By: Natalie Dearth, Vice President, Corporate Operations & Organizational Transformation at Benchmark ESG
An executive may be forgiven for centering their sustainability aspirations around the “E” pillar of ESG. But such a one-dimensional approach will neither maximize their ESG performance, nor its attendant bottom line advantages. Indeed, in the eyes of investors, global regulators, civil society, employees, consumers, and other stakeholders, the value of companies’ performance against diversity, equity, and inclusion (DEI) matters is rapidly appreciating.
Clearly, rising to the occasion will first require executives to at least implement a DEI policy that delivers measurable outcomes. But to ensure that this DEI policy delivers credible value for their companies’ stakeholders and, in turn, their companies’ bottom lines, executives will need to build the policy with extensive stakeholder input. And they’ll need a cloud-supported ESG data management and reporting platform to bring efficiency and effectiveness to the management, evaluation, and when necessary, adaptation of this policy.
Presuming the company’s labor practices are compliant with pertinent regulations, the first step in designing a credibly valuable DEI policy lies in determining the materiality (i.e., financial relevance) of its three component parts. But identifying, let alone appraising a financial risk attributable to, for example, the ethnoracial composition of an enterprise software company’s product engineering and development managers, is a decidedly more ambiguous exercise than assigning a financial risk to, say, inefficient energy use in the company’s offices.
The input of the company’s employees, customer advisory boards, key investors, vendors and other stakeholders, extrapolated from anonymized results of targeted surveys and randomized in-depth interviews, is necessary to cut through this ambiguity. And it’s by managing and analyzing this stakeholder input with a digital platform that our B2B software provider will determine whether there’s a plausible correlation between the lack of ethnoracial diversity among its product engineering and development managers and the job satisfaction of junior product engineering, management, and sales personnel—a clear financial risk.
Beyond this materiality assessment phase, there is invaluable merit in leveraging a cloud-based ESG data management and reporting system to drive the company’s subsequent DEI policy development, implementation, evaluation, and adaptation stages, too. These digital platforms are a more robust, functional, and ultimately sustainable alternative to their end-users’ otherwise instinct-driven materiality assessment, as well as their manual, spreadsheet-driven ESG performance data collection, analysis, management, and disclosure processes.
To illustrate this point, we can consider a scenario where our B2B software provider’s leadership proposes a DEI policy that establishes specific goals and corresponding achievement strategies, such as reforms to companies’ hiring and staffing decision matrices or the introduction of bespoke career advancement opportunities (i.e., a professional development reimbursement program) for junior BIPOC employees.
First, the DEI policy will need to be tendered for stakeholder feedback, a process enabled by the multi-directional communications functionality of the ESG platform. Should a platform-driven analysis of the received feedback substantiate a consensus on the policy’s design, then the company’s leadership will proceed to developing accurate, agreeable KPIs, such as the ratio of junior BIPOC employees that capitalize on new professional development opportunities each year, and assign responsibilities for their monitoring and management.
By virtue of the cross-functional communications they enable, the ESG platform will equip the company’s designated KPI managers and, by extension, the company’s ESG program administrators and their stakeholders with continuous insight into the alignment of the DEI policy’s actual and targeted outcomes. Exceptionally important is how these platforms bring integrity to their end-users’ evaluation of their ESG performance management efforts and efficiency and effectiveness to the adaptation of those efforts whenever necessary.
There may be a scenario where our B2B software provider’s BIPOC-targeted professional development reimbursement program goes underutilized and, as a result, fails to support an internal pipeline of BIPOC product engineering and development managers. Proposed reforms to the DEI policy, such as financing an annual scholarship fund for BIPOC STEM students enrolled at a local university with funds leftover from the underperforming professional development reimbursement program, can be developed, trialed, and evaluated through the same platform-driven stakeholder engagement processes.
Regardless of the ESG risk, impact, or opportunity at hand, this stakeholder-influenced, platform-driven process ought to be distilled into a standard operating protocol.
For instance, while it may be tempting to consider the EHS compliance officer as inherently qualified for the role of ESG program administrator, expecting them to singlehandedly manage the company’s pursuit of performance excellence across all three pillars of ESG would be a gross miscalculation. Because without direct, continuous insight into the companies’ management of ESG issues that fall under the purview of, say, the HR department, the EHS officer will be consigned to an arduous, error-prone, manual process-driven data collection, management, and analysis exercise.
The solution, then, is to equip these professionals with a diversity of resources describing their companies’ management of ESG issues, as well as different perspectives regarding their financial relevance, how they might be managed, and how that management might be assessed. And it’s by provisioning the EHS officer with a cloud-based platform that enables seamless cross-functional communication and collaboration that executives will not only empower them to continuously monitor ESG performance across all three pillars, but also ensure that their conduct as ESG program administrator is shaped by a diversity of cross-functional expertise and perspectives.
A truly holistic, operationally resilient enterprise ESG program is one that secures and, importantly, sustains stakeholder buy-in. To secure it, executives will need to ensure a diversity of stakeholder perspectives are used to determine the program’s target outcomes, achievement strategies, and evaluation methodologies. And to ensure stakeholder buy-in is sustained, executives will need to ensure that the responsibilities for managing and, when necessary, adapting these component parts are equitably distributed.
The operationalization of an enterprise ESG program capable of delivering continuous results requires all hands on deck. And it’s by affording each of the company’s mission-critical stakeholders the opportunity to shape this program and see to its success that executives will set their organizations on a path toward lasting ESG performance excellence.