ESG quick wins before an IPO.
Updated: Apr 5, 2022
As soon as your company becomes listed then ESG rating schemes (and investor analysts) will be evaluating your company’s publicly available information to rate your ESG approach. ESG rating schemes such as Sustainalytics, MSCI, Bloomberg, VE and ISS publish company ratings to their investor members. To keep your pool of investor as large as possible it’s important that you meet their minimum rating requirements.
Each rating scheme is unique however there are commonalities, and addressing some of these quick wins will ensure a respectable starting score:
Define a governance structure for sustainability. For maximum points, establish a Board-level ESG Committee, with Terms of Reference, and ensure that the person responsible for sustainability reports into the CEO.
Develop key ESG policies including: Anti-Bribery and Corruption (explicitly including anti-money laundering), Health & Safety, Labour Standards (to include freedom of association, collective bargaining, diversity and equality, flexible working and fair payment of wages), Data Protection, Energy/Climate Change and Environment (align to ISO 14001 requirements). These can be combined, for example in a professional services company with relatively small environmental impacts, an “Environmental and Climate Change Policy” would be appropriate. A Code of Conduct can also be a useful way to combined the contents of all these policies in a formal and more readily digestible way for employees and other stakeholders. Less critical, but also often asked for, are policies on conflicts of interest, anti-competitive behaviour, political contributions, lobbying, responsible sourcing and community impact.
Have a framework for monitoring policy compliance, including, at a minimum, a whistleblowing process (ideally using an confidential third party hotline). Implement any relevant policy training, including induction training, and consider introducing compliance confirmation statements, whereby senior members of the company confirm they have understood and are abiding by company policies. This can be relatively simply done through a periodic e.g. half-yearly, email with voting buttons to indicate compliance.
Consider disclosing the metrics required in the SASB standard relevant to your industry.
All of the above information needs to go in the public domain, commonly on an ‘ESG’ or ‘Sustainability’ sub-section of your investor website.
This shouldn’t be the end of your sustainability journey, rather it is the beginning. By doing the above you cover the breadth of sustainability issues in a light-touch way. With this complete, you can then focus on developing a proper ESG strategy - one that is aligned to the sustainability issues most material to your business and stakeholders, and that will truly add value to your business. Do this, and your ESG rating scheme scores will excel.
If you need support with implementing any of the above, or to develop an ESG strategy, then please contact Rawstone Consulting here.