ESG – From buzzword to requirement – Part 2: Why is an ESG program important? | Mitratech Holdings, Inc.

[Author: Javier Gutierrez]

Implementing an environmental, social and governance (ESG) program is more than just a ticking exercise.

In the first part of this series of ESG articles, we explored ESG ownership within an organization. The key takeaway was that a leadership role needs to be placed and an ESG program needs to exist within the company. Read the article in detail here: ESG – From buzzword to requirement – ​​Part 1: Who owns it?

In this article, we will explore the importance of ESG and how true operational resilience can only be achieved if there is an ESG program in place. Let’s start.

When we talk about operational resilience, we refer to all the business processes in place that allow an organization to remain resilient: prevent, adapt, react and learn from operational disruptions.

The purpose of ESG risk management is to prepare organizations for anticipated issues in the business operating environment. ESG and operational resilience couldn’t be more interconnected. Assessing an organization’s ESG risk exposure is crucial to fully understanding its business horizon.

It’s no surprise that investors and regulators are increasingly advocating for ESG reporting.

From a process perspective, don’t try to reinvent the wheel.

If you have comprehensive ERM processes in place, leverage them to address ESG risks as well. ESG doesn’t have to be a fundamentally new capability, it’s risk management after all.

esg scope

Don’t forget to extend your ESG scope beyond the environmental factor alone.

Social and governance factors must also be taken into account to avoid any problems or misinformed investment decisions.

risk management

Risks and opportunities are more than likely to arise when implementing an ESG program.

Be sure to consider both. Develop a strategy on how your organization can best use the information gathered from identified ESG risk analyses.

esg reports

Implementing an ESG program as soon as possible should be a business priority.

Don’t wait for future ESG requirements and regulations, get a head start and have a well-rounded program ahead of these last two successes.

Implementing an ESG framework can be quite complex.

In this article published by Nasdaq, many of these complexities are explored in detail, but it is by no means an impossible task. It is important to understand that ESG frameworks rarely impact a single function. More generally, they will involve multiple processes and different business units and may well span across countries, as well as the supply chain. These are highly interconnected and ESG initiatives should be a collaborative effort that encompasses the entire organization.

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