How to strengthen your ESG credentials

The management of risks, reporting and reputation issues for Boards and executive leadership has increased significantly over the past several years, with an ever-expanding focus on ESG issues from shareholders, customers, and other key stakeholders.

For many Directors, their organisation is advanced on the ESG journey, with well-defined strategies, embedded frameworks, comprehensive annual sustainability reports meeting international standards, and long-established community and social involvement. However, stakeholder expectations continue to evolve, and Directors and executive leadership must remain dynamic, focusing on a range of actions to improve and strengthen their organisation’s ESG credentials.

Strengthen ESG governance

Many organisations will have dedicated ESG committees to conduct regular reviews of ESG frameworks and reporting structures, maintain an ESG risk register and oversee assessments of expected or emerging risks, and set clear goals and targets for senior executives.

Regulators are sharpening their focus on ESG disclosures, with Australia, Hong Kong and Singapore, for example, all having provided guidance on how investment firms should disclose their approach to the consideration of ESG factors in their investment decisions.

Corporate oversight can be strengthened by ensuring ESG issues are integrated into other governance processes, establishing clear roles and responsibilities for ESG-related activities, and providing regular training and education for Directors, management and employees on relevant issues.

Review operational integration

Organisations need regular reviews into the effectiveness of workplace initiatives to integrate ESG considerations into operations and decision-making processes.

To implement strong ESG strategies, organisations must ensure policies and procedures that address ESG issues are current. Responding to stakeholder concerns, understanding the impact and outcomes of sustainability initiatives, and assessing how productive the organisation has been in embedding ESG requirements into product development, supply chain management and investment decisions are all key considerations.

Seek out collaborative partners

Collaborative partnerships provide organisations with access to additional expertise to help advance ESG objectives, promote affective team diversity and deliver innovative responses.

Partnerships with not-for-profit, government or reputable partners, who can provide access to skills and knowledge in critical areas.

Many of Australia’s largest companies have a strong focus on collaborative partnerships as part of their ESG strategy. CBA, Westpac, Telstra and BHP, all address ESG challenges collaboratively with stakeholders, through community events, industry forums, and digital platforms to foster dialogue and collaboration on ESG issues.

Ensure robust crisis planning

ESG-related issues are increasingly the primary cause of reputational risks and crises for organisations. At minimum, a crisis management plan should be in place that outlines how a company will respond and communicate in the event of a crisis.

Effective planning and preparation are critical to ensure an organisation can manage its reputation and mitigate the impact of a crisis which may result from its ESG performance.

Enhance reporting and transparency

Organisations can improve their ESG proposition by increasing the transparency of their ESG performance, disclosing more information about their ESG-related activities, and ensuring accuracy and reliability of their ESG reporting. Following the selection of an appropriate reporting framework, organisations need to integrate ESG strategies into their business plans, and provide consistent disclosure across all reports.

This will include aligning disclosures with the International Sustainability Standards Board (ISSB) issued sustainability disclosure standards (IFRS S1 & S2) released in June 2023, which provide guidance on identifying sustainability-related risks and opportunities, as well as climate-related disclosures.

It will also require consideration of the Exposure Draft Treasury Laws Amendment Bill 2024: Climate-related financial disclosure released in January this year. This draft legislation proposes requirements for reporting, disclosure, and adaptation of sustainability standards, and aims to improve transparency and comparability of information available to investors regarding Australian entities’ exposures to climate-related financial risks and opportunities.

How can we help?

At Phillips Group, we provide strategic guidance and support to help organisations improve and strengthen their ESG proposition.

We can help strengthen your ESG governance, enhance reporting, and manage ESG communication by providing brand and marketing, reputation management, stakeholder engagement and reporting services.

To find out more, visit our ESG and Sustainability page.