8
Insights

ESG Strategy Execution: 3 Steps for Success

ESG Strategy Execution: 3 Steps for Success

Introduction

We are faced with the biggest transformation challenge in history: how business can operationalise ESG, to de-carbonise our environment and ensure sustainability of business and the planet.

Why we need an ESG strategy is clear.  There is now growing demand from shareholders, increased interest from executives, employees and customers to justify an ESG strategy, based on broadly accepted scientific evidence.  Colvin et al (August 2023) provided a description of how to operationalise ESG, with practical examples of how companies globally have gone about dealing with opportunities in E, S and G.  

This paper delves further into how an ESG strategy can be operationalised into the cultural DNA of the business. We know that 70-78% of transformation and strategy execution fails (HBR 2022, McKinsey 2023). Execution risk is unacceptably high.  Yet the prospect of failure is unacceptable and even unimaginable.

This article describes FutureBuilders 3 step framework for implementing your ESG strategy with an approach that delivers precision, momentum and traction.  The 3 steps include:

  1. Establish your ESG business strategy with precision, aligned to culture 

  2. Set up your project management approach to deliver traction, aligned to culture

  3. Plan your change management approach to deliver momentum, aligned to culture

For those businesses who already have well established execution approaches, this provides some ideas for board members and executives to benchmark your ESG strategy implementation approach.

An overview of the FutureBuilders Transformation Framework
The FutureBuilders Transformation Framework

FutureBuilders Transformation Framework™ has been developed based on research and experience of over 50 transformation programs with a 96% success rate.  Strategy execution (transformation and change programs) is successful where there are 3 integrated perspectives:

  • A business, commercial, strategic perspective means you make optimal decisions for your business. This delivers precision. 

  • A change management perspective is people oriented (customers and staff). This delivers momentum.

  • A project management perspective builds appropriate project governance.  This delivers the traction.

All 3 must be aligned to fit organisational culture.  Where leaders consider only one or two perspectives, or where the approach is not aligned with the culture, the transformation fails.  An integrated approach ensures you make the right business decisions, with the right people at the right time, working in the right way.  This approach creates a flywheel to turbocharge the transformation. A flywheel is a heavy wheel that stores rotational energy to accelerate faster.  This pulls the business into the ROI and Innovation Zone. 

Applying the transformation framework - 3 steps to implementing ESG strategy

Establish your ESG business strategy with precision, aligned to culture 

There is a growing understanding amongst board and executive teams that an organisation’s culture plays a critical role in determining what actually gets prioritised, and what gets done.  I have previously written in AICD’s Company Director magazine that “As part of setting the cultural framework, boards must agree with the CEO and executive a specific choice of words to describe the target culture and desirable behaviours.” The culture will partly be determined by the board and leadership’s attitude to ESG. 

This needs to be precise, clear and aligned to the stated business strategy, else it will appear to be an inauthentic “greenwashing” approach.  If an organisation has announced an ESG strategy that is not aligned with its workplace culture, this can generate significant scepticism and reputational damage amongst staff and the public.  This happened for example when “Rio Tinto drew international criticism for destroying ancient rock shelters at Juukan Gorge”  (ABC 2021). 

Authenticity of any publicly announced business messaging is important, however it is especially important for ESG priorities, because they often bear a financial cost without delivering a direct ROI.  Environmental management initiatives (such as energy usage), higher standards of supply chain management and community giving programs are all unlikely to pass cost/benefit scrutiny based on a quantifiable business case.  

This means that the board and executive need to be aligned in the public facing ESG strategy and external messaging.  And this needs to be synchronised with the internal behavioural signals that they send to staff inside the organisation that make up the fabric of the culture. 

Several years ago I developed an ESG strategy with an executive team of a large global business.  They had a strong, consistent culture which prioritised financial performance above all else.  As a result, they decided to take a cautious “follower” approach to ESG, as they knew that they were unlikely to approve any of the “nice to have” initiatives on the table. Their position was clear: despite the fact that they were a market leader, they agreed not to take a market-leading environmental position.  Although they may not be the “gold standard” in environmental terms, their ESG strategy is authentic to their business and aligned with their organisational culture.  I believe this style of authentic leadership (Keogh 2019), is preferable to having a misaligned business strategy and workplace culture, which will generate staff scepticism, demotivation and undesirable turnover, as well as external brand damage. 

On the other end of the ESG spectrum is Canva, the Australian design company last valued at $US27 billion.  Their culture is based on tightly held values, including “Be a Force For Good”. This translates into strong ESG practices including a pledge of Founders Melanie Perkins and Clive Olbrecht to give 30% of Canva to philanthropic causes aimed at alleviating poverty, 1% of profit to the community, and staff policies such as 3 paid days of volunteering each year.  Canva has been carbon neutral since 2021. Talking to a “Canvanaut” recently, what struck me is the consistency in how this team member spoke about the culture inside the company, compared with the external branding.

