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ESG in Action: 6 Steps to Get Started

"Decarbonisation will affect in some way every single company in Australia," states Mike Cannon-Brookes, co-founder and co-CEO of Atlassian at AICD's Climate Governance Forum last month. His words resonate deeply in today's economic environment, highlighting an increased focus on Environment, Social, and Governance (ESG) considerations. ESG is no longer a secondary concern; it is (or it should be) at the heart of strategic decision-making, impacting not only organisations but society at large.

Here are some key messages from the Forum around ESG:

  • The Emerging Trend of ESG

ESG is not only about compliance and reporting requirements; it is shaping how companies operate, influence, and contribute to a sustainable future. Julia Hoare, Chair of the Port of Tauranga, reflects on this shift, noting the transformation from compliance to strategic importance.

  • The Role of Leaders and Directors

Leadership plays a critical role in embracing ESG. Timothy Stutt, Australian lead for ESG at Herbert Smith Freehills, advises a balanced approach for disclosures, combining top-down direction with substantiated plans. Leadership must be proactive, setting and communicating clear ESG goals and strategies.

  • ESG in Non-Profits

Ian Hamm MAICD, Chair of the Indigenous Land and Sea Corporation, speaks to the role of smaller and non-profit organisations. Despite the daunting scope of global issues, every entity can contribute meaningfully. Setting an internal benchmark for ESG, regardless of external requirements, reflects a commitment to societal good.

people sitting around a table. green background with reference to environmental and social governance.

6 Steps to Get Started with ESG Management

1. Define the ESG Policy: Boards should actively discuss and establish their stance on ESG, setting clear expectations. The cornerstone of any ESG strategy is a well-defined policy. This policy should articulate the organisation's commitment to environmental stewardship, social responsibility, and ethical governance. It's not just a statement of intent; it should reflect the organisation's core values and provide a framework for decision-making and actions. This policy serves as a guide for the entire organisation, ensuring that everyone is aligned and working towards common ESG goals.

2. Conduct a Materiality Assessment: Identify the most material risks and opportunities in your business. Understanding what matters most is crucial in ESG strategy. A materiality assessment helps identify the most significant ESG risks and opportunities relevant to the organisation. This process involves stakeholder engagement, industry analysis, and considering factors like regulatory requirements and market trends. The outcome is a clear understanding of where to focus efforts and resources to make the most significant impact.

Understanding what matters most is crucial in ESG strategy.

3. Understand the Current State: Before setting goals, it's essential to know where you stand. Establish Key Performance Indicators (KPIs) to measure baseline performance and identify areas for improvement. This baseline assessment can include carbon footprint, diversity metrics, or community engagement levels. Understanding the current state helps in setting realistic targets.

4. Set Targets and Initiatives: Define clear goals and plans that align with the organisation's strategy and purpose. With a clear policy, materiality assessment, and a clear baseline, it's time to set specific, measurable, achievable, relevant, and time-bound (SMART) targets. These targets should be ambitious yet attainable, driving the organisation forward in its ESG journey. Alongside these targets, define key initiatives - actionable steps or projects designed to achieve these goals.

5. Execute and Involve: Implement the strategy, involving the entire team and stakeholders for comprehensive impact. Effective execution of ESG strategies requires involvement at all levels - from the boardroom to the staff on the floor. Communication is key; everyone should understand their role in achieving ESG goals. This step often involves training, and reviewed resource allocation to ensure alignment with ESG objectives.

6. Report, Monitor, and Adjust: Continuously track progress, reporting regularly and adjusting strategies as needed. Continuous improvement is a hallmark of any successful strategy, including ESG strategies. Regular reporting and monitoring allow organisations to track progress against targets, engage with stakeholders, and demonstrate transparency. This step also involves being agile and ready to adjust strategies in response to new information, challenges, or opportunities.

The call to action is clear: the time to integrate ESG into business strategy is now. Cannon-Brookes' foresight about stricter controls and shareholder reporting in the future underscores the urgency. It's about making informed, strategic choices today for a better tomorrow.


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