Curtis File
Editorial Manager, ESG and Sustainable Finance
Awareness of environmental, social and governance (ESG) issues has officially moved into the mainstream. According to a 2021 survey, 88% of publicly traded companies, 79% of venture and private equity-backed companies, and 67% of privately-owned companies now have some form of ESG program in place.1 The reasons for a shift towards mitigating ESG risks are clear.
Beyond regulatory compliance, companies with strong ESG performance are able to attract more diverse investors than their weaker performing peers, reduce the cost of capital, and appeal to a growing consumer base that is looking to buy from companies that align with their values.
As a result, sustainability and corporate social responsibility (CSR) professionals are looking for ways to optimize their ESG programs and become leaders in their respective industries.
While the journey to managing ESG risks will vary between industries, and between organizations, there are habits every company can adopt to help achieve their ambitions. This blog provides insights on two important habits your company can adopt to become an ESG leader, by looking at three high-performing companies that earned a Sustainalytics Top-Rated Badge.
Habit One: Integrate ESG Into All Aspects of Your Business Strategy
Successful ESG programs start in the boardroom. Without a clear direction from executive leadership, it can be challenging to implement an ESG strategy that drives all aspects of the business.To achieve their ESG-related ambitions, leaders need to ensure they set clear objectives and performance indicators. These should be integrated across the entire business, ensuring every team is aligned on ESG goals and how they can make meaningful contributions to achieve them.
Taking a holistic approach also makes it easier for companies to identify performance gaps and discover new opportunities to optimize their performance. ASR Nederland N.V., a Netherlands-based insurance provider, says integrating ESG into the core of their business has been a key driver of their success.
“The biggest driver behind our ESG performance is the mindset of our people and their intrinsic motivations. There is an eagerness to play a meaningful role to make society more sustainable,” said Barth Scholten, ESG Investor Relations Officer at ASR Nederland N.V. “The executive board and senior management today walk the talk. It is essential that they live up to their commitment to ESG. For us, ESG is not a program. It is a way of doing business.”
Holaluz Clidom SA, a Spain-based energy transition company, has taken a similarly integrated approach to ESG. Carlota Pi, the company’s Co-Founder and Executive President, says that team buy-in and fostering a sense of purpose has been crucial for the successful implementation of ESG initiatives.
“Our team is 100% aligned with the company's purpose, which is to connect people to green energy in order to achieve a 100% green world,” said Pi. “All the awards and recognition that we get related to ESG performance or the impact our work has are really fully celebrated. It increases the sense of belonging for the team and also gives us as human beings a sense of purpose in what we do.”
Taking this approach not only ensures your ESG program is built on a strong foundation, but also fosters a sense of ownership and investment in the success of your company’s initiatives.
Habit Two: Be Proactive in Learning the Latest Regulatory and Reporting Standards
In a fast-moving regulatory landscape, companies that are proactive in learning about the latest laws and reporting standards are more likely to see their ESG programs succeed. Compliance is of particular importance to investors, as it helps ensure that a company is operating ethically and legally, reducing the risk of financial loss and reputational damage.
Joseph N.C Huang, Chairman of E.SUN Financial Holding Co., Ltd., says that staying at the forefront of international standards has been essential to the company’s success.
“E.SUN Financial continues to lead in adopting international practices. In 2015, we joined the Equator Principles. From there, we learned how to assess the impact of financial projects on climate and society,” said Huang. “We are also the first company in Taiwan to use the Task Force on Climate-Related Disclosures framework, and we learned a lot about how to measure the risks of climate change.”
With many industries facing tighter regulations and more robust reporting standards, staying informed is only one part of the puzzle. Companies will also have to be agile to ensure they are able to implement and adopt new standards without business interruptions.
While there is no one-size-fits-all solution to developing an effective ESG program, starting with these important habits from some of the top performing companies in Sustainalytics’ universe can help you build a strong foundation for success.
Curious about whether your company would be eligible for a Sustainalytics ESG Top-Rated Badge? Read more about the program here or connect with our team of experts.
References
1.Navex Inc. 2021. “Global Survey Finds Businesses Increasing ESG Commitments, Spending.” February 23, 2021. Navex Inc. Blog. https://www.navex.com/blog/article/environmental-social-governance-esg-global-survey-findings/
