For many private market investors or portfolio companies who are setting out on their ESG journey, getting started represents one of the most difficult phases. ESG concepts are new to many of the key stakeholders involved, there remains a lack of consensus on the key metrics, and the space seems to be in a constant state of evolution. At Re:Co, we have worked with companies at an earlier stage of their work on ESG who want to achieve results efficiently and without delay. We have found that these three tips can help companies put the right infrastructure in place to enable long-term success:
1) Start small and build up over time:
We have found that this principle serves companies well on multiple fronts as they begin their ESG journey. One key area of focus should be on ESG metrics. Even a basic set of metrics covering a few key performance indicators (KPIs) is an effective starting point. These metrics should be readily trackable using available data sets or processes. For example, it may be easier to track data on metrics such as gender diversity through simple staff counts than, say, energy use across all facilities worldwide. In addition, starting small also works well when considering measures that reduce carbon emissions; while net zero may be the long-term goal for many companies, starting with simple projects such as energy efficiency retrofits at a single facility or on-site solar at the company headquarters will teach your teams a lot about the opportunities and challenges inherent in transforming the company’s infrastructure, which may lead to more successful outcomes further down the line.
2) Take a long-term view, and be patient with the results:
Transformational change doesn’t happen overnight, and even organizations with all the resources at hand to improve on ESG may need to wait several years to see the results bear fruit. Any plan to achieve net zero is likely to take several years to implement while facilities are retrofitted and renewable energy resources are procured, and carbon removal markets remain nascent today. Moreover, moving the needle on diversity, equity, and inclusion (DEI) entails comprehensive efforts at recruiting, interviewing, and onboarding new hires. This multi-year lag time between ESG target setting and results is normal, and we encourage companies to set ambitious but achievable targets accordingly.
3) Involve key management and the Board of Directors early and often:
ESG champions can set the stage for more comprehensive ESG plans in the long term when key decision-makers are already in the habit of considering ESG-related concepts at key junctures. With or without a long-term ESG plan in place, ESG champions can begin to integrate ESG concepts into the decision-making process by, for example, requiring that the Board of Directors address at least one element of ESG strategy at every board meeting. Such efforts will introduce key decision-makers to ESG-related concepts and terminology and normalize taking up ESG matters within strategic planning efforts in ways that will facilitate more complex conversations down the line.
A successful ESG program requires many parts of an organization to align, and it often falls to ESG champions to navigate the complexities and see the process through. We find that the tips described above can help ESG champions work through some of those complexities, laying the initial groundwork for more transformational work over time.
“Transformational change doesn’t happen overnight, even organizations with all the resources at hand to improve on ESG may need to wait several years to see the results bear fruit.”