Foundations for Effective ESG Policies

Environmental, social, and governance (ESG) policies and practices have become a hot topic for discussion among both corporate leadership teams and regulatory agencies in recent months.

Risk Management Magazine summarizes some of the circumstances that have contributed to ESG’s rising profile in risk and compliance management strategies:

“The concept has been around for years, but myriad factors increased its prominence in the last year: the ongoing COVID-19 pandemic, the unprecedented social unrest in 2020, impending regulatory guidance (specifically around climate change), and an upcoming, younger generation of more environmentally and socially conscious investors.”

ESG policies keep organizations accountable and serve as a reference point for regulators, investors, and consumers. Federal agencies are particularly interested in robust ESG initiatives to provide a framework for effective legislation.

Defining the Elements of ESG Policies

Developing an effective ESG program first requires policies that define how each component—environmental responsibility, social responsibility, and corporate governance—applies to your organization’s goals, strategy, and operations.

E – Environmental Responsibility

The environmental pillar of ESG considers an organization’s efforts toward shared societal concerns, such as climate change and resource conservation. Policies may cover topics including:

• Waste control
• Energy conservation
• Sustainability
• Climate-related risks

S – Social Responsibility

The social component of ESG holds organizations accountable to their employees and communities. Policies may address issues such as:

• Human resource concerns
• Diversity, equity, and inclusion (DEI)
• Harassment
• Privacy

G – Governance

Finally, governance informs and influences the other two areas by determining how organizations approach matters of ethics and conduct, such as:

• Accountability and transparency
• Operational resilience
• Consumer data protection
• Anti-corruption initiatives
• Board and executive structure and involvement

The common thread through each pillar of the ESG framework is organizational responsibility. Thoughtful ESG policies can benefit the organization and its employees and customers, while also working toward shared goals and community improvement. Making ESG part of your governance, risk, and compliance (GRC) management strategy ensures that the public has insight into your organization’s activity and integrity in pursuit of these goals.

Successful ESG initiatives must begin with a code of conduct and corporate policies, which set the foundation and tone across the organization. It’s important that ESG policies are clear, consistently applied, and accessible at all levels. Additionally, policies need to be accompanied by procedures and metrics for measuring success. This allows for accurate reporting and timely response to concerns.

ESG will continue to be an important consideration for leaders looking to take their corporate citizenship seriously.

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