From an ESG perspective, what are the challenges and opportunities for clients in the next 12 months?
When clients consider their position on ESG, it needs to be based on fact. There are many clients who know the importance of embedding ESG initiatives within their strategy but are not clear on why they are important. Understanding the risks and opportunities and integrating these with stakeholders' expectations means that organisations are better able to make informed decisions which are focused on facts and driven by data. This reduces the risk of establishing ESG initiatives which are opinion-focused and could therefore be unachievable or lacking impact.
When it comes to looking at the data around ESG, there are many clients who work within an echo chamber. Too many are focused solely on what competitors are doing. More focus needs to be placed on consultation with external experts within areas which best relate to the organisation’s business model as well as effective engagement with civil society and affected stakeholders. This is critical to the new legislative demands that will come through the EU Green Deal and mandatory human rights and environmental due diligence. This will allow them to expand out of the chamber. Thus, reducing the chances of missing opportunities due to living in their own self-fulfilling prophecies and, in turn, provide them with a competitive edge.
In terms of systems, there is not one system which helps organisations to understand their ESG data in its entirety. It is difficult to map progress as there are so many tools available. Therefore, it’s difficult for organisations to know which works best for them and their ESG strategy.
For organisations to have access to the best opportunities, they need to know what their data points are as this is crucial to help them manage the direction in which they are going and what actions are needed to help them get to where they need to be.
Our experience has shown that many systems do not talk to one another. You can set a plan, but if it is siloed and doesn’t talk to other systems in the organisation this will result in decisions not being aligned. The risk of this is setting ESG-related targets which are unachievable or difficult to measure and which focus on measuring effort rather than outcomes.
Lastly, within many organisations, there are skills gaps within ESG, and with limited contextual understanding at the top of the business. Those required to make the decisions do not always have the necessary skills or essential training for making ESG-related choices.