In a previous article, we delved into the significance of governance, both at the national and corporate levels. To revisit this topic, you can find more insights here.
With global scrutiny on corporations intensifying, there's a heightened demand for eco-conscious actions and sustainable outcomes that could be backed by robust ESG reporting practices from companies.
In this article, our focus is on guiding your company towards the implementation of sound governance principles, serving as a robust bedrock for your ESG endeavours.
- Holistic sustainable efforts
- Clear and comprehensive ESG strategies
- Using established ESG frameworks to monitor progress
- Form an ESG committee
- Invest in data collecting technology
- Proper due diligence for suppliers and 3rd parties
- Implement green policies at the company
1. Set a holistic sustainable approach that informs how you do business.
Numerous research studies highlight the paramount importance of purpose and ESG considerations in ensuring enduring business success. Research findings conclusively demonstrate that companies possessing a robust sense of purpose are twice as likely to secure positions in the top two quartiles for 10-year total shareholder return performance, when compared to their counterparts with less defined purpose.
Moreover, leading ESG performers are consistently rewarded with valuation multiples ranging from 3% to 19% higher than their counterparts in the median bracket.
Within this landscape, industry leaders set themselves apart by transcending superficial, perfunctory measures. These leaders exemplify what is often termed "Authentic ESG," signifying a commitment to environmental and social impact that is deeply intertwined with a profound sense of purpose — in other words this is what it means to set a holistic sustainable approach.
Why do sustainable efforts need to be holistic?
Holistic sustainable efforts provide companies with a more comprehensive understanding of the impacts of their practices. It helps align sustainability with business strategy, optimises resource allocation, engages stakeholders effectively, manages risks, fosters long-term value creation, and enhances transparency.
Focusing on just one ESG issue might hurt a company in the long run. For example, if a company improves employee benefits by giving them petrol cars, it's good for employees (the "Social" part of ESG). But it can harm the environment (the "Environment" part) because more petrol cars mean more carbon emissions.
To further illustrate how E, S and G are interconnected, let's consider the hypothetical company "RenewaCore Inc." which is transitioning to cleaner energy, and how they deal with interconnected ESG issues that arise in the process.
This example clearly illustrates how E, S, and G are intertwined. By harmonising all three dimensions, RenewaCore Inc. navigates this complex situation, minimising adverse social impacts while advancing their environmental agenda.
2. Set clear comprehensive ESG strategy, specific goals and targets.
Creating value effectively starts with smart planning. To plan a strong ESG strategy, follow these steps:
- Set Clear Goals: Start by defining precise objectives that follow the SMART principles: Specific, Measurable, Achievable, Relevant, and Time-bound.
- Visualise Success: Write down what success looks like for your ESG strategy. Consider how it benefits your business, customers, and the community.
- Measure Performance: Implement a clear and specific performance measurement system to track progress.
- Create Value: Look for opportunities to create value, not only for your company but also for the industry and the community. Explore emerging markets, use resources efficiently, and cut operational expenses where possible.
- Keep Growing: Keep your business growing by working with different people involved and meeting their changing needs.
Here’s how the SMART principle can help you set clear goals:
3. Synchronise your objectives with established ESG standards, frameworks, and initiatives such as the Task Force on Climate-Related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), IFRS (International Financial Reporting Standards) Foundation, and Carbon Disclosure Projects (CDP).
- Malaysia is set to unveil its ESG Framework by end of 2023.
In an announcement made on April 11, 2023, the Malaysian government revealed its plans to introduce an environmental, social, and corporate governance (ESG)standards framework by the year's end. This framework is designed to facilitate the funding and capacity building of small and medium-sized enterprises (SMEs)while also fostering their transition to renewable energy. Over time, address ESG oversight and apply continued management to ESG goals.
In the meantime, businesses can explore aligning to well-known international ESG standards such as IFRS Foundation, GRI, TCFD or CDP to get started.
4. Establish an ESG committee.
Embracing ESG signifies a deeper dedication to responsible business practices, transparency, and long-term value creation. To effectively navigate this dynamic terrain it is important to establish ESG committees.
These committees play a pivotal role in ensuring ESG goals are achieved, risks are managed, and stakeholders' expectations are met.
