While it's always been important, ESG (Environmental, Social and Governance) has shot up the ranks as a top concern for businesses in recent years. The pressure is on from all angles, with customers, investors, the government, and employees all scrutinising a company's ESG policies.

One of the initial challenges when it comes to developing an ESG strategy is the huge range of potential topics that you could explore. Trying to decide which environmental, social and governance challenges to prioritise can be tricky, but in this article, we'll be sharing 7 steps you can follow that will help you develop a strong ESG strategy.

  1. Carry out a materiality assessment

A formal materiality assessment is used to benchmark how different ESG issues rank in terms of importance for your business and your stakeholders. Starting with a materiality assessment can help to prioritise different issues and initiatives as you develop your ESG strategy and can also suggest where you need to be setting targets or developing your reporting.

  1. Assess your current baseline

Once your ESG themes are prioritised, the next step is to record a baseline of your existing policies, metrics, and engagements. It's a good idea to engage cross-functional stakeholders within the organization that have expertise in each priority ESG topic for this activity. Information can then be collected from annual reports, policies, and other available data, which can then be supplemented by interviews with internal stakeholders to build a full picture of the current baseline.

Carrying out this internal assessment can help you to understand the current status of your business and gauge the maturity of ESG across your organization. It can also help you to identify any siloed activity in the organization, which is not currently included in the organisation strategy.

  1. Set Objectives and Goals

When implementing any new strategy, it's important to set objectives and goals so you can track your progress and ensure that the actions you have taken are making a positive change. Your baseline should help to give you a better understanding of what is a realistic goal for your business, and your key stakeholders should agree that these goals are achievable and feel motivated to reach them.

Your objectives should, at a minimum, cover the following: Measuring the impact of your actions, tracking your organisations overall ESG performance and benchmarking yourself against industry peers.

  1. Conduct a Gap Analysis

A gap analysis is the next step in helping you to determine how to achieve the ESG goals you have set out. It makes a comparison between your current baseline and the target ESG model you have for your organisations and highlights the disparities and opportunities for improvement.

A better understanding of the scale and area of these gaps can help you to do the right preparation to ensure your new ESG strategy is successful, and to highlight areas where you may have problems down the line.

  1. Design your framework and build the roadmap

With the first 4 steps complete, you should now be in a position to design your ESG framework and build a roadmap – mapping out your organisations vision and goals, and showing the tangible steps you will take to achieve it. This a great tool to ensure accountability for key milestones, help to track your progress and allow you to share your ESG strategy both internally and externally with customers and key stakeholders.

  1. Set an action plan and measure KPI's

Now that your general roadmap has been determined, it's time to set out a detailed action plan and begin tracking KPI's that feed into the objectives and goals you set earlier.

Your action plan should focus on the steps needed to integrate an ESG focus into existing processes and practices. It should ensure the ESG remains a core focus of your organisation and doesn't slip off the agenda, meaning that going forward you will be able to have positive and productive conversations about ESG at any point.

The KPI's you put in place at this stage should track progress at an individual or team level – measuring the small but significant actions and improvements that are being seen day to day.

  1. Report progress

To develop your ESG report, it's important to decide what you want the report to accomplish. It can be a combination of communicating ESG strategy to stakeholders, sharing company specific ESG goals, and evaluating progress and engagements in key ESG areas.

It's important to decide this early in your ESG strategy so that you can ensure the right data is being captured, and it will simplify the process when it comes time to run the report. Along side the official reporting, you may want to release an external summary of your ESG strategy/ progress, as this is an important factor for many customers, investors and future employees.

The ESG strategy should be reviewed and updated every year to ensure the organisation stays aligned with current industry standards, stakeholders' and customers' expectations and overall business strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.