Six reasons you’re not yet ready to have an ESG Strategy, and what to do instead in less time and at lower cost

We’ve talked before about the predictable stages of a company’s ESG journey (see our previous blog) and how each stage underpins the next but how do you go about approaching this in the right way, without diving in and creating a full ESG strategy?  

The pressure to demonstrate ESG commitments is coming from investors, regulators, customers and often employees as well but rushing into developing an ESG strategy can lead to wasted time, inefficiencies, and possibly reputational risks.  You also want to avoid setting targets that are based on weak data sets which could lead to ill-informed targets being put in place. 

Before committing resources to develop an ESG strategy, we recommend assessing the following points to see if there are practical and cost-effective steps you can take to lay a solid foundation. 

1. No clear business mandate or regulatory understanding 

ESG is an investment for a business and without understanding if it’s a regulatory requirement or just a trend, any ESG efforts can seem unfocused and unauthentic to your business and core values. 

Conducting a quick regulatory and industry benchmarking exercise will help identify some of the key ESG drivers that impact your business.  You might have regulatory reporting requirements on the horizon or be unable to win future business without having certain ESG criteria in place.  A carbon reduction plan and an energy plan are examples of what certain customers might demand, as are social value commitments. 

2. Lack of Executive/Management buy in 

Any ESG strategy will struggle without senior leadership support.  ESG really is an area where you need top-down leadership to drive investment and allocate resources.  If decision makers see ESG as a compliance headache rather than a business opportunity, progress will dwindle and ultimately stall.  As with a lot of business initiatives, if ESG is ‘everyone’s responsibility’ then it will become no one’s priority. 

Consider assigning ESG duties to an existing role in the first instance – depending on your business case drivers, this role could sit in risk, compliance, or finance.  Start small with one focused initiative before hiring a dedicated ESG lead. 

Armed with your knowledge from your regulatory and industry benchmarking you can then start to build a clear and compelling business case.  Highlight financial benefits, risks and opportunities, and market expectations to demonstrate how an ESG strategy matters to your company’s long-term success.  You might discover a unique selling point and you can include feedback from employee engagement surveys if your own people are asking for progress to be made. 

3. Weak or non-existent data collection and reporting capabilities 

Without at least some measurable data, ESG commitments and targets remain just words and ultimately you will run out of things to talk about in disclosures without positive action.  Many companies don’t track and aren’t set up to track emissions, diversity metrics, or supply chain sustainability.  Carbon footprinting is a specific skill and although you can get systems that will measure it for you, you should always remember that ‘rubbish in = rubbish out’. 

You may be able to identify a few key ESG metrics that are already aligned with existing financial or operational reports, and these are more likely to be relevant to your business.  Start with these and use existing resources to track simple, relevant ESG KPIs before committing to targets and full-scale reporting.  Read more about ESG data quick-wins.

4. No defined policies or governance structure 

Policies formalise a company’s approach and ensure consistency and accountability.  Without them, a company’s approach is just cultural, thus potentially prone to change and hard to externally communicate.  Almost all ratings agencies that assess ESG compliance for larger companies will look for certain ESG policies to be in place and publicly available. 

Draft a few essential ESG-related policies, such as an environmental policy, DEI (diversity, equity, and inclusion) policy, and a supplier code of conduct, as a starting point.  You can also use our ESG policy checklist to compare your policies to best practice.

5. Overwhelmed by the alphabet soup of ESG frameworks and reporting standards 

So many acronyms!!  GRI, SASB, TCFD, CSRD – ESG reporting frameworks are overwhelming and we see many companies stalling because they simply don’t know where to start.   

Once you’ve assessed which regulatory disclosures your organisation is in line to complete (use our quick guide for the most likely UK ones), you can then choose those that best align with your industry.  If you’re unsure, we would always recommend SASB (for industry-specific disclosures) or GRI (for broader sustainability reporting).   

6. Fear of greenwashing or reputational risk 

Concerns about greenwashing and ESG matters such as EDI cause some businesses to avoid ESG altogether.  The risks are real, but inaction could be worse. 

Focus on transparency and authenticity by starting with small, honest steps that you can easily communicate and provide updates on. 

We don’t believe that you need to wait until everything is perfect to start ESG efforts.  Instead of rushing into an expensive, resource-intensive strategy, take small incremental steps that build momentum and demonstrate value. You can find out which are your next steps in our ESG Strategy Readiness Assessment. 

If you’re looking for a structured way to begin and would like some guidance, Rawstone are specialists in helping companies assess and develop ESG foundations before embarking on a full ESG strategy.    

Authored by Sarah Kirton.