This diverse and dedicated team, operating under BOD oversight, is vital for successfully navigating the multifaceted world of ESG, embedding sustainability in core operations, and upholding the principles of responsible and purpose-driven business practices.
5. Monitor advancement and invest in technology to improve ESG SOP are crucial for enhancing data quality and curbing data redundancy which can ultimately lead to the mitigation of environmental impact.
According to Marty Vanderploeg, CEO of global software-as-a-service company Workiva, robust ESG data capture and reporting not only enable sound business decision-making but also cultivate investor trust and empower consumers to make informed choices.
Higher quality data can also curb data redundancy. A forecast indicates that the digital cloud will house a staggering 100 zettabytes (equivalent to 100,000,000 petabytes) of data by 2025. This large digital repository translates in to approximately 350 million metric tons of CO2 emissions, as per the EPA's estimations. To put this into perspective, over 16 billion trees would be required to offset the current carbon footprint of cloud storage.
Technology-driven data management practices can significantly mitigate environmental impact and reduce operational costs, addressing both ecological and financial aspects of ESG. Enterprises have the opportunity to mitigate their environmental impact significantly by adopting judicious data management practices, yielding both ecological benefits and cost savings.
6. Proper ESG due diligence on suppliers and third-parties.
Without proper due diligence to ensure that suppliers and third parties match the company’s ESG goals and visions, the company risks reputational damage, legal and regulatory risks, operational disruption, financial consequences, ethical and moral responsibilities, competitive disadvantage, and potential loss of market access.
Thus, by carrying out research on suppliers and third parties that the company will be in partnership with can help the organisation identify, manage, and mitigate ESG risks while fostering transparency, compliance, and ethical practices in their supply chain. This, in turn, contributes to building a reputation as a responsible and sustainable corporate citizen.
So here we want to share a few ways companies can address these risks effectively.
This meticulous process involves a comprehensive assessment of potential business partners, vendors, and stakeholders to identify any associated risks, particularly those related to ESG factors by the internal audit teams:
- Establish clear ESG risk assessment protocols, including specific criteria for ESG indicators.
- Implement robust data collection and monitoring systems for ESG performance.
- Collaborate with suppliers to address identified ESG risks through corrective measures.
- Provide training and capacity-building opportunities to suppliers to enhance ESG compliance and responsible business practices.
This proactive approach not only mitigates negative impacts but also aligns with sustainable and responsible business practices, benefiting the company's reputation, financial stability, and competitiveness.
7. Implement green policies within company:
Green policies play a pivotal role in today's business landscape, offering numerous benefits for both companies and the environment. From a corporate standpoint, these policies promote sustainability, reduce operational costs through energy efficiency and resource conservation, and enhance a company's reputation, leading to improved customer trust and brand loyalty.
Simultaneously, green policies serve as a vital force in mitigating environmental challenges, such as climate change, pollution, and resource depletion. By adhering to these policies, businesses contribute to a healthier and more sustainable planet, where ecosystems are preserved, and future generations can thrive. Let’s see how other industry leaders have achieved success through its green policies.
Green policies are not one-size-fits-all solutions. However, businesses can proactively establish their own eco-friendly guidelines by following several key steps:
- Carrying out a comprehensive review of their core business principles and values, ensuring alignment with sustainability objectives. Staying well-informed about industry-specific standards and practices is essential.
- Understanding the language and terminology used in the sustainability field,
- And becoming familiar with the regional or local environmental concerns is crucial for effective green policy development.
In summary, while tailored approaches are essential, these initial steps lay the foundation for businesses to set their own meaningful and impactful green policies.
Conclusion
To embark on this journey, your company should have these essential components in order. Once they are established, you'll be well-prepared to address your sustainability objectives effectively.
At this juncture, you can explore our comprehensive turnkey solutions and contribute to the nation's transition to clean energy with Sunview. Speaking of Sunview's offerings, you can discover more about our solutions at https://campaign.sunview.com.my/.
For further details on commencing the process of instilling strong governance within your organisation, get in touch with us today. Let's lay the groundwork for good governance and ESG success at your organisation now.
