Your business is no longer only evaluated on what it does; how you do it matters too. Investors, regulators, legislators, consumers, and employees are increasingly expecting companies to measure and minimize their impact on the world. Environment, social, and governance (ESG) is a framework to plan, track progress, and report on your organization’s actions. More and more, ESG is gaining traction. According to a 2021 survey by PricewaterhouseCoopers (PwC):
- 83% of consumers want companies to shape ESG best practices
- 91% of business leaders think they have a responsibility to act on ESG issues
- 86% of employees want to work for a company that supports the same issues that they do
ESG measurement has historically been decentralized, with various rating systems and rankers who make it hard to compare companies against one another or track progress from year to year. There is a push to address the issues plaguing ESG scores by standardizing frameworks and producing meaningful, relevant, and actionable reporting. For example, the 2021 COP26 — a UN climate change conference — created the International Sustainability Standards Board (ISSB) to establish a structured global reporting standard.
Tackling ESG strategies and disclosures is no small task. No matter the stage your business is at currently, Antea Group is here with expert support. This post explores some of the steps you can take to kickstart your ESG strategy and lists the most common standardized ESG frameworks.
5 Tips to Enrich Your ESG Strategy
To get started, review our step-by-step guide to develop your ESG strategy. In addition, here are five tips to help you create meaningful measurements and relevant disclosures.
- Ask: Use interviews or questionnaires to get key stakeholder feedback from employees, customers, suppliers, and investors about where to focus efforts and how to address important issues.
- Focus: If ESG measurements are too narrow, they can’t capture vital information and KPIs, and your strategy won’t be successful. Conversely, if they are too broad they may distract from the most important issues to your stakeholders. Harvard Business Review cautions organizations to:
- Measure inputs, outcomes and impacts to get a complete picture.
- Scrutinize systems and processes, not just specific initiatives.
- Don’t overlook the value of initiatives that can’t be easily monetized such as impacts on biodiversity and habitat.
- Measure: Build a rigorous governance culture around ESG data management and clearly define KPIs.
- Prioritize: Develop a list of topics that you need to take action on in the short term, versus topics for annual disclosure to focus ESG investments.
- Reach Out: Work with third-party experts, industry associations, and NGOs that can help surface ESG measurement priorities and gaps. Turn to established frameworks for guidance and structured evaluation of your progress.
The Top 5 ESG Frameworks & Indexes
You don’t have to create your ESG strategy out of thin air. Robust systems exist to provide guidance, measure efficacy, and disclose progress to interested parties.
As a point of clarification, you'll notice different measurement methods described as disclosures, frameworks, and ratings or rankings. A disclosure simply refers to information you transparently communicate to the public or investors about your business operations. A framework organizes these disclosures around customized or pre-set reporting standards. Raters or rankers refer to ESG scoring systems that evaluate performance by various formulas or algorithms.
There's frequent overlap between these terms, but they are distinct and you'll see all three forms represented below. You can also check out a global comparison of a few of the most common reporting frameworks from Inogen Alliance, our global network.
The CDP has the largest repository of Greenhouse Gas (GHG) emissions and energy use data in the world. Their scoring method is transparent and easy to implement. CDP recognizes top-scoring companies in the Carbon Disclosure Leadership Index (CDLI).
- Greenhouse Gas (GHG) emissions
- Climate Risk
- Water Stewardship (CDP Water Security)
- Forests (CDP Forests)
Scores are based on the quality of the following organizational attributes:
THE DJSI publishes the Corporate Sustainability Assessment (CSA) and provides simple, sector-specific disclosures for public companies. The 2,500 largest companies in the S&P Global Broad Market Index are evaluated and scored.
- Industry-specific economic, social, and environmental criteria that are of material value to investors.
- DJSI reports a sustainability score between 0-100 ranked among peers.
- The top 10% highest-scoring organizations in each industry are highlighted in the index.
The GRI is the oldest and most widely adopted ESG framework. It is the official reporting standard for the UN Global Compact. Public and private companies, government agencies, universities, hospitals, and NGOs report to the GRI.
- Corporate Social Responsibility (CSR) with equal weight given to ESG factors.
- Rather than issuing a set score, the GRI evaluates based on consistently updated guidelines focused on accountability and transparency.
- The result is both a high level and a detailed look at the topics deemed material to each organization.
- Incorporates stakeholder input to determine materiality.
The SASB tailors ESG reporting standards to the specifics of more than 75 industries. Any corporation can use SASB to guide disclosures.
- Aligns organizations and investors on the financial impacts of ESG.
- Industry-specific focus on material impacts to an organization’s sustainability performance.
- SASB offers guidelines and standards rather than scores.
- SASB can easily be used in conjunction with other frameworks.
The TFCD framework focuses on climate-related risks and opportunities and is the only framework specifically focused on climate, rather than other ESG topics.
- Strategies and guidelines to address climate-related risks and opportunities.
- Provides decision-useful information to investors evaluating exposure to physical and transition risks.
TCFD asks companies to answer eleven questions focusing on their Governance, Strategy, Risk Management, and Metrics and Targets related to climate-related risks.
Explore the Benefits of ESG
Though ESG frameworks have various attributes, the movement to standardize and improve them is ramping up quickly. Adopting an ESG strategy will get your business on track to mitigate risks, attract investors, and cut costs. You don’t have to navigate ESG issues on your own, reach out to Antea Group to learn more about our Corporate Sustainability Reporting and Disclosure services.Corporate Sustainability Reporting and Disclosure
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