Ted Dhillon is the CEO and founder of FigBytes, an ESG insight platform.
Environmental, social, governance (ESG) is trending—so much so that a record $649 billion was poured into ESG-focused funds worldwide in 2021.
With stakeholders looking to put money into companies that have sustainability plans in place, more businesses are jumping on the ESG bandwagon. But are these companies making a difference, or are they greenwashing or “purpose-washing,” making grand long-term commitments with no concrete short- or medium-term plans? Now, the SEC in America and the Federal Government in Canada are making moves toward mandating that publicly traded companies disclose their climate-related risks.
Purpose-washing can easily occur when businesses get caught up in the hype of ESG. It’s not about making splashy campaigns. ESG is a data-driven approach to sustainability that has the power to drive positive change for both people and the planet. So, how do you make sure that your ESG plan is going to make good on its promises?
An effective ESG strategy can be boiled down to these three elements: setting goals, tracking your progress and taking a holistic approach.
1. Set goals for your industry, not others.
The most frustrating thing about ESG is that there is no one right way to go about it. Goals vary from company to company. The one common denominator? Strategy.
Begin by considering what makes sense for your company’s goals and mission. The goals of an oil and gas company will differ greatly from those of a small retailer. Just because companies like Coca-Cola are committing to net-zero emissions by 2040 doesn’t mean it’s the right target for your company.
Look for sustainability areas that are relevant to your industry. The SASB Materiality Finder is a great place to start exploring new and ultra-specific concepts.
Managing your emissions is a great step in the right direction, but carbon isn’t the only hurdle we have to overcome. What if your company is involved in manufacturing, or getting minerals out of the ground? Water stewardship should be part of the plan, too. Fracking, mining and other energy-related activities suck up a lot of water.
Remember to be realistic about what’s achievable for you. What KPIs can you measure and manage? What are some ways to improve your energy efficiencies now? This isn’t to say that your goals shouldn’t be ambitious; in fact, aggressive goals are what the world needs right now, per the latest IPCC report. But the aim is to actually make progress toward them.
If you’re committing to net-zero emissions by 2050, you have to set realistic targets with specific dates along the way. Can you find a supplier who uses alternative fuel vehicles? Sometimes small wins can help set the tempo for a successful ESG program and create the buy-in needed to push toward bigger goals.
By setting large goals and then breaking them down into smaller chunks with timelines attached, companies can assess their progress along the sustainability journey.
2. From disinformation to data: Track your progress.
A cloud content delivery platform came to us looking for help reaching its goal of 50% renewable energy. But with more than 4,000+ data centers across 130 countries, collecting data was quite the challenge.
By implementing top-down directives that mandated tracking energy data and converting it into greenhouse gas (GHG) emissions, we were able to help the platform cut its calculation time significantly. This made it easy to not only show progress in real time, but to engage stakeholders with data-driven info as well.
Operational data will help you understand your impact today and can help you see what changes you need to implement to reach your targets tomorrow. Net-zero carbon emissions by 2050 goals need to have waypoints along the journey—you need the ability to check on your progress. Pinpoint your carbon output today and figure out next steps from there.
Different companies may have different goals, but each approach should be data-driven. By looking at the bigger picture and then tracking, recording and reporting on these sustainability initiatives, companies will be able to get a better sense of what their actual impact is on the world. It will only be from there that they can set attainable goals for themselves.
3. Don’t forget the ‘S’ and ‘G.’
Ethnically diverse companies are more likely to outperform less diverse companies in their industry. What’s more, 78% of workers say it’s important to work at an organization that prioritizes DEI—so in terms of talent retention alone, this is valuable to pursue.
A diverse team adds value to your organization, whether that’s geographically, by industry or beyond. Diversity helps leadership look at challenges with a wider lens and supports finding a more sustainable solution for the long-term success of the company.
Though the social aspect can be trickier to navigate, there are several ways to make your business more diverse and equitable. One way we ensure diversity at my company is by rethinking recruitment. We started by removing unconscious bias from the hiring process. We began to consider more heavily transferable skill sets; candidates with diverse backgrounds often bring valuable perspectives to the table. We’re also placing more value on soft skills—members of your team need to be able to think critically and communicate just as well as they manage budgets and projects.
By keeping a holistic set of goals at the forefront of your mission, your business will be sure to not only appeal to talent and stakeholders but make a real impact on the planet, too.