Embarking on an Environmental, Social and Governance (ESG) and sustainability journey is a strategic decision that can significantly impact a company’s long-term success, provided that you want to do it genuinely. In Malaysia, many companies initiate ESG and sustainability efforts primarily due to external pressures, such as stock exchange listing rules, customer demands, and regulatory requirements. Companies often hastily implement ESG initiatives, neglecting the potential consequences of inadequate planning, which can lead to greenwashing.
It’s understandable that companies may be hesitant to adopt new practices without external mandates, as compliance often drives change. To foster genuine sustainability, we must provide consistent education to companies and cultivate a mindset of authentic environmental stewardship, social responsibility and corporate governance.
At Bernard Business Consulting, we believe that starting on the right foot is very important to ensure effective implementation, maximise the benefits, and reduce greenwashing. This article outlines five key steps to guide aspiring companies to be authentic in their ESG and sustainability journey.
Table of Contents
Step 1: Define Your Purpose and Goals
The first step involves gaining clarity on why your company wants to pursue ESG and sustainability. This requires a deep understanding of your business objectives, values, and the expectations of your stakeholders.
You only need 10 minutes to ask yourself these questions:
- Why is ESG and sustainability important to your company?
- What are your specific ESG and sustainability goals?
- How does ESG and sustainability align with your business strategy?
By answering these questions, you can establish a clear and compelling purpose for your ESG and sustainability efforts. Having a clear reason for pursuing ESG and sustainability can be a powerful driving force, helping you stay focused and resilient, even during challenging times.
Step 2: Understand the Double Materiality
ESG and sustainability are not mutually exclusive but rather interconnected. Understanding the impact of ESG on your company and vice versa is crucial for effective decision-making. This concept, known as double materiality, considers both the financial implications of ESG factors and the impact of your company’s activities on the environment and society.
Through ESG risk assessments, companies can pinpoint potential financial and reputational risks, as well as opportunities for innovation and growth. Based on risk assessment findings, companies can identify the ESG issues that are most significant to stakeholders and have the greatest financial implications. To ensure alignment between words and actions, companies must integrate ESG considerations into decision-making processes, such as incorporating ESG factors into their business strategy, risk management, and investment decisions.
By understanding double materiality, you can make informed choices that align with your ESG goals and protect your company’s long-term value.
Step 3: Gain Commitment from the Board and Management
While bottom-up approach is more widely seen in Malaysia in matters related to ESG and sustainability, it is undeniable that top-down approach works better in this country. Securing support and buy-in from your company’s top leadership is essential for successful ESG implementation. The board of directors and management should be actively involved in setting ESG goals, allocating resources, and overseeing progress.
To gain support for ESG initiatives, it’s crucial to clearly communicate their benefits to the board and management. By highlighting the positive impacts on reputation, financial performance, and risk mitigation, you can secure their buy-in. Once you have their support, establish clear roles and responsibilities within the organisation to ensure effective implementation. This will help avoid confusion and ensure everyone knows their part in the ESG and sustainability journey. Finally, allocate adequate funding and resources to support your ESG and sustainability initiatives. Look out for financing assistance from the government like the Malaysian Investment Development Authority (MIDA) and financial institutions to fast forward your journey.
Without the necessary support, it will be difficult to achieve your goals and make a meaningful impact.
Step 4: Engage with Stakeholders
Engaging with stakeholders is crucial for understanding their expectations and concerns, and for building trust and credibility. Before finalising your ESG strategy, consider carrying out stakeholder engagement by following the steps below:
- Identify key stakeholders: Determine who your company’s key stakeholders are, including employees, customers, suppliers, investors, and local communities, etc. You don’t need to engage with all of your stakeholders. Instead, select those who are most important to you, such as the top 5% of your suppliers based on procurement spending.
- Gather feedback: Conduct surveys, focus groups, or interviews to gather stakeholder input. Develop specific methodology for each stakeholder group to achieve the greatest effectiveness. Some of the things to take note include language and engagement channel (e.g. email, phone, face-to-face).
- Address concerns: Take steps to address any concerns or issues raised by stakeholders. Remember to keep stakeholders informed about progress and changes in a timely manner.
Step 5: Implement and Monitor Your ESG Strategy
Once you have defined your purpose, understood double materiality, gained commitment from the board and management, and engaged with stakeholders, it’s time to develop your ESG strategy.
The ESG strategy should outline your specific goals, objectives, and key initiatives. To ensure successful implementation, seek guidance from practitioners in ESG and sustainability, like Bernard Business Consulting to provide valuable insights and best practical solutions.
With a well-defined strategy and expert support, you can now take action to address identified ESG risks and opportunities. This might involve reducing your carbon footprint, improving labour practices, or enhancing corporate governance. Remember to regularly monitor and track the progress of your ESG initiatives to measure their impact against your goals. This will help you stay on track and make necessary adjustments.
Finally, it’s essential to communicate your ESG and sustainability efforts and achievements to your stakeholders. Transparent reporting and disclosures will build trust, enhance your reputation, and demonstrate your commitment to sustainability.
How to Start Right in the Complex ESG and Sustainability Landscape
Remember, embarking on an ESG and sustainability journey is a continuous process, not a one-time event. It requires wise planning with enormous patience to start right. As the world evolves, so too will the expectations and challenges related to ESG and sustainability. The sustainability of your organisation is intrinsically linked to the well-being and commitment of its people.
We have witnessed numerous cases where companies’ sustainability teams become overwhelmed by the vast amount of information available, leading to a disconnect between data collection and action. Companies that rush into ESG initiatives often neglect the wellbeing of their employees, resulting in inefficiency.
Are you feeling overwhelmed on how to start your ESG and sustainability journey? Book a free 30-minute discovery call with our sustainability practitioners to gain clarity.
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