Environmental, social and governance (ESG) has become a massive emerging market, expected to hit $40 trillion in 2030. Because of this, stakeholders are prioritizing, and leadership teams are looking for more ways to report on sustainable goals and initiatives.
Much relies on supply chain transparency to properly report on organizations’ ESG efforts. This includes leveraging existing tools to extract supply chain data and working with external vendors on other components that impact carbon footprint. However, with the number of roles needed to keep a supply chain running, it’s safe to say that both small and large organizations are dealing with some level of limited resources. There are not enough trained employees in ESG, and many companies don’t have the luxury of a chief sustainability officer (CSO) to guide them. Even if they do, legacy issues like filing paperwork and manually collecting data could continue to hinder even the most well-known companies.
Going beyond the minimum can be beneficial as we look to the industry’s future, where businesses are held more accountable for their ESG impact. Instead of trying to boil the ocean, here are three ways organizations can maximize limited resources and reap the benefits of ESG reporting.
Gain a Proactive Mindset
The supply chain industry is quickly moving toward mandated ESG reporting. When it comes to addressing legislation, one can never be overly prepared. One of the worst things an organization can do is wait too long to act and realize it needs appropriate human capital, whether a new hire or someone internal, to step up to the plate.
It’s also likely that a number of organizations are still using Excel or older methods to manage their ESG reporting. Older forms of reporting and analytics tend to limit the amount of data gathered from suppliers, leading to a rapid scramble to collect more reliable data or data that is not fragmented and siloed.
It is essential to thoroughly assess and evaluate your current ESG reporting practices and be ahead of the curve by at least 12 months. When considering the change management required for these programs, you likely have a 12-to-18-month runway. By being a year ahead, you can confidently gather data and conduct a dry run to see how prepared you are to meet future legislation.
Leverage Existing Employees
There aren’t enough CSOs to go around, but in many cases, organizations already have an environmental, health and safety (EHS) manager who oversees which departments need help minimizing hazards in the workplace. This is an opportunity to expand their role and is a great retention piece for your current workforce or those who may have an existing interest in ESG.
Depending on the company’s size, there’s a significant overlap between EHS and ESG, but there are still a lot of new material and management nuances to learn. If organizations can’t afford or do not have the budget for additional headcount with specific sustainability training, they can invest in their EHS manager. For example, organizations can pay for relevant certifications or give their EHS manager professional upskill opportunities so that they can feel empowered to really run this unit.
Know When to Seek Outside Assistance
Managing an organization’s ESG reporting may seem daunting, especially starting out. The good news is there are third-party staffing, consultants, and contractors for hire to do the heavy lifting, such as conducting a materiality analysis or creating a strategic five-year plan. From greenhouse gas Scope 3 emissions reporting to ensuring an organization minimizes forced labor risk, companies like Avetta are available to collaborate with contractors and suppliers to reduce their carbon footprint, prevent forced labor and adhere to ethical practices.
One key advantage of leveraging a third party is the ability to look at an organization’s data with fresh eyes. This fresh perspective can lead to instructive recommendations around goals and improvement areas. It empowers organizations by customizing the assessment needed, identifying specific ESG risks in their supply chains, strategizing risk mitigation plans, executing, and managing and monitoring their Scope 3 emissions, modern-day slavery risk and more.
Benefits Are Twofold
Regardless of an organization’s size, small and large companies can capitalize on ESG. There’s the internal operational piece, where an ESG assessment or audit of your practices is an efficiency exercise that helps you identify opportunities to save by optimizing operations and reducing waste.
There are also external benefits, such as how an organization manages ESG reporting, which gives it an advantage over its competitors. Nowadays, more and more RFPs require companies to be transparent in their ESG initiatives. If an organization wants to win more business and access more capital, it needs to have this data prepared and a statement around sustainability.
With so much at stake, it’s common for organizations to shy away from making bold statements around sustainability or releasing ESG reports. The fear of getting it wrong hinders many from making progress but when it comes to ESG reporting, it’s essential to remember that perfection does not exist - and there are companies to help accelerate impact.
Consumers want to see defined data on where an organization is, where it wants to be, and how it will get there. There is no negative to telling your sustainability story, even if it’s incomplete, if you are transparent around data gaps and your organization’s plan to close them. A well-structured ESG report allows businesses to better define their brand externally, showcase beyond-compliance commitments to the resources and communities underpinning their product/service, and maintain (or gain!) market share in a world where rising generations’ business expectations have evolved and sustainability is now table stakes.
