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Canadian Credit Union Association

ESG stands for Environmental, Social, and Governance. ESG takes the holistic view that sustainability extends beyond just environmental issues but covers social responsibility, environmental impact and governance metrics.

ESG refers to the disclosure of environmental, social, and governance data, to increase transparency, reduce risks and identify opportunities. Increasingly, Canadians and governments consider these as baseline metrics both to measure the sustainability and ethical impact of organizations and to enable consumers to make value-based financial decisions. ESG covers a spectrum of business aspects that financial analysis might not traditionally consider, yet often have financial relevance for credit unions.

Key Highlights

According to Corporate Finance Institute,

  • ESG is a framework that helps stakeholders understand how an organization manages risks and opportunities around sustainability issues.
  • ESG has evolved from other historical movements that focused on health and safety issues, pollution reduction, and corporate philanthropy.
  • ESG has changed how capital allocation decisions are made by many of the largest financial services firms and asset managers in the world.
  • An emerging class of ESG specialists is stepping into the industry and supporting both net zero and carbon neutrality goals.

Three Steps to Start Your ESG Journey

In our era of transformation, ESG initiatives have to be a large part of the strategy to evolve. If you’re just getting started, don’t feel alone. A recent survey from PwC found that 75% of businesses consider themselves in the very early stages. Rather than drag your feet, however, this is a prime opportunity to let your organization lead your industry in creating initiatives that will have a long lasting, positive impact on the future.

Here are three steps as an ideal starting point to making sure your organization is primed for ESG success.

Define your value and understand your approach.

ESG covers a wide range of topics, so wide in fact, it may not make sense to have them under one umbrella within your organization. In addition to environmental impact and sustainability, ESG includes social policies that affect employees and company culture, as well as the broader community. Initiatives around diversity and inclusivity fall under this part of an ESG plan. Finally, governance includes both the way ESG plans are executed as well as managing accountability and transparency, working with regulators and measuring efficacy and results.

Start by taking a critical look at your credit union and the community you live and operate in. Where do problems lie? Where do gaps exist? What is possible to change and which changes will have the most impact? 

Create a reasonable plan of action

Issues surrounding climate change or diversity or human rights are never easy. Depending on the structure of your organization, seeing change can take time and measuring the effectiveness of your efforts can be challenging. One of the worst mistakes a company can make is creating ESG initiatives in a vacuum. Because ESG principles cover such a wide range of topics, every individual is going to have a different approach. It’s imperative to consider those most impacted by your ESG strategy – whether they are employees or stakeholders or the consumers you serve – and get their input and buy-in.

Other common mistakes include failing to communicate clearly across your organization and failing to make it a part of your culture. ESG cannot exist in a silo. To be successful, it has to be an element across every business decision.

Strive for authenticity and transparency

Gone are the days when everything an organization did was kept secret. It is no longer possible, and largely undesirable to work in secret, without any external measure of accountability. As Martin Sandbu laid out in his Financial Times article earlier this year, a new era of corporate transparency is dawning, one where “what can be known, will be known.”

This new environment shouldn’t be feared, however. It can be liberating to be transparent and we have seen remarkable examples of companies that make a mistake but are willing to admit accountability, address issues and right the wrong. Consumers and shareholders are more than willing to forgive missteps if the organization is working hard toward authenticity.

When it comes to something as complex and nascent as ESG, missteps are going to happen. You can sit back and watch other companies make them, or you can take the risk as a leader and carve out the future you want to take, helping others along the way. Rather than see ESG as a competitive advantage, see it as an opportunity to lift your organization, your industry and the rest of the world to accomplish things that impact everyone for the better.

Each of the elements of a strong ESG program are intertwined with one another. Improving one area can help another and failing in one area can harm the others as well. Companies can no longer afford to simply pay lip service to ESG goals. Integrating ESG will prove fruitful in any number of ways – helping you to reduce costs and negative impacts on the environment, accelerate company growth, attract new talent, build loyal customers and contribute to a healthier, happier humanity.

Reference: https://www.strategyblocks.com/blog/three-steps-to-start-your-esg-journey-today/

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