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How to develop an ESG strategy

ESG / CSRESG Initiatives

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Kara Anderson

updated 4 Dec 2024

UK Copywriter at Greenly

The business landscape is shifting. Companies today are under increasing pressure to adopt sustainable practices, engage meaningfully with stakeholders, and ensure ethical governance. But while Environmental, Social, and Governance (ESG) strategies have become a critical focus for businesses, knowing where to start can feel overwhelming.

Building an effective ESG strategy isn’t just about meeting stakeholder expectations - it’s about creating long-term value for your business while contributing to a more sustainable and equitable future.

👉 In this article, we’ll explore the key steps to develop an ESG strategy that not only meets global standards but also aligns with your company’s unique goals.

What is an ESG strategy?

An ESG strategy outlines a company’s approach to managing its environmental, social, and governance responsibilities. It provides a framework for embedding sustainability and ethical practices into business operations, ensuring that the company addresses issues ranging from climate change to employee well-being and corporate transparency.

Rather than being a standalone initiative, an ESG strategy integrates with the overall business strategy, helping companies manage risks and seize opportunities. For example, prioritising energy efficiency or sourcing sustainable materials can reduce costs while also meeting stakeholder expectations.

A good ESG strategy is proactive, transparent, and measurable. It considers the unique challenges of the business and its industry, setting clear goals that align with global standards like the UN Sustainable Development Goals (SDGs) or the Paris Agreement.

In short, an ESG strategy is a roadmap for building resilience, fostering trust, and driving positive change - both within and outside the organisation.

Why does your company need an ESG strategy?

In today’s market, a strong ESG strategy is no longer optional - it’s a business must-have. Companies that fail to act risk falling behind competitors, alienating stakeholders, and even facing regulatory penalties.

An effective ESG strategy offers numerous benefits, including:

Risk mitigation: Addressing environmental and social risks, such as supply chain disruptions or regulatory changes, can safeguard your business against future challenges.
Enhanced reputation: Companies with strong ESG commitments are more likely to attract customers, investors, and employees who value sustainability and ethical practices.
Improved operational efficiency: Initiatives like reducing energy consumption or minimising waste can lower costs while advancing sustainability goals.
Access to capital: Investors are increasingly favouring companies with robust ESG credentials, as they’re seen as lower-risk and more future-proof.

Beyond these practical benefits, an ESG strategy enables companies to contribute to broader societal goals, such as combating climate change or promoting social equity. Businesses that embrace ESG are not just meeting expectations - they’re shaping a more sustainable future for everyone.

Key steps to developing an ESG strategy

Creating an ESG strategy that drives meaningful change requires a structured and thoughtful approach. Whether you’re starting from scratch or refining existing efforts, these steps provide a roadmap for success:

1. Assess your starting point

Before setting goals, it’s essential to understand where your business currently stands. Start with a materiality assessment to determine the environmental, social, and governance issues most relevant to your operations and stakeholders.

A materiality assessment involves identifying the topics that have the greatest impact on your business and are most important to your stakeholders. This ensures your ESG strategy focuses on what truly matters.

Next, gather comprehensive data on your current performance. Key areas to assess include:

Environmental metrics: Carbon emissions, energy usage, waste generation, and water consumption.
Social metrics: Workforce diversity, employee satisfaction, community engagement, and supply chain practices.
Governance metrics: Transparency, compliance, and ethical practices.

Creating a baseline will help you identify strengths, weaknesses, and opportunities for improvement. This step is also crucial for measuring progress over time.

2. Engage stakeholders

ESG initiatives impact a wide range of stakeholders, from employees and investors to customers and local communities. A successful strategy depends on meaningful engagement with these groups to understand their priorities and expectations.

How to engage stakeholders effectively:

Surveys and focus groups: These tools allow you to collect qualitative and quantitative insights.
One-on-one interviews: Speaking directly with key stakeholders, such as senior executives or community leaders, can provide valuable perspectives.
Partnerships: Collaborating with NGOs, industry groups, or academic institutions can help align your ESG efforts with broader sustainability goals.

