Insights

Some organisations exist primarily for profit. Some exist primarily for a social or environmental purpose. And many exist for some combination of purpose and profit.

If you have any aspect of social or environmental purpose in your organisational DNA you will be feeling the push to account for, and report on that purpose – and almost certainly, the term ‘ESG’ is looming large on your horizon (or is being embraced with gusto!).

So how do you make ESG considerations a practical addition to organisational strategy and performance? How do you ensure it is not a distraction, or even worse, a series of hollow promises to stakeholders?

For organisations that have invested in developing a theory of change or outcomes framework, we have great news – you will be well-placed to develop an ESG approach and take action that is meaningful, is aligned with your purpose, drives innovation and reduces risk. For those that haven’t, we suggest you get on with it!

Why bring an ESG approach to your purpose?

The reasons for a strong focus on ESG considerations is compelling. To name just a few:

• The climate is changing. We are all subject to the impacts of extreme weather events like winds, hailstorms, extreme heat and floods. The most vulnerable people and communities are disproportionately impacted by this changing climate. They are more likely to experience greater hardship with:
  • prohibitive costs to adapt as needed
  • insecure or poor-quality housing contributing to poor health and reducing the ability to respond
  • energy poverty, as heating and cooling homes becomes more expensive.
• For human rights, fairness and equity.
• To fulfill investor and funder expectations.
• To meet compliance and disclosure obligations (such as Modern Slavery, Australian Sustainability Reporting Standards, IFRS Sustainability Disclosure Standards)
• To support more resilient and sustainable organisations – monitoring, managing and responding to risks and opportunities.

The steps – how to bring an ESG approach to your purpose

You do not need to start your ESG journey from scratch. Here are our three practical steps to get you going.

Step 1: Understand and clearly articulate your context and intended impact

The most meaningful place to start managing ESG topics is with your purpose, ensuring clarity about your context and intended impact. Why do you want to take action? The reasons may be listed above, but they should also be closely linked to your strategy, purpose and intended impact. Document them to ensure they are clearly articulated.

Step 2: Assess how ESG topics interact with your stakeholder outcomes and theory of change

Considering how ESG topics influence and contribute to your purpose should be at the heart of your organisational strategy. Assessing ESG topics may include:

• Conducting a materiality assessment to identify ESG topics that are most relevant and significant to your context. This should include engaging with your stakeholders to understand what is relevant and important to them. It will also include reviewing external drivers. You may consider double materiality – how the sustainability topic influences your organisation’s ability to create impact (including on your financial performance) and your organisation’s impact on the topic. Topics may include those listed in the diagram below.

• Brainstorming how these topics may be interacting with or influencing your intended impact and stakeholder outcomes. Consider the following questions:
  • What is the relationship between the ESG topic and stakeholder outcomes? It that relationship positive or negative?
  • How does the topic influence your theory of change? Will you need to be doing something different to continue to influence stakeholder outcomes?
  • What might it look like under different future scenarios? You may consider scenario planning (both positive and negative) to understand the potential influence of the ESG topics on your purpose. This could include, for example, looking at different future climate scenarios to understand potential impacts.
  • What if we continue with business as usual?

This work will include research, stakeholder engagement and workshops involving people with different perspectives to understand the topics most important and relevant to your context.

This step may also highlight the need to revise your theory of change. A theory of change should be regularly reviewed and updated, ensuring it continues to evolve to your context and stakeholder needs.

Step 3: Develop your action plan – identify, assess and prioritise

Start with the low-hanging fruit, the quick wins. Actions may include establishing a baseline of data to understand how much water and energy is being consumed by your activities, and how much waste is being produced. You may consider establishing a Working Group.

Drawing on insights from the materiality assessment and scenario planning, what needs action? What are your ambitions? What resources and skills do you have available to act? Set targets.

Think about the different activity areas across your business and the types of goods and services being procured. What opportunities do these create for more sustainable choices? Who else could benefit from your investments?

Identify all the needed actions, then assess and prioritise them so you can act. Communicate about your work. Regularly check in to monitor your progress, reflect, learn and importantly celebrate the wins and keep going! This will be your continuous improvement journey – design, measure, communicate and improve.

The result

By taking these three steps, you will end up with a strategy and actions that are true to your purpose and intended impact. You will not be duplicating effort, but embedding ESG into your organisation. This work will also contribute to making your organisation more sustainable – there are savings to be found in being more efficient. And importantly, by taking these steps, you are managing for better impact!

If you need help to get started on your ESG approach, please get in touch with us via hello@thinkimpact.com.au.