ESG strategy
Knowing what ESG is (if you don't, check our article), we can move on to defining our organization's strategy in this area. What is ESG strategy, and why is it important? Reporting in ESG areas under the CSRD directive is meant to help companies minimize their negative impact on the environment and eliminate the socially harmful effects of their operations.
Which areas require changes in our organization? How costly will these changes be? How long will their implementation take?
But also – who will they affect?
Stakeholder – who is it?
To approach the ESG strategy appropriately, we must determine the organization's current state and business environment. To do this, we start by identifying stakeholders—individuals, groups, or organizations involved in or influencing the company's activities.
Stakeholders include, for example:
- Shareholders and investors
- Employees
- Customers / consumers
- Suppliers
- Local communities
- Non-governmental organizations (NGOs)
- Governments and regulartory bodies
- Media and public opinion
- Competitors and the business environment
- Industry organizations
Shareholders and investors
Both shareholders of the company and institutional investors as well as financial analysts have an influence on the company's activities. Their influence can be both direct and indirect. Shareholders participate in meetings and vote on the company's development direction and undertaken investments. As a result, their decisions affect the company's situation in the area of ESG. Large financial institutions engage in active dialogue with the management, expressing expectations regarding strategy, financial results, and risk management. Such actions also influence the functioning of the organization.
On the other hand, financial analysts serve an advisory role. Their recommendations have a real and direct impact on decisions made within companies. Recommendations can bring both positive and negative effects on the environment and society. Therefore, financial analysts constitute an important group collaborating in ESG reporting and the implementation of sustainable development strategies.
Employees
Employees make the company and make numerous decisions and actions within the organization. Their influence on the company and its sustainable development is crucial. However, employees are a very diverse and non-homogeneous group of people. So, who will be a stakeholder? Every employee? Only office workers? Department managers? Trade unions? Who should be considered when preparing the report?
Every employee is a stakeholder, as are trade unions as a group and potential employees, as each impacts decisions made in the organization. However, this does not mean that every employee needs to be surveyed when preparing for reporting. Instead, each department/department manager should be consulted, and conversations should be initiated with trade unions if they exist in the organization.
Fot. Weronika Dyląg
Customers / consumers
It is worth asking: Why do my customers buy from me, not the competition? Is it about price, delivery, quality... or business responsibility? In the case of the clothing company Patagonia, love for nature, nature observation, and experience are significant factors, along with the company's actions demonstrating respect for nature. Customers choose Patagonia because, like them, Patagonia wants a change in the way they shop, and its actions support that goal. They want a company that allows them to experience nature and take care of it. Therefore, Patagonia introduces various services, such as clothing repair, to meet the expectations of its customers and fulfill its mission. In Poland, SOLAR has introduced clothing repair, following SLOW FASHION principles.
Understanding customer needs and how the organization meets them makes consumers another group with a genuine impact on the company. Therefore, we should communicate with this group to understand their views on the company's ESG activities. For B2B service providers, obtaining such information may seem more manageable. However, regardless of the difficulties, B2C companies should consider it when creating an ESG report and strategy.
Suppliers
From energy suppliers, through printer paper suppliers, to IT service providers – each of them, by collaborating with the organization, becomes a stakeholder in the context of ESG reporting. The more knowledge we have about suppliers’ sustainable practices, the more consciously we can build our ESG strategy. By choosing suppliers, we broadly influence issues related to work ethics, environmental protection, and social justice.
If an organization aims for sustainable supply chains and minimizing negative impacts on the environment, it should choose suppliers with similar ambitions. Therefore, the information obtained from suppliers – both feedback regarding our organization and data about their operational practices – is extremely important in the context of ESG reporting. In many cases, accurate reporting depends on this information, which is why it is crucial that the entire supply chain is aware of ESG topics and actively engaged in them.
Local communities
No company operates in a vacuum, and each impacts local communities. A small plant, a local store, will primarily impact the community geographically closest to its location, while global corporations directly and indirectly impact various local communities. It is worth examining which local communities our organization affects and in which—and how—it is already actively involved (e.g., organizing local initiatives, engaging in dialogue and cooperation with residents).
Non-governmental organizations (NGOs)
Active collaboration with non-governmental organizations can be extremely helpful in building and evaluating ESG strategies. This collaboration supports the identification of areas requiring improvement and allows for a better understanding of societal expectations toward the company. Non-governmental organizations often operate in specialized areas, and those focused on ESG act as social guardians of ethics and the environment.
NGOs that the organization collaborates with constitute an invaluable source of valuable information about the company’s activities. They can also indicate potential actions to be taken in the future. Therefore, active collaboration with NGOs in the ESG area is crucial for conscious management of corporate social responsibility.
Governments and regulartory bodies
ESG regulations issued by various authorities have a significant impact on enterprises. They define not only the obligation to report on ESG and the legal scope of conducting sustainable activities, but also introduce restrictions in this area. Therefore, it is extremely important for the organization to stay up to date with all regulations.
However, in ESG reporting, active corporate engagement in legislative activities is also important. This includes dialogue with regulatory bodies and actions within the organization’s capabilities. Such an approach supports conscious ESG management and demonstrates the company’s responsibility toward the legal and social environment.
Media and public opinion
Media and public opinion have a significant impact on corporate actions. On one hand, their role is monitoring company activities that affect social well-being, and informing the public. Therefore, a well-prepared communication strategy regarding a company’s sustainable actions is a key element of the ESG strategy.
On the other hand, the media can become allies of companies in educating local communities and larger groups. They can support informing about ESG initiatives, showcase the company’s progress in sustainable development, and highlight actions that the community can implement with the organization’s support.
Competitors and the business environment
On the other hand, the media can become allies of companies in educating local communities and larger groups. They can support informing about ESG initiatives, showcase the company’s progress in sustainable development, and highlight actions that the community can implement with the organization’s support.
At the same time, it is crucial to understand how pursuing competitiveness in other areas affects ESG-related decisions. The organization should seek ways to minimize negative impacts on sustainable development while remaining competitive in the market.
Industry organizations
One way to mitigate the effects of competition is by collaborating with industry organizations that bring together companies from our sector. Such organizations enable exchange of experiences, setting common standards, and developing industry ESG strategies. Additionally, they promote innovative ESG solutions whose individual implementation might be less effective or impossible due to market conditions.
Industry organizations are also a valuable source of feedback and ideas for ESG solutions well suited to the realities of the sector. Reporting joint initiatives that support the sustainable development of the entire industry also positively impacts the company’s reputation.
Fot. Weronika Dyląg
Summary
Properly defining stakeholders, their role and impact on the company, as well as effective stakeholder communication, is key to initiating work on a coherent and effective ESG strategy. It is important both to gather information from stakeholders and to transparently inform them about the company’s ESG activities.
No strategy will be effective without taking into account the needs and constraints of internal stakeholders (shareholders, employees, management) and external stakeholders (customers, suppliers, industry organizations, local communities, NGOs, media, governments, competitors). Careful identification of the situation and impact of individual stakeholders allows for the creation of a comprehensive responsible business model and, consequently, the building of a lasting and positive social, environmental, and economic impact.
Our IT services
Staff augmentation
Whether you need a single system-business analyst, a developer, a tester, DevOps, or a complete team to carry out the assigned tasks, at Finture, we are ready to help you select the right person or complete a team according to your requirements.
IT consulting
As part of IT services, our company – Finture – offers personalized IT consulting in solution architecture, audits, and analytical-advisory services. We specialize in process inventory using Event Storming and DORA consulting. Our experienced team pays attention to every detail, creating solutions that perfectly meet the unique needs of our clients.