Engaging stakeholders not only ensures your strategy addresses real-world concerns but also builds trust and support for your initiatives.

3. Set clear goals and KPIs

Your ESG goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Setting realistic yet ambitious targets ensures accountability while aligning with global standards like the UN Sustainable Development Goals (SDGs) or Science-Based Targets (SBTi).

Examples of ESG goals include:

Environmental: Reducing greenhouse gas emissions by 30% within five years or transitioning to 100% renewable energy by 2030.
Social: Achieving a 50:50 gender balance in leadership roles or improving employee satisfaction scores by 15% within two years.
Governance: Implementing a transparent supply chain policy or achieving ISO certification for ethical governance.

Break these goals into measurable key performance indicators (KPIs) to track progress. KPIs provide clarity on what success looks like and help demonstrate accountability to stakeholders.

4. Create an actionable plan

An ESG strategy is only as effective as the plan that supports it. Once you’ve set your goals, outline the specific steps needed to achieve them.

Key elements of an actionable plan:

Prioritise initiatives: Focus on high-impact areas that align with your company’s values and stakeholder priorities.
Allocate resources: Determine the budget, tools, and personnel required for each initiative.
Assign responsibilities: Clearly define who is accountable for each part of the strategy to ensure execution.

For example, if one of your goals is to reduce emissions, your plan might include:

Investing in energy-efficient equipment.
Upgrading to renewable energy sources.
Implementing a company-wide recycling programme.

The key is to integrate ESG initiatives into everyday business operations, making sustainability a core part of your company’s identity.

5. Communicate your ESG strategy

Transparency is critical for building trust with stakeholders and maintaining accountability. Communicate your ESG strategy and progress both internally and externally.

Internal communication:

Educate employees about your ESG goals and how they can contribute.
Highlight progress regularly through company meetings, newsletters, or intranet updates.

External communication:

Publish an annual sustainability report using recognised frameworks such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or Task Force on Climate-related Financial Disclosures (TCFD).
Use your website and social media channels to share updates, successes, and challenges.

Clear and consistent communication ensures stakeholders stay informed and engaged with your ESG journey.

6. Monitor and improve

Developing an ESG strategy is not a one-time exercise - it’s an ongoing process. Regularly monitor your progress, evaluate your performance against KPIs, and adapt to changes in regulations or stakeholder expectations.

How to monitor and improve effectively:

Track performance: Use dashboards or software to visualise data and measure progress in real-time.
Conduct audits: Internal or third-party audits can validate your efforts and identify areas for improvement.
Respond to feedback: Actively seek input from stakeholders and adjust your strategy to address emerging concerns or priorities.

For example, if new regulations require stricter emissions reporting, update your monitoring processes to ensure compliance. Similarly, if a stakeholder survey reveals dissatisfaction with your social initiatives, consider refining your approach.

By staying flexible and proactive, your business can ensure its ESG strategy remains impactful, credible, and aligned with evolving expectations.

Challenges in developing an ESG strategy

While developing an ESG strategy is essential, it’s not without its challenges. Many businesses encounter obstacles that can slow progress or make implementation more complex. Here are some common challenges and how to address them:

Challenge	Details	Solution
Limited resources	Small and medium-sized businesses often lack the time, money, or personnel to dedicate to ESG efforts.	Start small by focusing on high-impact areas and scale up over time. Use tools like Greenly’s platform to streamline processes and reduce costs.
Data gaps	Gathering accurate data, especially for Scope 3 emissions and supply chain activities, can be difficult.	Leverage technology and partnerships to bridge data gaps. Use platforms specialising in ESG metrics to monitor performance effectively.
Resistance to change	Employees or leadership may resist ESG efforts due to uncertainty about long-term benefits or misaligned priorities.	Educate and communicate with employees and leadership. Show how ESG initiatives align with company goals and highlight the business case for sustainability.
Evolving regulations	Constant updates to ESG reporting requirements can make compliance challenging for businesses.	Stay informed about regulatory updates and partner with ESG compliance experts to keep your strategy current.
Measuring impact	Quantifying the impact of ESG initiatives, particularly social or biodiversity improvements, is often challenging.	Develop clear KPIs and use recognised frameworks to standardise measurement. Seek third-party certifications for external validation.

