Part 1 to this blog discussed the importance of incorporating ESG into your business strategy for stakeholders including customers, employees, and investors. In this follow up, you will learn how and why ESG evolved from its Corporate Social Responsibility (CSR) origins, transcending the latter’s internal perspective with an outward-facing regimen of objective, measurable, stipulated standards to validate and verify reductions in impacts such as carbon footprint/output.
The best news about ESG is that whether you know it or not you’re already doing a lot. According to Lisa Stewart of EisnerAmper, “Almost every company that I have ever worked with over my 35-year career has already been doing something right that actually qualifies as a corporate social responsibility (CSR) or ESG effort.” She has noticed actions like:
- Caring for employees-- taking the time to make sure that there's some work-life balance for them.
- Positively impacting your community by volunteering for and donating to local causes.
- Being honest and transparent with your customers.
- Practicing Continuous Quality Improvement (CQI).
- Investing in recycling programs to manage waste sustainably.
According to Stewart, the best first step for companies starting down the ESG journey is to start with their current strengths and successes. Identify them, celebrate them, and build on them.
If you go into this process just identifying all the things that you're doing wrong, then you tend to demotivate your owners, leaders, and employees.
There’s a wide range of areas to explore and very few companies do all of them. Most prioritize by perceived importance and measurability. However, companies seeking to progress down the ESG roadmap should begin by establishing which stage they’ve reached in the process.
Stage 1: Companies are in information-seeking mode; they are aware of ESG and understand its importance but are not highly knowledgeable.
Stage 2: Companies have identified their values and are:
- Better versed in ESG.
- Aligning their operational practices with their values.
- Beginning to look at the impacts of those practices.
- Incorporating aspects of ESG into current activities.
- Starting to put together a comprehensive ESG strategy as part of their overall strategic plan.
Stage 3: These companies are much more sophisticated; they have:
- A well-established, long-standing strategy.
- Measuring and monitoring methodologies working across various stakeholders and their supply chain to ensure alignment.
Stage 4: It takes years to attain champion status. Companies that reach this capstone stage have:
- Established policies and practices that cascade down throughout the organization, achieving
universal knowledge and understanding.
- Given their employees opportunities to volunteer in their local communities.
- Generously shared the impact of their efforts on their communities and the environment to foster greater collective CSR consciousness.
It takes years to attain champion status. Most companies are in stage 1 or 2.
Where to Begin
Involve your whole organization! Once manufacturing companies recognize the importance and urgency of ESG, there are some key questions to ask other people in the organization to get them involved in the process:
- What's your philosophy or vision and why are you adopting ESG principles?
- Do you already have a strategic plan?
- Have you already been thinking about your organization’s values in the context of your corporate culture?
- What are your company values? How are they reflected in the work that you've already done?
- How can you incorporate some of that vision into your strategic planning?
- What specific goals can you establish around these areas?
- Might you apply some of the things that are important to you from the philosophical perspective to your sustainability practices, operations, vendor and supplier management, and human resources practices?
Most companies start in departments where there is low hanging ESG fruit, such as HR, where management can act quickly and unilaterally with minimal disruption.
Only then can companies undertake initiatives with greater degrees of difficulty – those that pose disruption risk and require multilateral coordination, leaving management with less ability to command and control. Longer term sustainability questions and vendor / supplier management are more complex; thus, companies that are not already engaged in that arena rarely make it a starting point.
ICYMI: Watch all 3 of the BE THE CHANGE workshops on-demand:
Session 1: Corporate Social Responsibility – Doing Good to Do Better
Session 2: Incorporating Corporate Social Responsibility into Your Brand