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Four tips to start your ESG onboarding journey
Monday 25 April 2022
A company's decision to implement an environmental, social and governance (ESG) program marks the beginning of a journey that can well begin with an individual board member or board member and their own vision of how the company's future unfolds could.
As with any large company, the integration of ESG risks into strategy and subsequent reporting begins with high-level approval and requires planning, resources, external advice where appropriate, an action plan and a strategy for communicating issues. of the company in its quest for shareholder value.
The ESG integration process does not happen overnight. It is a conscious and gradual process.
Therefore, this article highlights four strategic steps that would provide any company with a starting point on their ESG integration and reporting journey:
1. Set the tone above
Tone at the Top establishes a company's guiding principles, values and ethical climate.
While ESG considerations must eventually find their way throughout the organization, the initiative must come from the top, accompanied by clear communication, accountability and the necessary resources.
A top-down approach greatly simplifies the process of integrating ESG into an organization. Therefore, the board and senior management must first understand the values and relevance of ESG to the business.
To do this, Boards and senior executives need to build their knowledge and capacity, including understanding the link between ESG and risk and understanding their company's impact on society and the planet.
Executives can benefit from the input of internal and external experts to support strategic decisions affecting sustainability.
An effective ESG program does not happen by itself, nor should it be delegated to anyone. High-level engagement and support is critical to fostering a culture of support, driving the ESG agenda or starting ESG-related discussions within a company.
2. Understand your own ESG situation
This step should begin with the sustainability manager collecting data on your company's environmental, social and governance practices, impacts and history.
Some of this information may already exist depending on regulatory requirements or the company's shareholders. In addition, this information may be obtained through feedback from suppliers, employees, investors and other relevant internal and external stakeholders.
A critical analysis of this information would give a good idea of where the company already has ESG information, what is missing and which stakeholders can be brought in to fill in the gaps.
A company can also look at the ESG performance of companies in the same industry and start evaluating the comparison.
Once a company understands its current ESG performance, it needs to have the information it needs to know what to do next.
3. Commit to a strategy and communicate
Armed with a clear understanding of its own ESG situation, a company can set credible goals. This includes committing to do your part, setting realistic short- and long-term goals and dedicating resources to achieve them.
In the early stages, there can be conflicts about the commitments and communication that should be made to the various stakeholders. Then there is the pressure to act.
Stakeholder analysis, prioritization and engagement therefore becomes an essential step in the ESG integration and reporting process to ensure that the needs of different stakeholder groups are met.
To be effective, the ESG team must prioritize stakeholders based on their influence and expectations of the company.
A company may also consider developing a corporate position statement to let others know that it understands the strategic importance of the identified ESG issues and is committed to addressing them.
By developing position statements, boards and management teams deepen their understanding of identified material ESG issues; clarify the connection with the overall strategy of the company; Clarify your position for other key stakeholders; and give management and employees the direction and confidence to act.
4. Benefit Disclosure
What is measured is managed. ESG integration and reporting goes a long way, and companies that define ESG metrics and implement a system to collect, analyze and report on ESG performance see improvements in their ESG performance over time.
ESG performance disclosure demonstrates transparency to stakeholders and a commitment to responsible investment by a company's board and senior management.
Without transparency there is no trust, and without trust markets do not function efficiently and institutions lose their legitimacy.
Therefore, it is important that the process of collecting, analyzing and communicating ESG performance data to stakeholders is well-documented and aligned with stakeholders' information needs to provide actionable data for decision-making, capable of capitalizing on sustainable business practices to steer .
The above strategic steps, read in conjunction with the Nairobi Stock Exchange's ESG Guide, which provides detailed guidance for companies on how to report on a range of typical material ESG issues across different industries, should give any company the confidence to get started . Your ESG journey.
Loise Wangui, Director of Regulatory Affairs - Nairobi Stock Exchange
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