Developing ESG Strategy Is Hard, But Executing It Is Even Harder

Executing a strategy is even harder than developing one.

The author is Andy Rugeroni.

Business leaders, policymakers, and investors around the world have been working on developing environmental, social, and governance (ESG) strategies, making them an essential business priority.

It's difficult to develop a strategy because of the number of factors to consider, but it's even more difficult to operationalize it. There is an anxiousness that is starting to set in with the emergence of broad goals, and we are already seeing companies admit they are behind.

It's a big risk to fall behind or kick the can. If organizations can't deliver on their promises, the penalty of failure can have a direct result on their bottom line.

The stakes are high for all organizations, no matter where they are in their journey.

• System issues beyond immediate control
• Balancing long-term value creation against the pressure of short-term financial requirements
• Making ESG tangible and meaningful to all employees
• The need to partner with the right suppliers, nongovernmental organizations (NGOs), or even competitors along the entire value chain
• The need to implement operational changes throughout the organization
• Increased cross-functional collaboration and the complexity of a multitude of change initiatives

How can you translate ESG intentions into action? You need to adopt a people-centered approach to operationalizing your agenda.

We learned a lot from Daggerwing's experience in helping organizations go from strategy to action.

This is the first thing. Don't confuse ESG and commit from the top. Do your people know what ESG is and what it means for them? Do they wonder if it is a ratings mechanism, a program that will drivesustainability, or a series of initiatives such as unconscious bias training? It's clear that confusion is the enemy of fast progress.

From the very beginning, make sure you know what ESG means and where it fits with your organization. The topics and language should be humanized with stories to foster understanding. The impact on your business case can be visualized with clear calls to action.

There are two Prioritize and build a long-term plan. To drive change, your employees and stakeholders need to understand how and why you are doing it. Do you know where you are lagging, keeping up, or innovative?

You don't have to be at the top of everything, but you do need a prioritized plan for different areas. If you have a plan, you can work with your organization to make it happen.

There are three. It is necessary to build a change capability. A high level of empowerment and expertise is required in order to deliver a tangible impact on the environment. A change structure that includes both is required.

Competing priorities will cause barriers to pop up. To overcome these, create a governance structure and appoint a single owner to make sure the business is held accountable. A change team focused on people-centered change approaches will work to accelerate your ESG impact.

There are four. Clear mindset and behavior changes can be articulated and embedded. ESG can't feel like it's another thing to do, but a different way of doing things. Change is being done with people not them. They need to believe that they are a part of the journey.

It is important that leaders give a safe environment and encourage a learn-as-we-go growth mindset because no one has tried and tested answers. The long-term culture change will require small actions along the way, so it's important to be patient.

Allowing employees to experiment with low-risk initiatives will help your organization get to the desired mindset and behaviors quicker.

There are five. Leader incentives need to be adjusted to support their actions. While long-term goals keep us focused, the tension between long-term value creation and short-term accountability makes it important that leaders aren't punished if results happen slowly

The long-term goals should be broken down into phased outcomes. Leader incentives should reward a mix of performance metrics. By having leaders present why their business model and practices are sustainable, and allowing them to make critical trade-offs, you will set them up for long-term success.

One of the most important steps your organization can take is to operationalize your ESG strategy. If you focus on people-centered change, you can get the change you want the first time.

You can learn how Daggerwing can help your organization.

At Daggerwing Group, Andy Rugeroni is a senior principal.