ESG survey: Measure, monitor, and enhance your strategy complianceweek.comESG survey: Measure, monitor, and enhance your strategy complianceweek.comESG survey: Measure, monitor, and enhance your strategy complianceweek.com
Impact Investing Forum 2023
London. May 04-05, 2023.
The poll, “ESG Clarity – Benchmark Your Initiative”, was launched in June and received responses from 219 finance, compliance, audit, legal and finance executives. Respondents stated that while their organizations were successful in setting goals and launching ESG strategies in their business plans and were more successful in applying these lessons to their initiatives, only 13 percent said they have fully implemented and embedded an ESG policy. Nearly 70% of respondents said that their companies were either in the process (40%) or more ad-hoc (29%) at this point. The rest of the respondents either didn’t have an ESG strategy at all or didn’t know about it. Fulcrum managing partner Pam Shearing said that people are trying to figure out ESG. However, there is some confusion about how to measure it. ESG is an evolving conversation. Companies need to continue working on their ESG strategies. There is still much work to be done for some companies. The survey respondents came from a wide range industries, including banking (11.5%), healthcare (8%) and manufacturing (8%) as well as technology (7.5%) and energy and utilities (6%) Generally, respondents said ESG initiatives address environmental concerns like climate change/carbon emissions/energy emissions; pollution control; natural resource usage; biodiversity/deforestation; and waste management. Data privacy, gender equality, ethnic diversity/inclusion, health and safety, human rights and labor standards; ethical supplier chain procurement; and community support are all social concerns. Governance covers inclusive executive board/leadership, ongoing leadership training, executive compensation; fraud and corruption; lobbying and spending; and a firm’s whistleblower program. Choosing up to four drivers of their company’s ESG initiatives, respondents said they were pushed by company leadership (19 percent), shareholders and investors (16.5 percent), customers/clients (16 percent), government/regulators (15 percent), and employees (13.5 percent). Shearing stated that ESG must be fully supported by the top. In an ideal world, everyone in the company would understand ESG and how it applies to daily practices. She suggested that employees should be encouraged and encouraged to share their experiences with the initiative, so companies can take corrective steps. She said, “You have to get everyone involved to create a culture within the company that everyone understands ESG and how they can be integrated into their daily practices.” Shearing stated that although only 40% of respondents identified employees as an important driver of ESG initiatives in their work, this is a growing benefit. Employers are finding that ESG initiatives are beneficial for recruiting new employees and keeping current employees. She said that companies that have managed to weather the pandemic while sticking to their ESG goals can gain a competitive advantage when hiring. It all comes back to ESG-related opportunities and risks. Shearing stated that if your company is doing the right things for the environment, society, employees, and its supply chain, it can attract the best talent. Nearly one in five respondents (18%) said that their company had refused to work alongside a party due to ESG concerns over the past three-years. However, most respondents said no (42%), or didn’t know (44%). Shearing stated, “If you say you won’t work alongside someone because of ESG concerns, it’s saying they don’t have your values.” ESG becomes more than a value that is spoken about. It becomes a lived and breathed value. Survey respondents seem to have less agreement on how to monitor and measure ESG-related risks. More than half of respondents said that they have not included ESG-related risk into their risk assessment. They are either monitoring them on an as-needed basis (27%) or not at all (25%). Only 10% of respondents said they do an annual ESG-specific assessment. However, 29 percent said that their companies now conduct an annual ESG-specific assessment. The rest of the respondents didn’t know how they measure ESG-related risk. Muryel Boulay is a U.K.-based sustainability expert and founder of consultancy B Other Wise. He stated that all ESG risk assessments should start with a materiality assessment. This analysis should assess the importance of ESG initiatives to your organization’s economic, environmental, or social goals. It should also determine what is important for internal stakeholders (senior management, board members, employees, and board members) and external stakeholders such as vendors, customers, clients and investors. Boulay suggests that companies focus on the activities that generate revenue for their business and then determine what products or services they need to produce. You can start by setting a baseline of data such as how much electricity your company uses and how many carbon emissions are produced by vehicles and facilities. Knowing how many hours workers work might help you to predict potential risks like employee burnout. She said, “It doesn’t have to be perfect.” “There is only one way to learn how to swim. That’s to jump in water and move your legs. Start small and add other factors later. If you want to follow up, when asked to list the biggest obstacles to their ESG initiatives, the most popular option was ‘obtaining data’ (23 percent out of 404 votes). Other obstacles include operationalizing the initiative across the organization (18%), lack of clear, tangible directions (15%) and a lack engagement (13%). Respondents were free to choose the obstacles that they felt were hindering their company’s progress in ESG initiatives. “There is a need to simplify the message. Boulay stated that people must first understand their place in the world. “What are the values and mission of your company? What are the most important places where you can make an impact? You can then link ESG activity to every day activities, making it part of your daily life. ESG initiatives can be embedded in a company’s culture to make them stick, according to Pamela Park (managing editor at Thomson Reuters). Larger companies should have ESG committees. All companies should educate employees about their ESG goals and initiatives. Park stated that the compliance department cannot be responsible for a successful ESG strategy. Park stated that every employee should be trained and informed about the company’s goals and stance. It should be a more formalized part a company’s culture. According to the survey, about one-third (30%) of respondents said that their compliance functions met with senior management and/or the board of directors every two months to discuss ESG-related issues. Only 18% met with senior leaders and the board once per month. 13 percent met once a month, 11 percent met twice a calendar year, and 28 per cent did not know how frequently. Shearing stated that it was important that senior management communicate with staff about the progress made in ESG initiatives. Training is another important aspect of ensuring ESG initiatives take root. This was clearly an issue for respondents. Only 14 percent of respondents said that their organization had spent more than four hours on ESG-related training during the past 12 months. A third (31%), said it took 1-2 hours and another third (31%) said it took less than an hour. Shearing stated that training helps companies incorporate ESG initiatives in their everyday business practices. She explained that training helps employees understand the strategy and what you are trying to achieve. “They will not only learn about ESG, but also how to monitor it and assess it properly.”