Ten Vital Steps in ESG Implementation Process

ESG has become an emerging issue in the business world, capturing the attention of the public, government, and investors. Various issuances are being introduced to support the implementation of ESG within corporations, aiming to secure sustainable business practices and long-term profitability. One common approach adopted by companies is the creation of ESG reports or the pursuit of ESG ratings. Through ESG reporting or engagement with sustainability organisations, companies can enhance investor confidence and demonstrate accountability in their business operations.

However, without proper planning and actual implementation, creating ESG reports or obtaining good ESG ratings can be seen as mere lip service to satisfy stakeholder demands, popularly called greenwashing. A true commitment to ESG is demonstrated through consistent actions and measurable targets. To help you navigate the ESG journey, ten crucial steps can be taken.

Important Steps You Need to Take For ESG Implementation

The fundamental step to start the ESG journey is understanding how every business decision will impact the stakeholders. Furthermore, companies are increasingly recognising how environmental, social, and governance factors present both opportunities and risks to their financial and overall performance.

Step 1: First and Foremost, Acknowledge the Issue

To effectively navigate the ESG landscape, organisations must first identify their specific ESG issues. This involves assessing environmental impacts, understanding stakeholder perceptions, and evaluating the robustness of governance systems. It’s important to recognise that the nature of each business presents unique challenges and priorities. For instance, financial institutions may face heightened risks in social and governance management, while mining or real-estate companies often grapple with environmental concerns. By mapping these issues, companies gain a foundation of ESG within their operations.

Step 2: Engage Stakeholders

Stakeholder engagement offers a valuable opportunity to gain diverse perspectives and identify potential ESG risks or opportunities that may not be apparent from a purely internal analysis. By fostering open dialogue with a diverse range of stakeholders, organisations can gain invaluable insights into their environmental, social, and governance impacts. This collaborative approach also enhances mutual capital and trust between the company and stakeholders. By actively seeking and incorporating stakeholder perspectives, companies can demonstrate a genuine commitment to sustainability and create shared value.

Step 3: Settling What’s Material

After consolidating perspectives from management, internal, and external stakeholders, organisations can construct a matrix or prioritised list of materiality issues. Essentially, the materiality issues matrix categorises ESG-related topics based on their urgency and potential impact, enabling the identification of issues with the highest likelihood of occurrence and severity.

Step 4: Reflect on the ESG Maturity

To effectively implement ESG strategies, it is crucial to conduct a thorough assessment of the company’s current standing in ESG matters. This involves a comprehensive evaluation of the company’s impact on the environment, its adherence to human rights principles, and the effectiveness of its corporate governance practices. By understanding the company’s strengths, weaknesses, and areas for improvement, it becomes possible to develop a tailored ESG roadmap that aligns with the company’s resources, knowledge, and overall circumstances.

Step 5: Benchmarking and Establish Roadmap

A well-structured ESG roadmap is instrumental in guiding companies toward peak performance in their sustainability initiatives. While overarching goals like achieving net-zero carbon emissions often serve as the primary focus, it’s important to recognise that these objectives may not be universally applicable or feasible across all sectors. Benchmarking against industry leaders provides valuable insights into potential opportunities and strategies, allowing companies to tailor their roadmaps accordingly.

Step 6: Establish a Strategy or Blueprint

An effective ESG roadmap extends beyond mere milestone planning, rather becomes a blueprint for ESG implementation. It should incorporate a comprehensive framework that includes alignment with sustainable development goals (SDGs), direct and logical strategy, clear performance achievement indicators, annual targets, and departmental responsibilities. This level of detail enables companies to accurately measure progress, assess departmental commitment, and identify areas where additional strategies may be necessary to address performance gaps.

Step 7: Unify Awareness

Many industry leaders implementing ESG face the challenge of unequal awareness of ESG principles. Boards often have high expectations, but departments may resist due to perceived increased workload. In other cases, some Boards and CEOs are pessimistic about ESG, believing it to be costly and less profitable.

If unaddressed, these misunderstandings can risk a decline in long-term achievements and profitability. ESG-specific training is crucial to unifying understanding and emphasising that ESG is not an additional burden but an integral part of daily operations, focusing on optimising resource utilisation for greater and sustainable gains. 

Step 8: Monitoring and Evaluation

The adage “what gets measured, can be managed” underscores the critical importance of robust monitoring and evaluation in the realm of ESG. By establishing a regular system for tracking and assessing progress, organisations can ensure that their ESG commitments are not merely superficial gestures but are actively implemented and delivering tangible results. Without quantifiable targets and regular evaluation, companies risk overlooking critical issues and failing to manage the risks identified during the initial stages of ESG implementation.

Step 9: Taking Accountability

Accountability is a fundamental end cornerstone of ESG. To elevate this commitment, companies often publish ESG or sustainability reports detailing their ESG performance. These reports serve as a crucial tool for stakeholders to assess whether their concerns, both raised during engagements or other communication channels, have been adequately addressed. To ensure credibility and effectiveness, ESG reports should be meticulously crafted with clear and accurate information, supported by verifiable data, and presented with a balanced and confident tone.

Step 10: Enhance Exposure

Proactive engagement with ESG-focused media partners, active participation in ESG-related associations, and the pursuit of ESG ratings such as GRESB, Sustainalytics, or EcoVadis are essential steps to enhance our company’s visibility and recognition among investors and the general public. By leveraging these platforms, we can effectively communicate our ESG commitments, achievements, and aspirations, ultimately solidifying our position as an industry leader in sustainability.

While the 10 steps can be overwhelming for companies who are starting their ESG journey, there is no pressure to do everything at once. Established sustainability leaders have invested years in cultivating their ESG practices, often initiating these efforts well before ESG became a widely recognised acronym. Nonetheless, with the widespread emergence of ESG, equipped with sophisticated technology and expert counsel, the implementation process can be significantly simplified. At the end of the day, sustainability is to be lived in, not conquered.

Written by Kyna Sara, ESG Consultant @EliteAsia