Strategies to Build an Effective ESG Team

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Incorporating environmental, social, and governance (ESG) reporting and strategy into an organization requires stakeholder involvement at all levels. From top leadership setting the vision and strategy, to employees contributing to daily operations, and external stakeholders holding the organization accountable, a collaborative approach is essential.

Passage of the California Senate Bill 253 and the proposed SEC climate disclosures rule catalyzed ESG reporting across the compliance landscape. A holistic, collaborative approach to engaging stakeholders can help streamline data collection and reporting while positioning your organization to better understand other sustainability-related risks and opportunities.

Organizational Hierarchy and ESG

Your organization’s size, operating model, goals, and reporting needs will significantly influence the number and type of individuals involved in reporting and strategy. Just as the ESG framework is designed as a cross-functional method to communicate value and identify risk, the individuals involved on an ESG team will be equally diverse. The type and goals of your reporting will also influence who is included on an ESG team, as well as the level of involvement of each of the following groups.

Governing Bodies

Governing bodies should be responsible for actively engaging in ESG discussions, setting long-term goals, and facilitating alignment between ESG strategy and the organization's operational objectives. In their role, governing entities may establish committees or assign specific directors to oversee ESG matters, reinforcing their commitment to sustainability.

Governance groups such as a board, council, or owners set the overall direction and vision for the organization. Their involvement in ESG signals that sustainability and responsible business practices are prioritized and integrated into the organization's operations, which makes climate-related risks and opportunities impacting key inputs to value creation more likely to be identified.

Individuals at this level also provide important perspectives on the financial materiality of sustainability information, relevant key performance indicators (KPI), and how material risks and opportunities could be managed. Their work can help build value and confidence in an organization’s long-term performance.

Executive Leadership

Top executives are often responsible for driving the organization’s ESG agenda. They’re also usually responsible for the reporting strategy—including the alignment of ESG reporting with financial reporting, social responsibility reporting, or other public filings.

CEOs

The CEO, as well as other high-ranking executives, provides perspective on the ways sustainability-related risks and opportunities might impact an organization’s long-term strategy or operations. They often champion sustainability initiatives, allocate resources, and hold accountable all levels of the organization for achieving ESG objectives.

CEOs should communicate the importance of ESG to employees, investors, and other stakeholders and lead by example in integrating ESG principles into the corporate culture. They provide perspective on how, when, and what to communicate to internal and external stakeholders on specific strategies for incorporating sustainability into core activities, decision making, and performance evaluation.

Chief Sustainability Officers (CSO)

Not all organizations under a compliance obligation are in a position to hire a chief sustainability officer, in which case, these areas of oversight could be integrated into the other executive roles.

A CSO typically oversees the development and execution of the organization's sustainability strategy. They collaborate with other executive leaders, work toward alignment with business objectives, and drive ESG initiatives. They provide oversight and perspectives on how existing processes for collecting, managing, and reporting data can be updated or improved to include sustainability information and where new data streams may need to be established.

This role is often also responsible for staying up to date on industry-specific practices and trends for ESG disclosures, frameworks, and standards. This could also include monitoring peer practices and relevant benchmarks that can help the organization maintain a competitive position.

Chief Financial Officer (CFO)

The CFO plays a crucial role in ESG reporting by overseeing financial data related to sustainability efforts. They ensure accurate accounting, disclosure, and transparency of financial aspects linked to ESG performance. CFOs are also an important part of managing the accuracy and completeness of internal controls and disclosure controls.

Chief Human Resources Officer (CHRO)

The CHRO manages workforce-related ESG matters, such as diversity, equity, and inclusion (DEI), employee well-being, and labor practices. They implement policies and initiatives to promote a sustainable and socially responsible workplace.

Chief Operations Officer (COO)

The COO focuses on supply chain sustainability, energy efficiency, and operational improvements that align with ESG goals. They work to map climate-related risks and opportunities to an organization’s business operations.

Chief Technology Officer (CTO)

As reporting requirements increase, so do the number of technology solutions provided to the market. These can range from single-service solutions, such as greenhouse gas calculators, to fully integrated reporting systems.

A CTO can help provide critical perspectives on the architecture (technology, platform, software, etc.) that will support reliable, accurate, and complete reporting that meets management’s disclosure expectations or data collection that’s timely, accurate, complete, and secure.

This role can also provide perspective on how data gathering and reporting processes can be effectively streamlined and scaled.

Legal and Risk

Teams or individuals dedicated to legal counsel and risk compliance can also contribute toward shaping ESG initiatives.

Legal Counsel

An organization’s legal team is often involved in ESG reporting and strategy for their insight on how to adhere to existing and emerging regulatory requirements. This function can also advise on the resources required to comply with internal and external policies. Additionally, this group helps provide perspective on the legal risks related to the omission or inclusion of information in public documents or as disclosed in reporting.

Risk Officers

Risk officers provide a company-wide perspective on the internal and external risks faced by an organization and the ways to deploy resources to minimize, monitor, and control potential impacts that could negatively affect an organization’s value and potentially hinder the achievement of its strategic initiatives.

