Regardless of what PKD code characterizes your business, you decide whether you will become an inspiring hero or just a mere follower of the vision created by your competition.
ESG is an acronym coming from E like 'environmental', S like 'social', and G like 'governance'. ESG, therefore, refers to the three strategic factors of business influence, which define the company's unique DNA. So ESG is all about creating a sustainable business vision or a set of new rules for the popular tug-of-war game where three (and not two) players fight for victory. Each rope corresponds to one letter of the ESG acronym, and the ESG strategy is supposed to connect them. By maintaining the right tension and the optimal angle between the lines, we can influence the market value of your business.
Prepare yourself for ESG
Each game, including the one in a tug of war, is preceded by some kind of training since it's easy to get injured without it. In our case, we cannot simply forget about knowledge training. After all, ESG did not arise in a vacuum but evolved along with the development of business practices, law, expert discussions, and stakeholder needs.
The foundation for the ESG vision was outlined by such management concepts as corporate social responsibility (CSR), the triple balance sheet - one of the variants of CSR (Triple Bottom Line), which touches the subject of three areas of corporate responsibility: economic, social and environmental, or the concept of sustainable development.
ESG management is therefore a mosaic of variously defined business responsibilities. What ESG is not, it’s not the Holy Grail in the business world, but rather a well-lifted version of the management concept, staying in line with the requirements of the law, expectations, and widely understood stakeholders issues, as well as changes taking place in the environment of every business. It's nothing new, yet it manages to scare a lot of people…
Planning in ESG
Since the ESG nomenclature is as tempting as it is terrifying, many modern business leaders are asking themselves how to make a positive contribution and become a part of building a more sustainable future. The search for an answer to this question should begin at the stage of diagnosis of ESG conditions (law, risks, taxes, trends, social problems, or climate challenges), having in mind that skipping this step makes it is impossible to set ESG strategy goals.
It is worth starting the diagnosis of ESG conditions by reading the 2030 Agenda. It is a strategy for the development of the world - including business practices. The document has been divided into 5 areas: people, planet, prosperity, peace, and partnership. The 5P principle is considered the foundation of a new vision of the future. The broad outline of development is based on 17 global Sustainable Development Goals, 169 tasks, and 231 indicators measuring progress. In this case, our tug-of-war game will be more like a tug-of-war-spiders-web-edition game. Another compendium of knowledge helpful in the diagnosis of ESG determinants is the Paris Treaty of 2015. The provisions of the Paris Agreement (COP21) commit 195 global leaders to act in order to limit the temperature increase to 1.5 °C above pre-industrial levels, increase the capacity to adapt to the negative effects of climate change and promote resilience to change. Another must-have, when it comes to a nice read, is the law itself. Legislation in the ESG field has just accelerated to a speed of 1.6 km / s, the same speed reached in 2022 by the Spacex Falcon 9 rocket. Among the many legal standards worth mentioning are those regarding ESG reporting: Directive 2022/2464 (CSRD), EU Taxonomy, or SFDR (Sustainable Finance Disclosure Regulation).
The data collected at this stage of the diagnosis of ESG conditions will allow us to define or revise the goals of our business.
Making an accurate diagnosis, as well as writing a prescription for the most effective drug, is not possible without data. Those should be perceived as symptoms that provide the doctor with the right tools to decide on the best treatment. The instructions for use of the future ESG strategy should begin with the words: "Always use exactly as planned and described at the stage of diagnosis of ESG conditions, otherwise there is a risk of adverse effects."
So what to do to avoid side effects?
1. Collect information - as much as possible,
2. Look at global ESG trends - don’t forget about the local ones,
3. Recognize the potential - of people, structure, and processes,
4. Figure out scenarios - not less than 3,
5. Revise your original plan - without that part, it might be a waste of time to think about strategy,
6. Support your team members - in all departments,
A comprehensive view of your business - without presuppositions and exclusions, with full acceptance of its diversity and cross-sectional nature, will allow you to break down the walls of your comfort zone, and only in this way, you have a chance to become an inspiring hero, not an imitator of the vision of the world created by your competition.
