ESG Programs: How Organizations Can Increase Societal Value

What is an ESG Program?

An environmental, social, and governance (ESG) program is a set of criteria used to help organizations help the world by looking at impact beyond just financial goals. Some of these factors include environmental sustainability and social responsibility issues.

ESG programs are broken down into three main categories:

• Environmental: This includes environmental impacts such as reducing emissions, reducing waste, utilizing renewable energy, providing more efficient resources, establishing recycling initiatives, and more.
• Social: This section includes how management supports employees, neighboring communities, and customers. This also includes factors such as diversity, equity, and inclusion programs (DEI), volunteerism, labor practices, and data ethics.
• Governance: This focuses primarily on ethics in leadership decisions and focuses on accountability and transparency within the organization.

Why Businesses Should Implement an ESG Program

It’s no wonder that more organizations are adopting ESG programs—companies with strong ESG performance tend to outperform their peers financially. Here are several reasons why organizations should consider adopting an ESG program:

• Attract and retain top talent. More employees are looking for employers who share values similar to theirs. ESG programs are heavily values-based, so they attract more high-performing talent to your organization.
• Increase brand reputation. Investors, customers, and potential employees all look at your brand reputation before making major decisions about interacting with your company. Proving that you’re being socially and environmentally responsible can positively improve your brand reputation.
• Provide more access to ESG-related capital. Some investors only fund organizations that have established ESG programs. Creating an ESG program can open the door to more capital if your organization is looking to grow.
• Minimize risk and maintain compliance. With more legal regulations pressuring social and environmental accountability onto businesses, ESG programs help maintain compliance and minimize the risk of adverse business decisions in the future.

Developing an ESG Program

Steps to build a successful ESG program include:

• Conducting a materiality assessment to identify your company's largest environmental impacts.
• Setting concrete ESG goals and key performance indicators.
• Collecting data on energy use, emissions, diversity stats, and more to establish baseline metrics.
• Implementing policies, projects, and partner programs to achieve marked goals.
• Publicly reporting on your ESG initiatives and progress through a sustainability report.
• Engaging employees through internal communications and incentives like Scope Zero's Carbon Savings Account.

The path to ESG leadership requires strategy, commitment, and cross-functional participation. But, the long-term payoff makes establishing an ESG strategy a wise move towards growth.

How to Develop an ESG Program

Creating an ESG program in your organization is a cross-collaborative effort within the entire organization. Developing a good ESG program requires buy-in from various leaders, so everyone must be clear on the expectations for your ESG strategy.

If you’re looking to develop an ESG program in your organization, here are a few steps you can take.

#1 Establish an ESG Task Force

Since ESG programs touch on every aspect of your organization, key members of leadership must be involved in the decision-making process for this program. This task force will be responsible for the management and key facets of the ESG program moving forward.

At a bare minimum, at least one person should represent one of the three facets of ESG. For example, a task force might look like:

• Environmental: Head of Corporate Sustainability or ESG Director
• Social: Head of Diversity, Equity, and Inclusion or Chief People Officer
• Governance: Chief Executive Officer or Chief Legal Officer

#2 Benchmark Metrics and Set Goals

Before you implement any major changes to your business operations, it’s important to establish a benchmark so your team can identify and measure growth. This is a standard practice for any major change you make in your organization, but especially important for ESG practices.

Identify key metrics that you’d like to measure in each of the three sections of ESG. Some of those metrics may include:

• Environmental: Resource use, carbon emissions, waste management
• Social: Employee diversity, supply chain ethics, customer satisfaction scores
• Governance: Board structure, diversity, leadership compensation, anti-corruption measurements

#3 Implement Initiatives to Achieve ESG Goals

Once your ESG task force has established key metrics they want to improve, the next step is to implement strategic initiatives in each category that can help with the growth of your benchmarks.

Here are some sample initiatives your team could implement to help improve ESG growth:

• Environmental: Adopt employee Carbon Savings Accounts or implement a water recycling initiative
• Social: Implement employee engagement initiatives, offer work-sponsored volunteer days, adopt transparent pay equity practices
• Governance: Start political lobbying for environmental or social causes that align with company values, adopt new board members with a diverse background

#4 Publicly Report on ESG Practices

Publicly reporting on ESG practices helps organizations maintain accountability and prove their impact. Like a financial report, organizations are starting to report on sustainability practices.

Some legislation requires organizations to publicly release sustainability efforts. One way organizations can do this is by creating one large annual report that includes ESG efforts. This avoids duplicate reporting efforts and consolidates everything into one convenient annual report.

ESG Program FAQs

What does ESG stand for?

ESG stands for environment, social, and governance.

What is the purpose of an ESG program?

The goal of an ESG program is to encourage businesses and organizations to understand their impact on the world around them and take accountability for how their business can affect society and the planet as a whole.

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