An organization’s risk and legal teams will often collaborate on compliance with ESG regulations and mitigation of ESG-related risks. They work toward implementing ESG practices that align with legal requirements and identify potential liabilities.

Compliance

A compliance function is often responsible for conducting ongoing monitoring of compliance with internal company policies and bylaws and integrity-related risks faced by an organization. It can inform the necessary controls, policies, and procedures that are required to comply with applicable laws and regulations. This function is usually the first reviewer of the organization’s ESG reporting to make sure the information is consistent with other published reports.

Internal Audits

Internal audits bridge between the company and independent assurance providers in the context of ESG. By understanding the information needs of these providers, internal audit can facilitate a streamlined audit process and contribute to the reliability of ESG disclosures. This cooperation promotes accountability, as it allows for the validation of sustainability data, which is essential for maintaining trust with stakeholders.

Internal audit's perspective on risk management, controls, and governance processes and policies, is often provided to the board of directors, audit committee, and various stakeholders. This function’s insight into data control and risk management is instrumental in informing company management about sustainability performance, enabling informed decision-making, and helping to advance the organization's sustainability goals.

Employees

Employees across all levels can contribute to ESG reporting and future strategy. While top-level executives and committees set the strategic direction for ESG reporting and future strategy, middle management and frontline workers play a crucial role in implementation and day-to-day operations. Frontline workers are often the closest to the company's daily operations and can provide valuable insights into sustainability challenges and opportunities.

Other groups across the organization that could contribute to ESG reporting could include:

Department or Division Heads

Heads of various departments, such as marketing, operations, and procurement, are responsible for executing ESG initiatives within their respective areas. They must align their strategies with the broader ESG goals set by the leadership.

Sustainability Managers

Some organizations appoint dedicated sustainability managers who work closely with department heads to monitor and advance ESG performance. Different than a CSO, a sustainability manager often operates at a lower level within the organizational structure and reports to a CSO or other executive responsible for the broader ESG strategy.

Though both roles contribute to an organization's sustainability efforts, a CSO would focus on strategic leadership, overall strategy, and high-level stakeholder engagement, while the sustainability manager would be more operationally focused, implementing specific initiatives and monitoring day-to-day sustainability practices. These managers facilitate cross-functional collaboration and track progress toward sustainability objectives. The two roles often work in tandem to drive a comprehensive and effective sustainability agenda.

Data Analysts and Data Scientists

ESG reporting relies heavily on data analysis and metrics. Data analysts and scientists are instrumental in collecting, analyzing, and interpreting ESG data to identify trends, areas for improvement, and opportunities for innovation.

Technology and IT Teams

Leveraging technology for data collection, reporting, and analysis is core to building an effective ESG team. An IT team’s involvement can span data collection, reporting, data integration, technological innovation, and future system selection.

IT is responsible for implementing and maintaining the necessary software and systems to support ESG efforts. They’re also central to maintaining data integrity in ESG reporting and supporting the organization's ability to provide accurate, reliable, and trustworthy information to stakeholders.

Liaisons

As important as it may be to gather relevant internal stakeholders, it’s equally important to engage key external stakeholders. Some organizations may have dedicated customer or investor liaisons, and for others, this could be through survey data or an assessment.

As your organization gathers its stakeholder input, those channels should be tapped to inform your ESG reporting to make sure that it meets expectations while remaining clear, concise, and compelling. Some external stakeholder perspectives to consider include:

Investors

Shareholders and investors are increasingly considering ESG factors when making investment decisions. Organizations must engage with these stakeholders to provide transparent ESG reporting and demonstrate a commitment to long-term sustainability.

Customers

Consumers are becoming more environmentally and socially conscious. Organizations should involve their customer base by providing products and services aligned with sustainable values and seeking feedback on ESG initiatives.

Suppliers and Partners

Collaborating with suppliers and business partners who share ESG values can strengthen an organization's sustainability efforts. This includes encouraging suppliers to adopt sustainable practices and considering ESG criteria when selecting partners.

Regulatory Bodies and Nongovernmental Organizations (NGOs)

Organizations should maintain open communication with regulatory bodies and engage with NGOs to stay informed about emerging ESG standards and practices.

Reporting and Communication

An organization’s size, regulatory landscape, and ESG program maturity are the main influences determining how an ESG team comes together. A dedicated ESG team or sometimes an individual is responsible for gathering ESG data, preparing reports, and ensuring compliance with reporting standards such as the Global Reporting Initiative (GRI), Corporate Sustainability Reporting Directive (CSRD), International Sustainability Standards Board (ISSB), or the Task Force on Climate-Related Financial Disclosures (TCFD).

Communications specialists, or public relations roles can help effectively communicate an organization's ESG achievements to stakeholders. They play a crucial role in crafting the organization's ESG narrative and conveying it through various channels, including annual reports, websites, and social media.

We’re Here to Help

If you have questions about your organizational hierarchy’s influence on ESG strategies for your organization, please contact your Moss Adams professional.

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