Organizing and motivating for ESG
Organizing is the same thing as bringing to life. We have already answered the questions about why we exist? and in what direction do we want to desire? which road should be taken? what measures will be used? what are we planning to do in the near and distant future? We have grouped each of the ESG areas. We have made a diligent assessment of our environmental (E), social (S), and corporate governance (G) impacts. Maximum focus also allowed us to define goals and ESG performance measures, the so-called KPI (key performance indicators). It's time to raise the efficiency of the ESG strategy we have brought to life. But how should we do it? Let's go back to our game of tug of war for a moment. When starting the tug of war, its center must be directly above the central line of the ground, i.e. the critical point of the whole game. Achieving a temporary state of balance is not possible without appropriate commands, team selection, clearly defined tasks, bonds between players, and delegating. It is no different in our case. Organizing an ESG strategy that includes elements such as:
1. Define the content, method of coordination, and implementation of tasks
2. Choose the best way to instruct employees
3. Discover potentials: intellectual, relational, social, and environmental
4. Integrate the structures of departments and branches
5. Determine strategic, operational, financial, reputational, and informational KPIs
6. Determine different ways to evaluate tactical and strategic decisions
All of the above will undoubtedly increase the effectiveness of the ESG strategy, and in long term will translate into building lasting relationships with stakeholders, which will also affect the quality of the investment portfolio.
The game of tug of war continues. After all, planning, organizing, and motivating are translating into who is winning or losing. Control has a different job to do here. It is like an arbiter who intervenes in the case of some kind of breach of the rules, foul or unsportsmanlike conduct. Therefore, the control of the ESG strategy should provide answers to the questions of whether the planned goals have been achieved or not. Were there any unforeseen circumstances or irregularities in the process of developing the ESG strategy? The control trajectory of the ESG strategy is not a straight line - it is more like a wavy ribbon, which proudly and colorfully decorates the rope of each team participating in this spectacular discipline in the game of tug of war.
The amplitude of control should reflect the complexity of the ESG strategy, which can - and should - refer to such social, environmental, and organizational phenomena as, among others: energy consumption, climate change, loss of biodiversity, cyberterrorism, ethics of artificial intelligence, viral threats, shrinking natural resources, rising sea and ocean levels, increase in violent phenomena (e.g. rains, floods, droughts, hurricanes), fluctuations in the flow of water in rivers, concentrations of greenhouse gases, deepening stratification and social pauperization, data protection and employee health, gender equality, human rights, business and communication ethics, social commitment and dialogue with stakeholders.
ESG strategy in relation to your competitiveness
Today, every modern-thinking leader should understand and take into account the costs coming from irresponsible management, lack of transparency, non-compliance with the law, violation of human rights, unethical practices, marginalization of stakeholders’ needs, or rejection of good practices related to responsible business conduct. The task becomes all the more difficult in the face of the need to balance, often different goals, needs, and expectations, coming from owners, managers, shareholders, investors, or other stakeholders interested in the operation of the company.
For this reason, we need courageous leaders who understand these needs. We need people who want to create ESG strategies that are fit for the challenges of the modern world.
Strategies with a small and large scale. Tailored to the commune, region, country, continent, and the world and those, which will come with useful and imaginative strategies that, while building a more sustainable future, will also implement business goals that build competitiveness, such as:
1. ESG-linked loan
2. Green bonds
3. SRI investments
4. More points in responsible companies’ indices
5. Being appreciated in competitions
6. Better chances while emerging in new markets
7.Creating a talents-oriented brand
8. Loyalty and deep relations with stakeholders
9. ESG worth recommending
10. Changing the world for the better which brings a lot of satisfaction by the way.
ESG strategy will help you change the rules of the game. You can play alone or in a team, and if you need a coach, do not hesitate and visit the Contact tab.