ESG – From Buzzword to Requirement – Part 2: Why Does an ESG Program Matter?
Implementing an Environmental, Social and Governance (ESG) program is much more than just a ticking the box exercise.
In part 1 of this ESG article series, we explored ESG ownership within an organization. The key takeaway was that a leadership role must be placed and an ESG program must exist within the company. Read the article in detail here: ESG – From Buzzword to Requirement – Part 1: Who Owns It?
In this article, we will explore the importance of ESG and how true operational resilience can only be achieved if there is an ESG program in place. Let’s begin.
When talking about operational resilience we refer to all the business processes in place that enable an organization to remain resilient: prevent, adapt, respond and learn from operational disruptions.
ESG risk management has the objective of preparing organizations for anticipated issues in the operating environment of the business. ESG and operational resilience could not be more interconnected. Assessing the ESG risk exposure of an organization is crucial to fully understand its business horizon.
It is no surprise that investors and regulators alike, have increasingly been advocating for ESG reporting.
So, where to begin?
From a process perspective, do not try to reinvent the wheel.
If you have fully comprehensive ERM processes in place, leverage these to address ESG risks as well. ESG does not need to be a fundamentally new capability, it is risk management after all.
Remember to extend your ESG scope beyond just the environmental factor.
Social and governance factors must also be considered to avoid any issues or misinformed investment decisions.
Risks and opportunities are more than likely to arise when implementing an ESG program.
Make sure to account for both of them. Strategize on how your organization can best utilize the information gathered from identified ESG risk analyses.
Implementing an ESG program as soon as possible should be a business priority.
Don’t wait for future ESG requirements and regulations, step ahead of the curve and have a fully fleshed program before these last two hits.
Implementing an ESG framework can be quite complex.
In this article published by Nasdaq many of these complexities are explored in detail however, by no means is it an impossible task. It is important to understand that ESG frameworks rarely impact just a single function. More commonly, they will involve multiple processes and different business units and may well span across countries, as well as the supply chain. These are heavily interconnected and ESG initiatives must be a collaborative effort that encompasses the entire organization.
Furthermore, explore our latest ESG White Paper for a detailed look at Mitratech’s capabilities and comprehensive mapping of ESG-related risks to provide your organization with valuable quantified value at risk through powerful risk analytics and assessments, designed to deliver cutting-edge Governance, Risk and Compliance (GRC) capability across your business.
