How to set and achieve ESG goals

Companies worldwide feel pressure to increase the quality and quantity of ESG data from their stakeholders.

  • 86% of investors are dissatisfied with environmental risk information disclosed by businesses.[1]
  • US companies with the best ESG scores had 8% higher returns in 2021.[2]
  • More and more legislation is being passed worldwide, including Europe and the US.

These are all indicators of the growing need for businesses to focus on ESG as a result of pressures from consumers, investors, and governments.

How can companies adequately respond to this demand? And where should they start? Here are some steps we recommend when getting started with ESG goals for your business.

 

1.Identify areas of sustainability

The first step is to determine the areas of ESG you want to prioritise reporting on, which will vary depending on your industry and business. We recommend starting with the “low hanging fruit” topics that you already have a lot of data on, e.g., waste or resource use. If you are in the scope of specific regulations that require reports on carbon emissions or due diligence on topics like forced labor, then you should already have data on those… The best starting point is to set goals on areas where you are already collecting data and build your strategy around those topics.

Next, we recommend choosing topics close to your business values and mission, e.g., food poverty or green energy. You should also check for legislation and regulations within the countries and areas you operate and sell within.

Here are some examples of commonly reported on ESG topics:

 

2. Setting your goals and targets

Now that you know what ESG topics you want to focus on, the next step is to set your goals and targets for these topics. Here are some tips for setting targets:

  • Set a baseline: Work out what you are currently doing across the business, bring in different departments, and start with a gap assessment of your current activities, policies and processes.
  • Understand your current data: Using the baseline and gap assessment, you should be able to understand what you are currently measuring and also what you should be measuring. From there, you can determine your strategy and set realistic targets and the internal KPIs and metrics you use to push that progress.
  • Work collaboratively: Working across different departments and collaboratively within your organisation is critical. You must agree on the focus areas and KPIs to facilitate the free flow of data from various departments into your central reporting function.
  • Set tangible targets: With increasing scrutiny on greenwashing and transparency from companies, it is crucial to be specific about the targets you are setting. Avoid language like “becoming a green company” and opt for specific targets where you can easily report on progress through data.
  • Create data collection mechanisms: Setting up consistent data collection mechanisms and processes is integral to ensuring that you can meet your reporting obligations.

 

3. Collecting your data

There are many ways to collect ESG data depending on which topics you decide to focus on and the setup of your internal organisation. The following are examples of how you could collect data.

Cross-departmental tracking of performance and collection of information: 

  • Ensure water meter readings are regular, accurate, and recorded
  • Set procedure for the logging of accidents in the workplace and review quarterly
  • Maintain up-to-date records of employee training on sustainability topics

Utilization of third parties to support the collection of information

  • Using your energy company to get data on green energy percentages
  • Partnering with a supply chain management company to collect data through audits and assessments

 

4. Communicating your data to stakeholders

When you are ready to communicate progress towards your ESG goals, it is critical to consider your stakeholders and what they want to see from your data. Tailor your metrics and how you frame them when sharing with specific stakeholders. For example, when sharing ESG progress with consumers, you will want to ensure it is easy to navigate and understand. We are seeing more regulators and investors requiring ESG data to be reported in a standardized way.

 

Best practices for ESG reporting

To summarize everything we have discussed, here are some best practices that we have developed while consulting companies on ESG reporting:

  • Keep it clear, consistent and clean: Keep your messaging clear, be consistent with the scope of the data you are reporting on and ensure that your reporting cleanly aligns with your goals and targets.
  • Start early: Don’t wait until the last minute to respond to requirements or obligations from internal or external stakeholders.
  • Get leadership buy-in: Find an executive or senior sponsor to invest in your strategy early on to help get all the resources you need to achieve your goals.
  • Stay current on changing requirements: Regulation is constantly evolving; it is crucial to keep up to date with the latest requirements.
  • Link performance to core business goals: You can more quickly progress and achieve your goals by linking your ESG goals to your financial performance.

 

How Sedex can help

Our data platform, tools and services provide a seamless solution for holistic ESG management and reporting.

  • Self-Assessment Questionnaire (SAQ): Our SAQ helps to gather social sustainability information about a work site’s activities, working conditions and people. Complete for your facilities and ask suppliers to complete one for each of theirs.
  • Risk assessment: Our risk assessment tool, Radar, enables analysis of human rights and environmental risks across your operations and supply chain. Study inherent risks in relevant countries and sectors and build custom risk profiles for every work site.
  • SMETA Audit: Our supply chain audit builds a comprehensive picture of a work site’s operations, people and working conditions through an in-person assessment. Use it to look at your own or suppliers’ facilities.
  • Platform: The data captured through an SAQ and work site assessments can be stored on our integrated data platform, feeding into other Sedex tools to support ESG risk assessment and reporting.
  • Consulting: If you’re unsure where to start, our Consulting team can help you develop a plan to meet the ESG goals most relevant to your business.

 

 

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Sources:

EY, How to enhance long-term business value through sustainability: https://www.ey.com/en_vn/sustainability/how-to-enhance-long-term-business-value-through-sustainability

Morning Star, Why Sustainable Strategies Outperformed in 2021: https://www.morningstar.com/articles/1075190/why-sustainable-strategies-outperformed-in-2021

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