ESG Policy and Strategies: Guide to Environmental & Social Governance
The Small Business Guide to ESG Policy
You are a growing business, and you know that embedding ESG policies and strategies across the company is one of the keys to continuing your success. It’s important to you that your stakeholders understand that you care about the environment, the people in your community, how you manage risk, and they have evidence that you run an ethical company.
You want to enhance the reputation of your company and improve bottom-line performance, but you are unsure of how to optimise the opportunities which come from demonstrating your environmental, social, and governance credentials.
That’s what you aim for, but it’s complex and you don’t know where to start. This guide takes you step by step through the essential stages and provides the foundation for your future success.
What do investors think?
‘Investors’ include your stakeholders. They invest in who you are, what you offer, and what your business does for them. Your customers spend their money with you, and without them your business is merely an expensive hobby.
According to the CBI regardless of the size of your company two thirds of investors take ESG factors into account when investing in a company, meaning ESG has the potential to grow your business while benefiting the environment and community. You may not be looking for investment, but those investors are stakeholders who can – and often do – influence those in your target audience.
For example the FCA regulates conduct matters in the financial services industry in the UK. In recent years it has had a sharp focus on issues relating to ESG within the financial sector, including new rules to improve transparency around the consideration of ESG risks. Financial firms regulated and/or operating in the U.K. will soon be required to provide sustainable disclosure information relating to investment products, personal pensions, and other products designated by regulators. That covers a wide range of stakeholders, including your staff, who will have an interest in your ESG credentials.
What is ESG?
In a nutshell, ESG is an acronym for “Environmental, Social and Governance.” It is a collective term for the impact a business has on the environment and society as well as how robust and transparent its governance is in terms of company leadership, executive pay, audits, internal controls, and shareholder rights. It’s a framework, including:
a strategy that reflects your overall business strategy
policies that work, because policies without action are just bits of paper
a set of practices which emphasise the benefits of ethical behaviour
procedures which are straightforward for staff to implement and maintain, and
related metrics that you can use to enhance the positive impact your company makes to society.
Implemented properly ESG is a powerful tool to drive your sustainability and business resilience. It provides your stakeholders with the confidence that they are endorsing and supporting a business which has embedded responsible practices across all parts of their operation. In short, it means they trust you.
ESG provides metrics which measure how your business integrates environmental, social, and governance practices into operations, as well as your business model, its impact, and its sustainability.
Implementing ESG lets stakeholders know that you understand that environmental stewardship, social equity, and robust governance are essential ingredients for creating a thriving, resilient, and profitable future. They know you can be relied upon to provide them with a service for many years to come.
Why does ESG Strategy it matter?
An ESG strategy demonstrates that you are reducing risks to yourself and to stakeholders, such as adapting manufacturing processes to meet future environmental legislation which in turn makes your business an attractive proposition for longer-term growth partnerships.
ESG takes the holistic view that sustainability extends beyond just environmental issues. It
is an important component for business growth, so it is important to understand what ESG is, where your business can adopt its principles and approaches, and how it can benefit your organisation.
ESG provides a platform which helps you to create a positive social and environmental impact, enhance your brand, improve your employee engagement, increase your customer loyalty, and differentiate you from competitors.
Is an ESG Policy mandatory?
Legally, only if your business meets stringent financial criteria including a large annual turnover. However a strong and authentic ESG policy will not only greatly enhance your companies reputation with your external stakeholders, but it will also increase the focus within your business, allow you to retain and grow your key like-minded people and ultimately, from a commercial perspective, give you the competitive edge.
Why should I spend time and money on ESG Policy?
First, the interest of stakeholders is increased. They don’t have to ask what you are doing to protect the environment, your staff, your community, or them.
Being proactive builds trust and respect.
Second, including a range of non-financial information as part of your statutory reporting you are demonstrating are dynamic, forward-looking, and ambitious.
Third, regulation is changing. Medium-sized companies are likely to be included in the near future, and the scope and amount of detail in ESG reports is frequently increasing, so it is important to plan strategically to get the best outcomes.
What is an example of an ESG strategy?
Examples include your strategy towards reducing your carbon footprint, how you deal with your waste, and what you are doing to reduce pollution. It requires you to demonstrate what you are doing under business as usual to improve the sustainability of your supply chain. It includes the social impact generated by your relationships with your workers, your customers, your suppliers, and the communities with which you interact.
Policies relating to equality, diversity, and inclusion, human rights, anti-slavery are all important elements in a holistic ESG strategy, and they are almost certainly going to be scrutinized by your stakeholders and other interested parties.
What action do I need to take?
That depends upon your current situation, and the markets that you operate in. For example you may need to embark upon an programme of internal culture change, and/or to (re)train the workforce about the principles and practices of operating within an ESG framework.
You will need to determine what:
your ESG strategy is
business critical data you need to capture, how and when you will use that data, and the extent to which that can be automated and/or outsourced
how you will track your progress against the strategic and operation goals which have been incorporated in to the company operations
the detail, format, distribution, and frequency of the reports your company will produce
processes your internal and external auditors will include in their plans to review and sign-off your statutory and voluntary reports
what training your staff will need, when to provide the training, and how much it will cost
Need help with ESG Policy or ESG Strategy? Talk with us.
We have a great deal of experience in the field of ESG. We will help you to:
Develop your ESG framework.
Build and implement your ESG strategy.
Identify your data sources, Including those which are internal and external, plus those which come from the value chain.
Aggregate your data; silos expose you to a range of problems.
Develop your approach to ESG through appropriate communication with your suppliers, clients, and other stakeholders.
Establish appropriate reporting structures.
Train your staff in the entire ESG philosophy, and how to embed it in your company culture.
Want to learn more?
Visit one of our Corporate Governance pages to see what we have to offer and book a call with us to discuss how we can deliver what you need:
Empowering businesses with expert ESG, CSR, and GRC guidance to foster responsible practices, enhance stakeholder engagement, and drive sustainable growth.
Optimise Your Business with Strong Corporate Governance and Regulatory Practices
Custom ESG Workshops: Empowering Your Business for Sustainable Success
Empowering Effective Decision-Making and Oversight
Remember - you can’t manage what you don’t measure.
Appendix – Beyond the U.K. – a high-level overview
The European Union
From the 2024 reporting year, companies which do business in Europe are required to comply with the Corporate Reporting Sustainability Directive. CSDR makes it mandatory to report about what actions the company takes in respect of the circular economy, human rights, corporate governance, other social and governance factors.
All companies within the scope of CSRD will need to report ESG performance based on compliance with 12 European Sustainability Reporting Standards. There are:
two overarching standards,
five environmental standards,
four social standards and
one governance standard.
Beyond Europe
In the USA, the SEC requires that all publicly listed companies report against each of the
Climate Disclosure Rules, including rules relating to Investment product, anti-greenwashing, sustainable development, and strategic planning.