Q&A: In your ESG journey, keep the destination in mind

September 30, 2022

Many Barr clients are working hard to advance their environmental, social and governance (ESG) goals, demonstrate transparency, and communicate progress that resonate with stakeholders. At the same time, many organizations are unsure how to navigate the journey or even feel like they’re trying to focus on a moving target.

ESG Strategic Consultant Emily Ahachich discusses things to think about in setting goals and demonstrating progress.

Q: What are ESG issues and why are they important?

ESG issues are material to a company and topics that its stakeholders care about. A company’s ability to demonstrate effective management of ESG issues is important to investors and other stakeholders, both in terms of mitigating risks and addressing opportunities. Effective (or ineffective) management and disclosure can impact a company’s valuation, ability to attract capital and new business, brand perception, and customer and workforce retention.

Q: How should my organization begin developing a sustainability strategy?

Your approach should be embedded within your corporate strategy—not something separate. Significant ESG risks and opportunities shouldn’t be addressed in isolation but rather within the context of your organization’s vision, mission, and values. If ESG issues identified are truly material, they can impact your ability to execute your strategy and ultimately your overall financial health and long-term viability.

Learning what is important to your company’s stakeholders—and whether they believe the company is addressing those priorities in a highly effective way—helps you identify material ESG issues. Stakeholder outreach is an important step in identifying your sustainability priorities. This typically includes gathering feedback from both internal and external stakeholders, including but not limited to investors, employees, customers, communities, suppliers, and policymakers.

Once you identify material issues, you can set goals and make plans to achieve them, including capital and resource allocation.

Q: Which ESG frameworks and ratings matter the most?

The landscape remains crowded, and it can be confusing, challenging, and frustrating to navigate. At the end of the day, it comes back to identifying the truly material issues, setting meaningful goals to address them, and transparently demonstrating progress in a way that resonates with stakeholders.

Across the numerous voluntary disclosure frameworks out there, we continue to see momentum around the Sustainability Accounting Standards Board (SASB), Task Force for Climate-Related Financial Disclosures (TCFD) and Global Reporting Initiative (GRI) standards, as well as industry-specific standards such as the Global Industry Standard in Tailings Management (GISTM).

Regarding ESG rating providers such as MSCI, Sustainalytics, or ISS, one company can look very different in terms of relative performance due to the variability in provider methodologies. Investors and other stakeholders are interested in the data and often develop their own internal ESG rating systems (e.g., State Street’s R-Factor^TM score). While it is important to monitor how others are reporting on your company and ensure the facts are clear, it is equally important to be deliberate about where to invest time in working to improve particular scores. Being deliberate about that comes back to staying focused on what is material to your business and important to your stakeholders.

Q: How does Barr help clients address their ESG priorities and achieve sustainability goals?

For clients who have clear sustainability goals, our work typically involves bringing ideas forward, conducting feasibility assessments, and executing projects that advance those goals. In addition, we help clients track and measure progress in areas such as greenhouse gas (GHG) emissions reduction, air quality improvements, water conservation or reuse, habitat restoration, or biodiversity outcomes.

For companies who have not defined sustainability goals, we can also help with stakeholder outreach and materiality assessments, data gathering and verification, metrics definition, baselining, goal setting, impact assessments, evaluation against various ESG standards, and data management and reporting, including advising on environmental management information systems. Contact our team to learn more.

About the author

Emily Ahachich helps clients think through ESG risks and opportunities in the context of their overall business. Her areas of focus include materiality, goal setting, and measurement; program development; and disclosures. She works closely with Barr’s industry and technical experts to identify and deliver advice and solutions that help clients achieve their sustainability goals across various environmental issues, including greenhouse gas emissions and air quality, water, waste, energy, habitat, and biodiversity.