Until recently, an organization's work on ESG was not considered material to anyone other than professional investors, but that has changed, not because of legislation or changing requirements for sustainable performance of organizations, but rather because of a broader understanding that reputation and integrity plays an important role in an organization's bottom line.
This has influenced how we view ESG, and many ESG metrics are now considered as important as certain financial and operational risks. Both investors, business partners, suppliers, customers, and employees all look at the sustainable initiatives organizations are implementing. So, if sustainability isn't part of your work agenda yet, it might be a good idea to look into it, as it will only become more important in the future
ESG risks: UN Sustainable Development Goals
The big question is, of course, which ESG risks are relevant, and the answer varies from organization to organization. The spectrum of ESG metrics is vast - from climate change to the gender composition of the board to human rights - but basically, they are all based on the UN's 17 Sustainable Development Goals.
Whether you like it or not, you can only work on some 17 goals simultaneously, especially if you have yet to systematize ESG data collection and processing. Look at the respective areas within ESG and see where it is relevant to take action for your organization.
- E (environment) represent the organization's positive and negative impact on climate and environment and how risks are managed in practice.
- S (social) represents the organization's work with workplace culture, relations with suppliers and consumers, and fundamental human and labor rights.
- G (governance) represent the gender composition of the board of directors, transparency of management, openness in reporting, and the organization's response to corruption, bribery, etc.
Compared to traditional risk management with more substantial operational risks, ESG risks are more difficult to manage and measure. By introducing monitoring practices, systematizing the work, and standardizing the management of ESG across the organization, you can ensure accuracy and transparency.
By putting in place measures that provide an overview of ESG risks, you ensure that your organization has a credible story to tell. The information is not only relevant for internal work on, for example, social and governance issues - it is also relevant to investors as well as the general public, who are increasingly making investment and purchasing decisions based on ESG key figures. Responsibility has become a decisive parameter in many situations.
If you want an overview of your organization's ESG risks, it is essential to have a consistent, systematized, and unified approach to data collection and processing. The alternative - that the work takes place in isolated silos around the organization - leads to inefficient processes that make it impossible to assess, document, and report key figures.
Fortunately, the solution is simple. With ESG software, you can structure processes and policies, plan efforts, document progress, set guidelines, and delegate risk follow-up.
The right software solution can:
- produce a well-documented sustainability report
- create coherence between policies and procedures
- set targets and commitments
- conduct ESG audits of the value chain
- delegate and anchor tasks
- manage controls and action plans
- prepare regular internal and external reporting
- document progress on objectives.
With a streamlined and systematic approach to ESG, you can get an overview of the overall risk landscape and thus making it easier to plan your efforts. At the same time, the refined overview allows you to identify problem areas that you may not have realized existed - and which, all things being equal, need to be addressed in either the short or long term.