeholders – customers, suppliers, debt, and equity investors, and so on – are seeking and the direction that your industry bodies are taking.
What legislation applies to you by jurisdictions and legislator, for example, the Companies Act, Stock Exchange rules, health and safety laws, supply chain traceability needs and so on.
The Scoping Pyramid will start to hone your focus and give rise to an abundance of initiatives that need to be prioritised and executed. Finding your balance between what is urgent, important, inter-dependent and synergistic – as well as what your resources will allow you to deliver – requires significant thought.
Your answers may change over time, too. So re-assessing where you're focusing your effort should be a regular exercise, supported by materiality assessments, to ensure that you have the right degree of emphasis on the relevant elements of ESG – not too much focus nor too little, not too hot and not too cold.
Having set your priorities, there's still the challenge of how to bake them into your 'business as usual'. The Value Drivers framework provides the process for this. It outlines the characteristics and infrastructure you need to ensure that your everyday decisions align to high-level strategic goals (whether ESG-related or not). Considering each value driver helps the consistent and controlled management of new reporting requirements and initiatives, such as carbon or gender pay gap reporting. We've also included examples of how each could be explored to ensure ESG is factored into decisions:
In summary, The Scoping Pyramid helps confirm and prioritise the relative focus required on ESG in your overall decision making, which is then baked into your decision-making processes through the The Value Drivers framework.
This combined approach lets you bring the relevant elements of ESG to life through trusted decision making on a suitably regular basis. That should avoid a last-minute rush on regulatory reporting, or ESG being an afterthought rather than a daily consideration. And it should avoiding 'the tail wagging the dog' by putting too much emphasis where it's not warranted.
It can be challenging to find time away from day-to-day operational demands to focus on your ESG ambitions. That's why we've designed 'The ESG Room'.
The ESG Room is a dedicated, stimulating and interactive space for a one-to-one discussion, delivered virtually or in person. It will help you think clearly, not only about your immediate issues but also your ambitions and objectives, and to stress-test existing strategies. You'll be challenged on existing and established thinking to help unlock valuable insights, consider critical strategic issues and identify solutions that will help to deliver your ESG agenda.
For more information or to arrange an appointment, contact Scott Wilson.
Our next article in the Making Best Informed Decisions series will focus on how organisations can hope to set budgets and forecasts in a fluctuating economic environment.