Companies that are able to successfully implement an effective ESG strategy will see benefits across their organization. This includes both financial and social rewards. The good news is that investing time in establishing a solid ESG strategy is not difficult or expensive. There are, however, several factors that must be considered in order to have a successful implementation plan. The implementation of an ESG strategy can be challenging for many reasons. It’s easy to get overwhelmed with the range of policies and procedures needed to get the process right from the start. This is year that businesses move from talk into action so if you’re ready to implement an effective ESG strategy, read on for our 5 steps and why good data is an essential part of the process.

Define Your Risk Tolerance

Before you get started on any strategy implementation, it’s important to take stock of your tolerance for risk. This is because you want to ensure that you don’t end up implementing an ineffective, or even harmful, ESG strategy. Once you understand how much risk you’re willing to take, you’ll be in a better position to choose an appropriate set of ESG-related policies and procedures. Depending on the type of organization you work for, a high-risk strategy may be appropriate—especially if your organization is new to the industry and/or unfamiliar territory. In these situations, risks may be high because you don’t yet know the best way to proceed. By low-balling your risk tolerance, you could put your company at risk of entering the market at a disadvantage.

Understand What Information Is Available to You

It’s worth clarifying at the outset what can and can’t be found via ESG research and data. First and foremost, regulatory information is available from all relevant government bodies. However, information on how companies are doing with regard to their ESG strategy is not included in this data. This is exactly what you’re looking for and an area of expertise at Permutable which we provide through our ESG sentiment reporting. You’ll also want to find out which regulatory bodies your company is subject to. Depending on your industry, some of these bodies may have specific data and reporting require requirements.

Examples of our topline ESG data and reports can be found below:

Create a Baseline Before Coming Up With New Strategies

Before you start looking for new strategies to implement in your ESG framework, it’s important to have a clear understanding of your current baseline. After all, if you don’t know where you are, you can’t start to look for a better place to be.

As a starting point, you should get an idea of your current environmental footprint and the resources being used to generate this. To do this, you can use tools like our carbon data tracking tool. By understanding the resources currently being used in your business, you can begin to build a baseline for your new ESG strategy. From there, you can see if certain environmental policies are helping to reduce your environmental impact. You can also use the information from your footprint to come up with new strategies to implement in your ESG and to make sure your carbon emissions are falling in line with your carbon reduction pledges.

Collect Data on Which Strategies Are Working and Which Aren’t

It’s important that you keep an eye on a variety of operational metrics as part of your ESG strategy. From time to time, you should sit down with your management team to see how these metrics are performing overall. If there are particular departments or functions that are underperforming in comparison to the rest of the company, these should receive additional focus. In this way, your team will be able to identify any underlying issues that need to be fixed. You should also keep track of the impact of your ESG strategies by monitoring the impact on business KPIs. This can be done by individual departments or functions or across the whole company.

Confirm That You Are Complying With Regulations

To stay compliant with regulations, you’ll want to make sure that your ESG strategy is being implemented correctly. This means that you’ll want to confirm that your existing policies and procedures are being followed. It’s also worth confirming that your company is in compliance with the specific regulations that your company is subject to. This is especially important if your company is subject to more than one set of regulations.

Summing Up

Above all else, you should approach your ESG strategy implementation with an open mind. There are a lot of factors to consider, and some of them may be outside your control. That being said, it’s important to remember that ESG strategies are not one-size-fits-all. This is a marathon, not a sprint, so it’s essential that you take the time to assess your own organization’s needs and identify the issues that need to be addressed. From there, you can implement the appropriate policies and procedures to help you achieve your goals.

5 steps to creating a successful ESG strategy: The importance of good data in 2023