Five signs your ESG strategy is flawed – and five ways to fix it

Environmental, social and corporate governance (ESG) strategy is becoming an increasing priority for businesses around the world. Between individual corporate goals and increased regulation by local, state and federal governments, companies are under increasing pressure to build more ethical and sustainable supply chains.

While such strategies are a step in the right direction, organizations should undertake constant reviews to ensure that their methods are effective in achieving ESG objectives. Unfortunately, many teams are not always able to recognize when it is necessary to rethink strategy or have the know-how and tools to pivot.

Here are some common tell-tale signs that your current ESG strategy is flawed, along with some steps you can take to fix them.

ESG is treated as a PR tactic. Many organizations have adopted ESG strategies in response to social and environmental issues around the world. However, it is not enough to simply say that you are going to focus on ESG. You must integrate sustainable and socially responsible suppliers who can help you achieve the goals you have announced via social media and press releases.

We focus too much on the rating of the company. While the goal may be to increase your organization’s ESG rating, this can often lead to a “tick the box” mentality. By prioritizing individual tactics in your ESG strategy and holding the team accountable to organizational goals, you can focus efforts to make impactful change. A better ESG score will often be the result.

The organization lacks consistency. To truly execute ESG strategies, your entire organization needs to be online and buy into the tactics. If some departments contribute to ESG objectives and others ignore them, you create inconsistencies within the organization, which will seem to have little commitment to sustainability and social initiatives.

Individual departments own the ESG. Often, individual roles will be created to focus on ESG strategy. But if they don’t work with other departments, these strategies can be seen as separate from the overall business goals. There must be full alignment between departments to ensure that these objectives are achieved.

Manual data management methods are used. Does your company use spreadsheets or other manual methods to track supplier data and ESG spending? Manual forms of data management lead to a limited view of current and potential suppliers. They can also allow for increased risk when data is not properly updated as business functions fluctuate, leading to missed opportunities for better expense management.

Once you are able to recognize the flaws in your current ESG strategy, you need to address and fix them. Here are five steps you can take:

Consider self-certified vendors. Not all suppliers that qualify as diverse or sustainable have official certifications. By broadening your searches to include self-certified suppliers, you can broaden your scope of supplier discovery and gain a broader view of companies that match your ESG goals.

Rely on machine learning and artificial intelligence. Manual data management methods result in outdated information that prevents you from using supplier data for innovation. Machine learning and AI enable you to consistently harvest, assess and analyze supplier data to quickly achieve ESG goals.

Stay on top of change. In the tumultuous world of modern sourcing, you can’t just trust who you know when it comes to achieving ESG goals. Business functions are constantly evolving and you need to be able to access up-to-date and accurate supplier data. In the process, you avoid working with suppliers who do not contribute to your ESG strategy and add risk to your supply chain.

Check your ESG spending. A critical part of a strong ESG strategy is monitoring spending to determine where there is room for improvement. In some cases, you may find that you’re allocating large amounts of money to a handful of “popular” categories, while neglecting others that could help you reach your goals faster. By knowing exactly where your budget is going, you can identify additional categories that lead to better sustainability and social justice.

With the help of an ESG strategy backed by effective tactics and solid supplier data, your organization can achieve its goals and make a difference in the community. Take a look at your current processes, compare them to the list above, and ask yourself: where can I make impactful changes?

Stéphany Lapierre is Chief Executive Officer of tealbook.

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