Erica Brinker, CCO and Head of ESG at Array Technologieshas more than 20 years of experience in the field of marketing, branding and corporate communication.
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As interest in expanding environmental, social and governance (ESG) initiatives across industries grows, so do questions around ESG frameworks and best practices. More than a year and a half ago, I launched our first ESG efforts, starting with a strategy for Array Technologies, a global renewable energy company. The idea of launching a new program, which just went public in October 2020, seemed daunting – knowing where to start was challenging because it was all new.
Bringing together your board of directors, your CEO, the executive leadership team, and work groups is a daunting task in itself. Add to that the fact that you are working to orchestrate your supply chain, human resources, legal, finance, safety and much more, and you have a huge task ahead of you. In our case, I have been fortunate to have the strong support of my CEO, the executive team and the board of directors.
If you find yourself in charge of ESG efforts in your company like I am, here are the answers to a few questions I often get.
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If ESG data is self-reported, why invest the effort and money to actually follow good ESG practices?
Some point out that since ESG data is often self-reported, companies could say they follow ESG practices rather than actually doing so.
To get serious about an ESG effort, it can be daunting to clearly establish what you are expected to track and how it will deliver returns to the organization. But it’s all about perspective. If you only think of ESG compliance as part of an annual ESG reporting cycle, it will not be very effective or pay off in the long-term. The last thing you want is for your ESG efforts to become a checkout.
Instead, it must be woven into the fabric of culture and strategy. Don’t just view your ESG goals as an annual report, but rather the way you work, the way you operate and how you view your impact as a business. Do this at multiple levels of the organization, including at the executive level. Determine what you want to achieve as a company and how you can achieve it with sustainability, diversity, safety and leadership in mind. Your goals shouldn’t be about getting better investor scores – better ratings are a result, but not the result companies should be trying to achieve.
What if we are committed to ESG compliance and we are accused of ‘greenwashing’?
I have three suggestions for companies that want to avoid being seen as greenwashing.
The first and best way is not to make claims that are not true. Don’t make claims that you can’t back up with data or that can’t be easily repeated if necessary. Improving your ESG efforts doesn’t mean you have to be the best from day one. However, it does require you to be truthful in your dealings and make genuine efforts to improve the way you work. Stakeholders want to know and will even reward companies for their radical transparency. Add footnotes where appropriate, avoid incomplete disclosures, and make sure readers understand where you are on your journey and where you want to be.
Second, create the core list of policies that are a priority for your business. Once you’ve approved and implemented the policies, make sure they’re readily available on your website. Reporting agencies use bots, interns, and other methods to identify what policies you may have, so make sure those policies are easy to find online and in your ESG annual report. Also, be sure to work with suppliers or partners who work with similar values. In addition, some external auditors can help ensure alignment between business owners and the companies they work with.
Third, make sure you self-report your efforts. Self-reporting is essential because many rating agencies will rank you whether or not you participate. So being proactive makes sense. Make yourself available for investor questions and give them the opportunity to provide feedback on what else they would like to see from your organization. This has proven to be an incredibly useful component in improving our ongoing ESG plan.
Will investors think investing in my company is risky because their funds are not in diverse funds/portfolios?
Doing good while doing good is absolutely possible. When the NYU Stern Center for Sustainable Business and Rockefeller Asset Management examined the relationship between ESG and financial performance in more than 1,000 research papers from 2015 to 2020, they found “a positive relationship between ESG and financial performance for 58% of the ‘corporate’ studies.”
Investors more and more want to invest in companies reporting ESG data. Being aware of the environment and your suppliers, hiring diverse people and having an independent board of directors are all factors that can make a company a more solid investment. Companies that offer transparency are common on companies whose investors don’t know what’s going on inside.
You don’t have to and shouldn’t do this all by yourself. While it’s essential to get strong support from the top, I’ve found one of the most rewarding parts of launching our ESG efforts in building a cross-functional team all working towards the same goal.
Start small, start with measurement and transparency, and go from there. ESG should not weigh profit against doing the right thing as a company. It is absolutely possible for companies to do well financially while making a positive contribution to the environment around them, the communities they serve and the employees who help make it all possible.
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