What is ESG?
ESG, or Environmental, Social, and Governance, is a set of criteria for evaluating companies’ environmental, social, and governance impacts. These areas include efforts to reduce greenhouse gas emissions, improving working conditions, addressing social inequality, and transparency in corporate governance, among others. The introduction of the CSRD (Corporate Sustainability Reporting Directive) makes the topic of ESG even more relevant, especially in the context of mandatory reporting by companies.
What is an ESG strategy and how to prepare it in accordance with the CSRD?
An ESG strategy is a set of actions that a company takes to meet environmental, social and governance responsibility criteria. For companies required to report under the CSRD, the ESG strategy must follow the guidelines of the CSRD, covering not only sustainability goals, but also how they are measured and how ESG risks are managed.
Step 1: ESG baseline assessment – defining the starting point
The first step in developing an ESG strategy is to conduct a detailed ESG baseline assessment that will allow the company to determine the current status of its environmental, social and governance activities. It is important to understand where the company stands with respect to ESG requirements. The baseline assessment should include an audit of existing ESG practices and policies, an analysis of ESG indicators, and identification of factors that may affect the company’s operations. This analysis will give the company a complete picture of its strengths and areas that need improvement.
Step 2: Double Materiality Analysis
In the next step, it is best to conduct a double materiality analysis, which is one of the key elements in preparing an ESG strategy. This means that a company should assess which ESG factors have a significant impact on its business, as well as how the company’s activities affect society and the environment. By understanding both of these perspectives, you can not only meet CSRD requirements, but also develop a strategy that will have a real impact on the company’s sustainability. Learn more.
Step 3: Gap analysis – identification of gaps
This is followed by a gap analysis, which helps identify differences between the company’s current operations and CSRD requirements. In this step, the company makes a detailed comparison of its policies, procedures and practices with ESG disclosure requirements. Gap analysis identifies areas where the company does not yet meet the guidelines or needs further action to comply with the new regulations. Conducting a gap analysis shapes a roadmap for a company to determine what steps it needs to take to meet ESG reporting requirements. Learn more.
Step 4: Identify ESG goals
Based on the results of the baseline assessment, double materiality analysis and gap analysis, the company should proceed to define ESG goals. These goals must be clear, measurable and implementable. In doing so, it is worth keeping in mind that ESG goals are dynamic and should be tailored to the specifics of the company and the industry in which the company operates. Examples of goals might include reducing greenhouse gas emissions, improving working conditions, or increasing transparency in company management.
Step 5: Identify ESG indicators and methods to measure progress
The next step is to identify ESG indicators to monitor progress. It is important that the indicators comply with international standards and CSRD requirements. Examples of indicators include: greenhouse gas emissions, water consumption, number of hours of training, or governance-related indicators (e.g., transparency in reporting). It is also crucial to implement an effective data collection system to regularly monitor progress.
Step 6: Implement ESG measures in the company
Implementing an ESG strategy requires commitment at all levels of the company. At this stage, appropriate procedures should be put in place to achieve ESG goals, as well as education and training for employees.
Learn more about developing an ESG strategy.
Summary
Creating an ESG strategy is a complex process that requires a thorough analysis of the company’s existing policies, the identification of goals, indicators and methods for measuring them. Conducting a double materiality analysis and identifying gaps allows you to create an effective strategy that will have a real impact on the sustainability of your company
