Senior Partner, Organizational Strategy and Business Sustainabilty
Are expectations too high for the ESG & sustainability strategies to reach?
The term ‘environmental, social and governance (ESG) and sustainability’ has quickly become a business buzzword.
Organizations are energized by the possibilities and potential for change. For the first time, they’re making ESG and sustainability fundamental pillars of business strategy—it’s been elevated from the footnotes to the front pages of many annual reports.
However, there are concerns that current ESG and sustainability strategies will struggle to deliver against enormous expectations, and aspirations won’t be matched by action. There are many risks attached to the scale of the challenges and changes ahead—and questions over the capabilities and resources needed to achieve ambitious goals.
At Korn Ferry, the conversations we often have with business leaders tell a similar story—ESG and sustainability strategy is starting to shape year-by-year action plans, but only gradually. For some stakeholders, including investors, customers, employees, partners, and regulators, the pace of change is not nearly fast enough.
Make way for people-powered change
Most ESG and sustainability strategies tend to focus on the more obvious and most visible. These usually include assets, technology and research & development (R&D), investments, policies, regulatory compliance, and public relations. As a result, many ESG and sustainability strategies still have people-related gaps, making them less-effective tools for change.
Leadership and culture are key to delivering successful outcomes for any type of organizational change. In addition, our research highlights many people-related factors— shared purpose, Board governance, talent and skills, and operating model agility—that are known to impact the delivery of ESG and sustainability strategy.
Factors that impact ESG and sustainability plans
For an ESG and sustainability strategy to deliver, here are some of the people factors that matter most and need to be addressed in the action plan:
- Organizations with a clear purpose are more successful in the long term
- Board accountability for ESG and sustainability is vital for good governance—and boards must adapt to support ESG
- Leaders need to grow their impact across and outside their organizations, such as the industry value chain
- Competing for the right talent and skills is critical for performing today and transforming tomorrow
- Reaching goals will require flatter, more connected operating models
- Culture helps to drive ESG activities—and vice versa.
Identifying these ESG and sustainability issues early will result in a more robust strategy—one that’s more likely to deliver desired outcomes. That’s the thinking behind our Action Map which puts people-related actions front and center in a step-by-step approach.
4 steps to create your ESG and sustainability action map
Step 1: Review
Action planning begins with a materiality assessment. Reviewing this helps you understand and rank your priorities. Getting to know what's important to you, your stakeholders, your industry, and the wider world will also help you pinpoint your most pressing ESG and sustainability actions.
Without this review process, the risks increase of focusing on the wrong things, missing the gaps in your strategy, or leadership not being aligned. This could lead to achieving targets that don’t contribute to the overall ESG and Sustainability purpose or outcomes. And you risk stalling on strategy and falling short on delivering the expected changes.
Step 2: Assess
Assessment identifies opportunities, risks, and the level of ESG maturity. The assess step also shifts focus to areas where action plans typically fail. These key findings for each of the people-related factors we set out earlier—purpose, governance, leadership, talent, operating model, and culture—then feed into the strategize and act steps.
For a practical example of what this assess step might look like, download our ESG and sustainability Action Map paper . In this illustration, the key findings highlight some of the most common reasons why action plans don’t deliver expected outcomes, including:
- Board members misaligned which limits the effectiveness of oversight and governance
- Senior leaders are not demonstrating the necessary mindset and skillset—in other words, modeling the behaviors that are need to deliver ESG and sustainability
- Executive incentives are not linked to ESG goals
- Lack of understanding among stakeholders of ESG priorities, how they were determined, and how they influence strategy and actions.
In the example, These findings led to fundamental questions about its role in their industry value chain. And which accountabilities it solely owned or shared with others.
The assess stage also provided detailed findings and insights on leadership skillset and mindset. Plus, it flagged up issues around building a more innovative, ‘fail-fast’ culture that needed to be addressed.
Step 3: Strategize
There are many ways to develop an ESG and sustainability strategy. In the review step, we looked at the importance of stakeholder engagement—and this is just as important when you strategize. Specifically, when you’re setting out the future state of your organization, and how you involve internal stakeholders at all levels, from senior leadership to management and employees.
The article, 5 factors to ensure a successful sustainability strategy, covers how best to harness collective effort—to help you focus on delivery. And it emphasizes the importance of mindset shift which gets you from “we should do something” to “how are we going to make it happen?” It also highlights three common derailers when it comes to executing on strategy:
- core or legacy business ‘blockers’
- silos that stop people from seeing sustainability as part of their role
- short-term financial hit.
Step 4: Act
All the previous steps of review, assess, and strategize can now be captured in an actionable, people-focused map. In the Action Planning Map paper, you’ll find an example of a map with a mix of short-, medium- and long-term actions.
Together, these draw the different threads and activities together, so you can address:
- ESG materiality priorities from step 1
- Key findings from step 2
- Strategy accelerators and derailers from step 3
Map your ESG and sustainability strategy before action
ESG and Sustainability is yet to make its most important leap. This is when organizations turn fine words and commitments into decision-making, tangible actions, and outcomes that truly benefit people and the planet.
Having a clear map will help you avoid being mired in strategy or losing momentum while you work out how to execute it. An action map won’t provide all the answers, but it will help you focus your ESG efforts on the right areas at the right time. Still, it’s the most effective way we know to turn aspiration into action, and objectives into outcomes.