[ESG] Business challenges in leading ESG
ESG (environmental, social and governance) disclosures are key to attracting investors, while also serve as an impetus for companies to improve their operations, and benefit society. What are the challenges when executing these initiatives?
While many organisations are finding ways to run a sustainable and successful business, they don't know where to begin those landmark changes. Some companies form sustainability teams to do all the work but they may lack the financial knowledge to meaningfully connect those practices to the company's finances and operations to effectively initiate change. Let's take a look at these challenges and how professionals may equip themselves with the necessary skills to succeed in the field.
MORE MEANINGFUL REPORTS
On 18 December 2019, the HKEX announced enhanced ESG reporting requirements for a company's board to disclose its oversight of ESG issues, its' ESG management approach and strategy, and how it reviews progress.
The board must have a formal ESG governance structure, sufficient knowledge and expertise in ESG internal risk management processes that connect to ESG risk management, and overall ESG strategy with clear goals and targets.
SET THE RIGHT TARGETS
1. About KPIs
When it comes to ESG reporting, one needs to set the right key performance indicators (KPI) and articulate the them while garnering more interest and trust from existing and potential customers, investors and stakeholders.
KPIs were put in place to track all three aspects of ESGs. They were also set to measure hours of staff training, staff composition, board diversity and the company's corporate social responsibility.
KPIs need to be relevant to the company and bring the board to a consensus.
2. Set the realistic KPIs
Gather insights through surveys, from within and outside the company; engage with stakeholders to understand their expectation, concerns and collect their opinions.
Understand which ESG factors are most important and relevant to the company, and the areas in which resources must be allocated and prioritised.
Set vision and benchmarks to measure its relevant performance. Set these KPIs with purpose.
3. ESG is a cross-departmental issue
Garner support from management and different departments within the company.
Each department also must be trained on how to track and monitor performance; set roles and responsibilities of those managing these KPIs.
Regular communication needs to be established between company's operations and management regarding ESG issues.