From words to action

FOR an effective “Environmental, social, and governance” (ESG) game plan to take shape, leaders must first understand Esg-related risks and opportunities, not only across all parts of their value chain but also specific to their organization. This means taking a fresh look at current operations, evolving regulations and stakeholder requirements to explore potential strategies and implement the related processes for each of the “E,” “S” and “G” pillars.

Only then can organizations complete a materiality assessment that prioritizes the most critical ESG risks and opportunities and decide where to focus initial efforts. This can lead to improved profitability, value, and other less tangible (social) benefits. Either way, it’s important to prioritize ESG objectives from the onset.

KPMG in the Philippines Advisory Partner and ESG Lead Kristine I. Aguirre stressed that the call for Net Zero among companies is growing to cope with the adverse impacts of environmental changes and the demands of stakeholders.

“Heeding the call to reducing carbon footprints is more than just a statement of support but must be coupled with concrete and sustainable actions,” Aguirre said. “Moreover, decision makers and corporate leaders must ensure that such actions and decisions are appropriate and relevant in their jurisdiction,” she added.

Building the team

DEVELOPING and implementing an ESG strategy requires team members who understand and will champion the transformations required to achieve an organization’s objectives across each of the ESG pillars. This inevitably requires additional time and effort for individuals throughout the organization to raise internal awareness of what ESG is, why it’s important to the organization and how to maximize the benefits.

Partnering with ESG specialists, whether new team members or external consultants, can significantly accelerate this process by bringing those industry insights, best practices and credibility to the decision-making table.

Not surprisingly in today’s environment, talent shortages are making it difficult to find and retain experienced individuals who can lead an effective ESG strategy. This should motivate organizations to improve their understanding of their needs now. Organizations that wait will likely end up scrambling to fill gaps as they appear.

Making it count

FOR stakeholders, proof that an organization is meeting its ESG commitments requires more than handshakes and press releases. Investors, for one, want quantifiable evidence that the organization is moving the needle when it comes to factors that matter most to their portfolios (e.g., greenhouse gas reductions, energy savings, social impacts, etc.). It’s therefore critical to establish the metrics and frameworks your organization will use to report on its ESG strategy.

Reliable data is central to ESG reporting. Once an organization decides which Esg-related factors it will measure, consideration must be given to how it plans to go about doing so in a way that ensures accuracy, integrity and relevance. Efforts must also be made to ensure ESG data collection practices adhere to evolving data privacy and security rules.

Location, location, location

AN ESG transformation is neither an overnight affair nor a side project that can be pushed off to one department or team. Making good on ESG commitments means planning for a multi-year journey defined by agreed-upon roadmaps, roles and processes for measuring progress. Moreover, it’s a transformation that requires the ongoing dedication of all internal players, from board members and C-suite executives to front-line professionals and everyone in between.

That’s not to say the journey needs to be difficult or costly. In many cases, acting on ESG is a matter of making small but meaningful changes in operations or supply chains. Done right, these changes can pay off in greater efficiencies and savings.

The corporate world has long felt the push for effective ESG strategies to strengthen its business resilience and, ultimately, shape a more sustainable future. Many organizations have made genuine and successful efforts to adapt rather than wait for government and regulators to dictate their path. As these ESG strategies build momentum, industry participants will be challenged to continue exploring the technologies, frameworks and processes that drive their unique “E,” “S” and “G” objectives. It’s no short journey but one that is sure to benefit all who take it.

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R.G. Manabat & Co., a Philippine partnership and a member-firm of the KPMG global organization of independent member-firms affiliated with KPMG Intl. Ltd. All rights reserved.

This article is for general information purposes only and should not be considered professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent the Businessmirror, KPMG International or KPMG in the Philippines.