As Australia prepares to implement Mandatory Climate-Related Reporting for Companies beginning in the new year, there’s an urgent call for companies to elevate the significance of their Environmental, Social, and Governance (ESG) strategy and reporting.
What is ESG?
ESG isn’t just a trend; it’s about holding companies accountable for their impact on the world. It’s a framework that encapsulates three fundamental pillars: Environmental, Social, and Governance.
- Environmental: Encompassing a spectrum of concerns including energy usage, emissions, waste management, and stewardship of land and water resources.
- Social: Focusing on employment practices, upholding human rights, and the depth of a company’s engagement within its community.
- Governance: Enshrining a company’s values, mission, management practices, and the level of transparency maintained.
Why should companies care about ESG?
Beyond the ethical imperative, integrating ESG practices can significantly bolster the bottom line in the long term. Sustainable practices often lead to cost efficiencies, increased operational resilience, enhanced brand reputation, and access to a wider pool of investors who prioritise sustainable initiatives.
Steps to Crafting a practical and implementable ESG Strategy
Crafting a practical ESG strategy is a three-step journey including the following steps: Define, Deliver, and Demonstrate.
This initial phase involves setting Key Performance Indicators (KPIs) that are not just aspirational but practical, implementable, and achievable. KPIs need to align with the company’s objectives and consider the industry’s standards while accounting for the specific nuances of the organisation.
Once the KPIs are established, a clear roadmap must be charted to illustrate how these targets will be met. This roadmap should include actionable steps, designated responsibilities, and a timeline for implementation. It’s crucial to integrate ESG into the core business strategy rather than treating it as an add-on.
Transparency is the cornerstone of a robust ESG strategy. Companies must report the outcomes of their efforts to stakeholders, showcasing tangible progress against the defined KPIs. Honesty in reporting is non-negotiable; stakeholders expect clear and comprehensive disclosure of a company’s ESG practices.
While Climate-Related Reporting within the ESG framework becomes mandatory, it shouldn’t be reduced to a mere checkbox. Instead, it should embody a transformative journey that businesses embrace, symbolizing a commitment to responsibility, innovation, and long-term success.
At Cubility, a management and technology consultancy, we leverage in-house frameworks, models and industry standards to optimise clients’ governance structures, improve their risk management and achieve specific business objectives. If your company requires assistance with developing its ESG strategy, please get in touch with us. We would love to hear from you.