ESG strategy frameworks and standards

Developing a robust ESG strategy can feel overwhelming, but established frameworks and standards offer a valuable starting point. These tools provide guidance on structuring your approach, setting goals, and reporting progress. Here are some of the most widely recognised ESG frameworks and standards:

Global Reporting Initiative (GRI)

The GRI is one of the most commonly used frameworks for ESG reporting. It provides detailed guidelines for companies to disclose their environmental, social, and governance impacts. The GRI’s comprehensive structure helps organisations identify material issues, track progress, and communicate their performance transparently.

Why it matters: GRI standards are widely recognised, making them an excellent choice for businesses looking to build credibility with stakeholders.

Sustainability Accounting Standards Board (SASB)

SASB focuses on industry-specific sustainability metrics, making it highly relevant for companies operating in sectors with unique challenges. It provides a set of standards tailored to 77 industries, covering material ESG topics most likely to impact financial performance.

Why it matters: SASB standards help businesses align ESG efforts with financial objectives, making it easier to communicate value to investors.

Task Force on Climate-related Financial Disclosures (TCFD) / International Sustainability Standards Board (ISSB)

The TCFD framework for reporting climate-related risks and opportunities has been transferred to the ISSB (IFRS S1 and S2). In October 2023, the TCFD was disbanded, and its recommendations were incorporated into the ISSB standards, which now provide a global baseline for climate-related disclosures. These standards emphasise governance, strategy, risk management, and metrics related to climate.

Why it matters: ISSB standards, built on TCFD principles, are increasingly favoured by investors and regulators. Companies aligning with these standards can effectively address climate-related risks while meeting evolving disclosure expectations.

UN Sustainable Development Goals (SDGs)

The UN SDGs offer a global blueprint for addressing pressing environmental, social, and economic challenges. While not specifically a reporting framework, the 17 goals provide a valuable reference for companies aligning their ESG strategies with broader sustainability objectives.

Why it matters: The SDGs highlight the global impact of your ESG initiatives and connect your strategy to widely recognised priorities like gender equality, clean energy, and climate action

ISO Standards

ISO (International Organization for Standardization) offers various standards relevant to ESG, such as ISO 14001 for environmental management systems or ISO 26000 for social responsibility. These standards provide practical guidelines for integrating ESG principles into business operations.

Why it matters: ISO standards are known for their focus on operational excellence and continuous improvement, making them ideal for embedding ESG into day-to-day practices.

Using these frameworks can help companies structure their ESG strategies effectively, ensuring alignment with global best practices and boosting stakeholder confidence. While no single framework fits every business, combining elements from multiple standards can provide a comprehensive approach tailored to your company’s needs.

What about Greenly?

Developing an ESG strategy is a complex process, but you don’t have to navigate it alone. Greenly’s expertise in carbon management and sustainability reporting makes it the ideal partner for businesses looking to build or enhance their ESG strategies.

Here’s how Greenly can support your journey:

Tracking and analysing emissions: Greenly’s platform provides an intuitive way to monitor your Scope 1, 2, and 3 emissions, helping you identify high-impact areas for improvement.
Setting actionable goals: With industry-specific insights and data-driven recommendations, Greenly can help you set realistic and measurable ESG targets, whether it’s reducing emissions or improving supply chain sustainability.
Streamlining reporting: Reporting ESG progress can be time-consuming, but Greenly’s platform streamlines the process, ensuring your reports meet stakeholder expectations.
Driving long-term change: From identifying decarbonisation pathways to recommending sustainable suppliers, Greenly’s comprehensive solutions empower businesses to create meaningful and lasting change.

By combining advanced technology with personalised support, Greenly makes sustainability actionable and achievable for companies of all sizes. Whether you’re just starting your ESG journey or looking to refine your strategy, Greenly is here to help. Get in touch with us today.