Corporate leaders must “live and breathe” ESG strategy to deliver vision

Organisations must work on operationalising their ESG vision and strategy if they are to avoid risks relating to greenwashing, reputation damage, and regulatory scrutiny and actions.

Speaking on the latest episode of Airmic Talks ESG, Emma Arnold, a Director at Control Risks who leads its environmental practice for EMEA, said having a senior leader or board member sponsor the ESG efforts of the group is often the key to success in delivering the vision.

“It all comes down to policies and procedures within the company,” Arnold said. “You’ve got to start right at the top. The board shouldn’t just give lip service to ESG. It’s got to live and breathe it.

“ESG needs to be meaningful to your company. It needs to reflect your values and your purpose, which is why it’s not a one-size-fits-all ESG product. So depending on your values and your purpose, you can give it real power. For some companies, they’re really passionate about diversity and inclusion. For others, it will be about resource management.”

While businesses are beginning to make sense of what ESG means to them and how they can make a positive impact with regards to environmental, social or governance initiatives, there are also inherent risks of overpromising and under-delivering.

“I think that one of the key risks is their loss of reputation, but we’re getting more clients asking us about various topics,” Arnold added. “A lot of investment managers are now using their voting rights to influence the way that businesses are being run. They could lose their licence to operate, which is quite important, particularly for mining companies.”

It is the operationalisation of the ESG metrics internally that appears to be the biggest challenge for corporations once they embark down the route of transition or making improvements. Incorporating it into the enterprise and operational risk management frameworks is one way to do this.

“Another place where companies tend to fall down quite a bit is just giving it to the responsibility of one person or one department. If they don’t have an ESG department, which quite a lot of companies don’t, they might have an environmental health and safety department or a sustainability department. They might just say, ‘okay, we’re going to give you ownership of ESG’. And that’s where it falls apart, because really it needs to be a responsibility of every department.”

Listen to the full interview with Emma Arnold on the Airmic Talks ESG podcast, available on all podcast platforms.