ESG is in focus in 2020. How is your company doing?

As environmental, social and governance (ESG) issues continue to permeate the social consciousness and national conversation, it is important for corporate managers and boards to pay close attention and evaluate their own policies.

ESG is in focus in 2020. How is your company doing?

No longer merely a public relations tactic, a company’s ability to address ESG challenges is increasingly critical to its long-term competitive success. 

In his 2020 annual letter to CEOs, BlackRock’s Larry Fink calls on business leaders to take a more active role in addressing ESG concerns. "A company's ability to manage environmental, social, and governance matters demonstrate the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process," wrote Mr. Fink.

BlackRock, the world's largest investor with nearly $7 trillion under management, sees a fundamental reshaping of finance ahead. Mr. Fink went on to write that ESG questions are “driving a profound reassessment of risk and asset values.” As investors, business and political leaders, and consumers continue to realign their thinking, it is a good time to evaluate your organization’s approach to ESG practices and policies.  

Making a judicious assessment of your ESG approach may require looking through a different lens. We recommend contemplating the following questions:

1. Is our approach to ESG in harmony with our business strategy? 
A prudent ESG strategy, one that balances responsible development and sustainability, will reduce risk and improve bottom-line performance over the long term. If ESG policy is in clear conflict with your business goals, it will be easily detected as disingenuous and perceived as greenwashing.

2. How are we communicating around ESG – internally and externally?
It is one thing to ensure your goals and objectives support your ESG policies, and it is another to communicate those alignments to both internal and external stakeholders in a clear and compelling way. In January  this blog focused on the importance of storytelling. As you formulate your ESG messaging, be honest about the risks and opportunities your company faces and share challenges and successes in a thoughtful and considered manner. Incorporate ESG into the broad story of your organization. Make sure it isn’t relegated to an appendix.

3. What is our process for continuous evaluation and improvement?
Establishing solid ESG policies and practices is not a single endeavor. Success requires a continuous feedback loop of assessment, modification, planning and implementation. Build structures and institute systems that facilitate ongoing evaluation. Such infrastructure will empower stakeholders, demonstrate commitment and support long-term success.

In closing, when thinking about the importance of ESG issues, Larry Fink put it best when he wrote, “As we approach a period of significant capital reallocation, companies have a responsibility – and an economic imperative – to give shareholders a clear picture of their preparedness. And in the future, greater transparency on questions of sustainability will be a persistently important component of every company’s ability to attract capital.”

ESG is here to stay. Make sure your firm is well positioned to mitigate risk and participate in the opportunities that lie ahead.

Look for our next blog post in which we will discuss crisis communications.