Cultures that are strong have more consistent messaging.  As I’ve written before “The board has an important role to play in fostering a strong culture — setting the appropriate, specific parameters for the organisation and consistently demonstrating this in their own behaviours.” (Lisa Carlin, AICD Company Director Magazine, 2022).  Likewise, Executive leaders will be most inspirational when they present a unified, clear message about ESG, that matches the cultural norms and the criteria that are applied in making investment decisions. 

Set up your project management approach to deliver traction, aligned to culture
  • Any organisation-wide program is best set up with program management governance, including an “operational level” ESG committee (or steering group) to oversee implementation. This is necessary for accountability, guidance and streamlined decision making.  The CEO may decide to sponsor the organisation-wide program to signal the priority, or it may be delegated to an executive of suitable influence and status, who is personally passionate about ESG.  If the Board has a dedicated ESG sub-committee, then it is possible to have a direct line to the “operational level” ESG steering group.

  • Reporting and benefits realisation is always an important component of project governance. For ESG implementation, you may need to implement or adjust your operational reporting to include key ESG metrics.

  • As always, the project management approach and governance must align with the culture.  For example, in high performance environments minimal project governance may be needed.  Alternately, in “avoidance” cultures where people avoid taking accountability and avoid decisions (described further by Human Synergistics Organizational Culture Inventory, then tighter governance and scrutiny are needed, with specific authorisation levels and sign-offs during the execution journey.

Plan your change management approach to deliver momentum, aligned to culture

I’ve written about moving away from a “dark room strategy” approach and co-designing solutions from the start (co-authored Dr Norman Chorn, 2021).  Instead of developing strategy behind “closed doors” in traditional style, this is an open strategy process where you involve those impacted or responsible for delivery from the beginning.

This means that the implementation in a sense is already starting as you formulate strategy and plans. It is what I call “strategy activation”, a combination of strategy development and strategy execution where these phases are intricately intertwined. People exposed to the new strategy ideas are already figuring out how they can do things differently when they walk out of the meeting room, they are changing their focus in subtle ways. This delivers the best support and the most momentum, and is consistent with Human Centred Design and Design Thinking principles.

In fact, I believe one of the best examples of a co-designed approach generating momentum is developing an ESG action plan with staff involvement.  The reason for this is that there will usually be strong advocates of the environment and social impact in every business.  If you engage those people appropriately, you have the most powerful ingredient for change momentum: a purpose-built highly motivated community. 

It is not a difficult exercise to establish an internal community in a business, sometimes called a working group. You can plan a collection of working groups, each with a different ESG focus (or geographical focus), as long as they are well coordinated.  

Again the execution must be planned with the workplace culture in mind.  For example, in a siloed culture it may be best to provide each business unit with their own ESG committee so each “silo” can make its own mark on their ESG program.  Alternately you may purposefully try and break down the siloes, by setting up cross-business / cross-functional ESG working groups.  In that case it will be essential to engage the correct representatives of each “silo”, to ensure the current cultural influencers are respected.

The working groups can be tasked with a range of responsibilities, usually on top of their business-as-usual roles.  They could for example:

  1. identify skills gaps in circular economy and carbon neutral principles

  2. invest in ESG or transformation skills development and tools for the business

  3. redesign products and processes for reduced environmental impact

  4. conduct R&D for innovation, partnerships and future sustainability.  

The benefit of setting these up as temporary working groups rather than permanent departments is the flexibility they offer, to deliver agile, just-in-time solutions as the ESG landscape changes, and to provide improved coordination and integration mechanisms across the business.  I have also seen significant recognition and careers acceleration for the people involved in these multidisciplinary initiatives.  The working group is then closed down once the project is completed, and handed over to an established business owner.

Conclusion

I have seen firsthand how this multidisciplinary approach to strategy execution, aligned with culture, generates unparalleled momentum in organisations.  Together with precision and traction, you can break down the inertia that is prevalent in many change initiatives. This accelerates your strategy execution from a push to a pull effect, delivering significant ROI and innovation.

ESG is laden with purpose, and therefore has a strong potential to capture the imagination of employees.  With authentic leadership of the executive and board, it enables your organisation to make a significant contribution to future generations.

Sources

John ColvinElizabeth MacGregorSasha Jurac, Operationalising ESG,  CEO & Board Practice, Colvin Consulting Group, (2023)

Paul A. Argenti, Jenifer Berman, Ryan Calsbeek, and Andrew Whitehouse, The secret behind successful organizational transformations, Harvard Business Review (HBR), Sept 2021

Patrick Simon et al., The State of Organisations 2023, McKinsey & Company, April 2023

Authentic leadership by Allison Keogh in Leading Well, Institute of Managers and Leaders Australia New Zealand, Sept 2019

Lisa Carlin, Read the Room, Australian Institute of Company Directors AICD Company Director Magazine (September 2022)

Human Synergistics Organizational Culture Inventory, www.humansynergistics.com

Lisa Carlin and Dr Norman Chorn, Stay out of the Dark Room, 2021

What We Do

Learn about how our firm values translate into the work we do.

Work with us

If you are interested in collaborating with us on a research project, please contact us.

Get in touch
Powered by BreezingForms