With geo-political and economic instability at an all-time high, corporate focus continues to be increasingly splintered. Have ESG goals, which often have a longer term horizon, lost center stage as corporations scramble to deal with emerging threats, or is there a way to use ESG initiatives to most effectively tackle those new threats?
ESG covers a broad set of issues, from a company’s energy footprint, to hiring practices and its anti-corruption policies. As businesses become increasingly divided or siloed, particularly in the governance, ethics, and compliance realm, staying the course on ESG goals can prove difficult.
Ropes & Gray’s Anti-Corruption and International Risk Global Co-Chair, Amanda Raad, discussed strategies for strengthening ESG strategies at a panel event during the 2nd Annual Summit on ESG organized by the American Conference Institute. The panel included Lisa Boyd (Director of Social Impact, Lyft); Maureen Mitchell (Independent Board Director, Webster Bank, Natixis Loomis Sayles Mutual Funds); and Tricia Etzold (Partner, Resolution Economics).
During the panel event, it was interesting to find that the audience identified gender & ethnic diversity amongst its employees and board members as one of their top ESG goals, with energy consumption and anti-corruption following closely behind. Some of the other ESG goals, such as pollution, carbon footprint, and conservation appeared to vary by industry and, as recognized by the panel, can pose as a challenge to monitor by metrics.
The panel discussed how tracking these metrics can have a strong impact on stakeholders, such as shareholders and employees, as well as the increasing focus on meeting regulator expectations. Indeed, recent years have seen a wave of enforcement action by regulators on companies that engage in greenwashing – falsely marketing that a company's products are environmentally friendly or have a greater positive environmental impact than what is true. Recently, the FCA proposed a package of new measures to tackle greenwashing.
However, to meet regulator expectations and make an ESG program really work to its full potential, Amanda Raad said it is important for organizations to identify the highest priorities to focus on and to drill down, from a data perspective, into how the business is performing in that area to paint a clear picture for stakeholders. Some of the key methods panelists discussed include:
- Identifying focus areas that are material to stakeholders (such as shareholders, board members, and employees);
- Translating ESG initiatives/commitments into business priorities (by tying clear and specific business objectives to ESG goals);
- Tracking metrics over time.
Panelists agreed that an effective ESG strategy requires rallying stakeholder buy-in – an ongoing process that is sometimes best reflected through an ESG strategy’s impact on the bottom line. Finding this alignment will require organizations to understand the values and goals that will drive the agenda, defining the metrics to measure progress in meeting those goals and tracking them.
As the energy crisis deepens in Europe, a second wind amongst organizations and governments to realign and renew ESG commitments could save many cold winters.
See here for more information on how Ropes & Gray can help your organization address the complex, rapidly developing demands of Environmental, Social and Governance, Corporate Social Responsibility and Business and Human Rights compliance.