Employees, investors, customers, the public, and other stakeholders are increasingly aware of businesses’ impact on the rest of the world. Now, businesses are often put under a microscope and examined under a framework known as ESG, which measures an organization’s environmental, social, and governance performance. This framework recognizes that businesses don’t exist in isolation. Instead, they should strive to operate in prosocial ways that benefit society and the environment, not just their business. Employers can assess their own organization’s performance and make an ESG strategy that creates profound positive changes.
What Is ESG?
ESG is a three-pillar approach to managing a business’s impact. ESG stands for:
- Environmental: a business’s effect on the natural environment, such as how much waste they produce and energy they use.
- Social: how the business affects the communities they operate in and their engagement with social causes.
- Governance: the fairness and ethics of business practices and structure.
This framework is important for stakeholders to measure the non-monetary risk and potential return on investment of each business. Employers can assess their business’s performance in each category by evaluating certain criteria, such as pay equity and diversity within the organization.
Often, people think of large corporations when discussing ESG initiatives, but ESG is for small businesses, too. By successfully adopting meaningful ESG initiatives, businesses of any size can benefit.
Benefits of Having an ESG Strategy
Pursuing good ESG performance is the right thing to do from a prosocial lens, but businesses can also benefit in other ways. Successfully implementing an ESG strategy with meaningful initiatives can lead to:
- Gaining a competitive advantage;
- Accessing new business opportunities;
- Obtaining higher profits;
- Retaining current customers and employees or attracting new ones; and
- Elevating the business’s reputation.
ESG initiatives can also help a company stay on top of evolving social trends and operate in line with current best practices.
Developing an ESG Strategy
Not all businesses can and should pursue the same ESG initiatives. Businesses should develop an ESG strategy with initiatives that are strategic, align with their purpose and goals, and are relevant to the company’s stakeholders. Here’s a brief overview of how you can develop your own ESG strategy.
Step 1: Assess your business in relation to each of the ESG pillars
You can’t implement ESG initiatives without first understanding your company’s impact. Part of your review should include ensuring your business is complying with applicable laws and regulations related to ESG, such as environmental regulations and pay equity.
Step 2: Select the right ESG initiatives for your business
Your ESG measures should be strategic and intrinsically tied to your organization and align with its goals and purpose. They should also be genuine, otherwise the company may face scrutiny and backlash. For example, many companies have been called out by customers and the public for “greenwashing”—making products or practices seem more environmentally friendly than they really are.
Step 3: Communicate, implement, and monitor your ESG initiatives
Ensure you explain why you are taking these specific ESG measures, their relevance to the organization, the timeline for accomplishing them, and how you will achieve them. The “how” is an important element that should not be overlooked; it demonstrates that you are serious about the initiative and have a plan in place to achieve it.
Download our FREE Guide to ESG Initiatives to learn how to achieve each step as a small business and create positive changes for the long run.
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