When companies are first introduced to the idea of ESG, it usually takes on “reporting” requirements and results in some level of goal setting by the organization. For example:
- Amazon – Make all Amazon shipments net-zero carbon, with 50% of all shipments net zero carbon by 2030
- 3M – Increase renewable energy to 25 percent of total electricity use
- CVS Health – By 2030, reduce the absolute scope 1 and 2 GHG emissions by 36% from a 2010 base year
Although reporting is a major aspect of ESG, there is a formalized process that a company must take. The ESG process includes multiple steps that are applied across various industries. The steps typically are as follows:
2. Baseline – What is the organization doing today? Making sure early actions are captured and measured to define the current state of sustainable operations.
3. ESG Goals – Once the “where we are” (baseline) is defined, the “where do we want to go” (goals) are created with buy-in from the organization’s internal and external stakeholders.
4. ESG Strategic Roadmap – Transparent roadmap and framework for actions across the organization.
5. Action Planning – Defining attainable actions quarterly/yearly and finding a measurable horizon to support the roadmap.
6. ESG Reporting – Agreed upon reporting practice on progress of defined goals for internal and external stakeholders
A standard materiality assessment maps the stakeholder importance of the ‘E’, ‘S’, and ‘G’ against organizational impact. This is the basis for a corporate ESG report and includes critical information to allow an organization to define and prioritize ESG initiatives.
The Impact of “E” on “S” and “G”
Now that our goals are achievable, it is important to understand how our environmental goals correlate with our social and governance goals. The “Relevant Impact Graph” maps the impact of the ‘E’ goals on ‘S’ and ‘G”. Let’s consider a materiality goal of decreasing greenhouse gas (GHG) production by 25% by 2030. To achieve this, an organization must reduce energy use, decreasing its dependency on fossil fuels and other GHG causes. Now, what are the ‘S’ impacts of this ‘E’ action? Healthier work environments, corporate stewardship, incentives for employee recruiting, and more. What are ‘G’ impacts of the ‘E” action? An organization saves money, complies with energy reduction requirements, follows corporate performance standards, and supports a customer’s supply chain GHG reductions now or in the future.
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