Five Pitfalls to Avoid When Setting Your ESG Strategy

Five Pitfalls to Avoid When Setting Your ESG Strategy


Your organization has decided to set a digital ESG Strategy, joining the ranks of the 80 percent of global companies that voluntarily report on their sustainability. However, with more than 614 potential reporting requirements and frameworks and without common standards, setting an ESG Strategy can be confusing, ambiguous, and time-consuming.

You could develop an ESG Strategy that outlines abstract commitments, sits on a shelf, and is revisited once a year. Or, you could develop an ESG Strategy that inspires action, aligns your business processes with desired outcomes, and demonstrates your organization’s tangible ESG performance improvement.

To ensure that your company’s ESG Strategy is action-oriented, achievable, and impactful, be careful to avoid these five common pitfalls.


Pitfall #1: Creating complex, bespoke strategies

A benefit of the abundance of ESG frameworks is that your company has plentiful options to choose from and does not need to reinvent the wheel. Instead of creating an overly complex, customized ESG framework, your company should:

  1. Align to the principles, frameworks, and standards that the market is rallying around. Most investors and companies use more than one framework or tool to inform their ESG Strategy. A few good places to start include the UN Sustainable Development Goals, the Impact Management Project (IMP) Five Dimensions of Impact, and the Global Reporting Initiative (GRI) Standards for Sustainability Reporting.
  2. Stay up-to-date on the latest trends to keep up with the frameworks and innovations the market is moving towards. The POI team recommends starting by subscribing to newsletters such as ESG Today and GreenBiz.


Pitfall #2: Setting the wrong metrics 

Actionable metrics are the foundation of your ESG reporting. With seemingly unlimited metrics to choose from, it is easy to go down a rabbit hole of trying to create your own bespoke metrics. Or, you could end up choosing overly generic metrics that do not have tangible business impact. Instead, you should:

  1. Take a structured approach to metric-setting by selecting metrics that are financially material to your business. The SASB Materiality Map is a useful resource to identify potential material issues for your industry and associated metrics.
  2. Engage stakeholders via surveys or interviews to determine which metrics will have the greatest impact on their priorities.
  3. Choose metrics that your company can measure, either from existing data sources or through newly defined standard operating procedures. POI recommends starting simple, with 3-5 key metrics, then expanding the number of metrics tracked over time as your ESG Strategy evolves.
  4. Use consistent metrics that you can report on and track improvement over time.


Pitfall #3: Neglecting to set up a process for ongoing monitoring and evaluation 

After selecting a framework and metrics, it may be tempting to check the box that your company’s ESG Strategy is complete. However, active performance management is critical to actively manage and mitigate risks and act on improvement opportunities. In order to set your organization up for successful performance management, you should develop a monitoring and evaluation approach that:

  1. Establishes a streamlined, scalable process to improve your business with ESG.
  2. Integrates environmental, social, and governance into your business workflows and processes.
  3. Incorporates digital data collection, validation, verification, analysis, and visualization to understand risks and performance improvement opportunities.
  4. Clearly articulates responsibility for managing the dimensions of your company’s ESG strategy to individuals and departments representing a cross-section of company functions.


Pitfall #4: Relying on manual tasks to execute on your ESG Strategy 

Many companies rely on a manual process to choose an ESG framework, select metrics, and track progress over time. Instead of spending critical team time on managing inefficient ESG processes, you should automate your strategy through digital platforms in order to:

  1. Quickly determine the frameworks, standards, and metrics that align with your company’s industry and objectives.
  2. Save employee time spent manually aggregating data from disparate sources across your enterprise.
  3. Automatically update performance indicators based on real-time availability.
  4. Conduct advanced analytics on company data to gain deeper insights.


Pitfall #5: Failing to act on ESG insights 

Strategy is 10 percent planning and 90 percent execution. Your company could avoid all of the four previous pitfalls – selecting a market-ready framework, choosing metrics that are material to your business and stakeholders, setting up a process for ongoing monitoring and evaluation, and implementing an automated performance management system – but the success of your ESG Strategy hinges on your company’s ability to ACT. To optimize your ESG performance through action, your organization should:

  1. Incorporate the regular review of ESG performance data into existing company meetings or communication platforms. Proof of Impact conducts quarterly business reviews with all of our clients to update client business objectives, understand insights from client data, and discuss plans for action.
  2. Regularly engage stakeholders (including customers, employees, board members, and investors) through surveys and focus groups to ensure actions are aligned with their needs.
  3. Develop policies and practices that are informed by insights from ESG performance data.
  4. Prepare for an iterative journey. Your stakeholders will value transparency and candor over perfection and pretense.


Now is the time to develop and implement your ESG Strategy 

These pitfalls are costly and could have lasting negative impacts on your business.

  1. Being unable to articulate your organization’s ESG strategy could mean losing out on potential investment dollars or revenues by failing to meet the expectations of investors and consumers that are demanding ESG transparency.
  2. If your organization publishes an ESG strategy but does not develop a process to track, report, and reassess your ESG performance, your company could risk being accused of “impact washing” and lose the trust of stakeholders.
  3. Bespoke processes and failing to leverage automated ESG technology increase the time and money spent on ESG, at the expense of investing resources on improving your company’s performance.

Instead of delaying the creation of your ESG strategy, take action today to set an ESG strategy, identify potential ESG risks within your organization, monitor your risk mitigation efforts, and optimize ESG performance.


About Proof of Impact

Proof of Impact is committed to supporting our clients on their journey to understand and improve their ESG performance. Whether your company is just beginning to report on ESG criteria or looking to gain deeper insights from existing ESG data, Proof of Impact will provide the resources to help your business succeed and enhance your impact.

  1. Follow POI on LinkedIn and Medium to access our next article in the series on four ways to profit from your ESG strategy.
  2. Stay up to date on emerging industry trends by signing up for the Proof of Impact newsletter.
  3. Build your ESG strategy with POI. To start your ESG reporting journey, reach out to or schedule a demo here.

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