As firms have grown more conscious of their stewardship roles, ESG strategies have gone from being buzzwords to strategic imperatives.
In a recent post by Diligent, outlined six key steps to developing a successful ESG strategy.
These robust plans of action detail how a company intends to positively impact its environment and communities, as well as fulfill its wider societal and governance obligations.
The evolution of ESG strategies is largely due to an increased demand from investors and shareholders. More than just monetary gain, these stakeholders are keen on seeing businesses having a positive impact on their surroundings. This increased interest in ESG-related initiatives is set to catapult the worth of ESG-related assets to $33.9tn by 2026.
Moreover, championing ESG issues brings significant benefits to businesses. Effective ESG policies can drive equity returns and foster a favourable corporate image, as 76% of consumers tend to withdraw their patronage from companies that neglect their environment, employees or communities. Hence, a well-crafted strategy is crucial for businesses looking to achieve their revenue targets and secure a competitive advantage.
Adopting an ESG strategy offers a myriad of benefits, from environmental conservation to the adoption of best practices in corporate governance and compliance. ESG strategies enhance efficiency by focusing on effective, ESG-approved operations and reduce waste by prioritising environmental impact. Furthermore, by meeting regulatory requirements such as greenhouse gas emission limits, businesses can avoid penalties and reputational damage. A robust ESG strategy also facilitates community engagement, fostering beneficial relationships with potential customers, suppliers, and stakeholders.
However, developing a strategy is not without challenges. As Shai Ganu, Managing Director at Willis Towers Watson emphasised, a successful strategy must deliver value, align with corporate goals, and take into account the commercial landscape.
Businesses must also take into consideration external stimuli such as new regulations, industry pressure, and media scrutiny when formulating their ESG strategies.
To craft a successful strategy, businesses need to identify best practices, consult with stakeholders, choose a suitable framework, involve the right people, assemble necessary data and evidence, and regularly measure and refocus. Only then can they ensure their strategies are effective and relevant, helping them stay ahead of the curve in an ever-evolving commercial landscape.
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