ESG Policy and ESG Strategy

Adopting, publishing and implementing an appropriate ESG policy can assist a business to identify and state clearly those factors that pose a risk to the business, i.e. factors that can directly or indirectly harm the business in any way. Such risks include the risk of litigation/liability, regulatory enforcement, risk of physical damage/loss/personal injury/harm to health, commercial risk and reputational risk. Identifying risks is the first step to minimizing them and planning for the eventuality that they materialize.

If a business additionally includes in its ESG policy a commitment to measure its degree of compliance with the policy (and report to its board, or publicly, on its compliance), it will not only have a basis for informing stakeholders and others about the extent of that compliance, it will also highlight for itself and others how it is mitigating risks. In short, adoption, publication and implementation of an ESG policy can aid business resilience.

Prudence dictates that a business firstly ensures that the ESG policy that it formulates is consistent with its culture and values. Secondly, it must be realistic: a business may be tempted to have a policy that covers a very wide range of matters, but it should only say what it can realistically do, only set targets and timescales that it reasonably expects to achieve and be prepared to report on why it has not achieved them. Otherwise, it will have failed to comply with its own ESG policy, producing a damaging effect to its reputation and its success.

Once a business has formulated an ESG policy, it needs to work out and document a strategy for implementing it. This will entail creating processes for doing so, including the means for measuring and reporting periodically on progress in implementing its ESG policy. In that connection, it should specify - using clear metrics - what will be achieved and when it will be achieved