ESG - 5 Steps from Board Strategy to Action
ESG - 5 Steps from Board Strategy to Action
Environmental, Social and Governance (ESG) is a set of standards measuring a business's impact on society, the environment, and how transparent and accountable it is. ESG is at long last on the boardroom agenda, but recent research[1] shows that whilst three quarters of boards believe ESG is important to their company’s success there is a disconnect in linking their governance approach with performance and goals. How can boards drive through their approach to deliver results?
Clarify & Commit
Board Members and their executive leaders must clarify from the very start what ESG means and where it fits with the organisation’s purpose, strategy and culture. Certainty is a friend of progress, and by making it clear on what ESG is and what it means for employees in their day to day, goals can be achieved faster. Making a strong declaration of intent and disseminating visuals of the impact on the business, can help humanise the subject and foster understanding of the direction of travel.
Create an ambitious roadmap
In order to make change happen, employees and stakeholders will need to understand how and why ESG is advancing the organisation’s ambition. Business leaders need to be clear on what is a priority across the full range of ESG initiatives. It is unlikely that an organisation can be totally across every possible area of ESG but providing a rationale behind activities and staggered priorities for each will at least illustrate where the business is transforming or lagging behind. This roadmap can then used to stage commitments and marshal resources to further the cause.
Dedicated Governance Structure
Delivering ESG is complex and cross-functional; it requires a change structure that combines an integrated transformation approach and high levels of empowerment and expertise. Competing priorities across the business are likely to create barriers to change. A dedicated governance structure with a single owner should be considered to overcome these barriers and hold all areas of the business accountable. An ESG change team focused on delivering people-centric change approaches across all initiatives will also accelerate the ESG impact.
Winning Hearts and Minds
Effective ESG initiatives should feel more like a different way of operating than ‘one more thing to do’. This requires leaders to articulate and embed clear mindset and behaviour changes in order to create ownership across the wider organisation. When employees feel they own the changes and are part of the journey they are more likely to commit and contribute directly to its success. Great ideas can come from anywhere and if employees have the psychological safety to experiment, apply learning and speak up they can adopt a learn as we grow mindset. As a result, small actions and low-risk initiatives can really help to drive through bigger cultural changes.
Tanja Jibrandt
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“As wisely said, effective ESG initiatives should feel like a different way of operating throughout the organisation, connecting mind and heart. A broader perspective from a diverse scope of stakeholders is needed but that is just one side of the coin. It also takes a skilled leader to utilize this collective intelligence; analyse its value and ensure to leverage the insights. Based on the many dialogues we have with board directors, this requirement is today more often escalated into the board room and as Chair it takes a new level of inclusive leadership to ensure that this collective intelligence is leveraged.”
Balanced Support
Whilst long-term goals are the focus, there will be inevitable tension between short-term accountability and future value creation. Results will inevitably be slow and leadership incentives need to support actions for every day rather than be targeted against the end result. This can be achieved by creating phased outcomes and measuring achievements and progress rather than punitive actions when results aren’t quick to appear. By having leaders present why their practices are sustainable, and granting them permission to make critical trade-offs, organisations can set them up with the tools they need for long-term success.
Operationalising an ESG strategy is the single most important step the board can take to ensure that it is a force for good. Turning ESG intention into impact and getting it right first time can happen through focussing on people-centric change.
References
[1] https://www.insead.edu/newsroom/2021-boards-are-committed-to-climate-change-but-knowledge-and-experience-gaps-in-boardroom-may-impact-ability-to-drive-future-change
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We have more than 30 years’ experience in supporting boards and their leadership teams to be the best they can be. Whether it is hiring in new personnel to manage discrete initiatives or developing leaders and their teams to work better together. We have a broad network of candidates and interim experts and are increasingly placing quality people into leadership roles both on boards and executive teams for ESG roles. If you would like to learn more, please get in touch.
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