Environmental, social and governance (ESG) programmes are becoming increasingly important for businesses of all sizes. These programmes are designed to help companies manage their environmental impact, promote social responsibility and improve corporate governance.
A successful ESG programme requires the involvement of a wide range of stakeholders. Part of the role of anyone managing ESG across the company is to assess these stakeholders. Stakeholders form part of your materiality assessment, where you identify which areas to focus on across the many issues covered by ESG. Your stakeholders can provide input, guidance and clarity on where you should focus.
ESG is different to many other areas of business because you are forced to look at issues from different perspectives in addition to your own. The other perspectives are often those of your stakeholders, so stakeholders are critical to the development of your ESG strategy.
While there are many different stakeholder types, below are the most common.
Employees are essential to the success of any ESG programme. They can provide valuable insights into the company’s environmental and social impacts, and help implement and promote the programme. Employees are a major part of the ‘S’ in ‘ESG’ and can contribute to many social programmes. They also contribute to the overall pulse of the company and often guide it towards a common purpose.
Customers are increasingly interested in doing business with companies that have strong ESG credentials. They can put pressure on companies to adopt more sustainable practices and reward companies that are doing well in this area. Knowing your customers and understanding their expectations is essential in ESG. Customers in different markets may have different expectations, so you must consider how this might impact your ESG programme.
Investors also pay close attention to ESG and more investors are looking to invest in companies that are committed to sustainability and corporate responsibility. There is a growing area of investors backing companies that have strong ESG mandates. If you are looking to sell to one of these investors, raise capital or potentially be bought by a fund that is the subject of an ESG-driven mandate, then these stakeholders will be very vital to your future success.
Governments set regulations and standards for ESG performance. They can provide support for ESG programmes and help ensure that companies are held accountable for their environmental and social impacts. Currently, there is a significant push from governments to regulate ESG reporting. These regulations and reporting requirements will likely drive much of the development of ESG for some time, so government stakeholders will be central for every company in the future.
Community organisations can play a key role in supporting ESG programmes. They can provide information and education to businesses and communities, and help monitor and enforce ESG standards. They are also an important piece of the community in which companies typically operate and often form part of corporate philanthropy initiatives, so they are an important stakeholder in ESG.
The planet is also a major stakeholder – yet it is one that doesn’t directly speak. Therefore, it is up to you to always remember to think about how the planet will impact your ESG initiatives and vice versa.
By engaging with a wide range of stakeholders, businesses can develop and implement ESG programmes that are effective and sustainable.
Best practices for engaging with stakeholders are as follows.
- Be transparent with stakeholders about your company’s ESG goals and performance. There are likely to be occasions where you don’t meet expectations. Be as open and honest as possible about these areas and provide a roadmap for improvement. Most stakeholders will be comforted by your openness and your transparency on how to address any shortfall.
- Involve stakeholders in the planning and implementation of your ESG programme. They should be involved in materiality assessments and engaged as part of the risk assessment process on key ESG risk areas. They should also be consulted on all major initiatives, with best practice being to engage with them before making major decisions on the ESG strategy. Such an engagement might be formal or informal, where research might suffice to determine their position.
- Listen to stakeholder feedback and make changes to your programme as needed. Your stakeholders are a great source of knowledge and guidance. You should seek their input regularly and document their feedback and suggestions.
- Communicate often with stakeholders about your ESG progress. A communications plan can be formal or informal, written or oral – whatever works for each particular stakeholder. Ideally, the communications should be documented and tracked using an ESG management platform.
- Celebrate your ESG successes with stakeholders.
By following these tips, you can help ensure that your ESG programme is successful and that you have the support of your stakeholders.