Operational ESG is another way of referring to operational environmental, social and governance (ESG) practices. It is the integration of sustainability practices into a company’s daily operational activities, which leads to the execution of ESG strategies that result in broad impact.
Operationalizing ESG in your organization is critical because ESG has become the new normal in measuring corporate performance. Data shows that organizations that lead in sustainability investment earn more than those that do not.
Organizations are compelled to implement processes not only based on economic performance, but on what is best for the planet. To operationalize this performance, organizations must act across areas that include environment, health, safety & sustainability; product stewardship; and operational risk management—all of which are informed by the data collection/management, analysis, reporting and insight activities that support robust operational ESG.
Benefits of Operational ESG
Organizations can optimize sustainability programs to boost innovation, maintain market reputation and increase brand value. Corporations and investors recognize the importance of addressing environmental and social impact issues as well as maintaining strong governance practices to achieve long-term, sustainable success while reducing impact on the environment in which they operate.
The benefits of integrating sustainability solutions and ESG metrics into an organization’s business processes help companies manage risks, improve reputation and attract socially conscious investors. The outcomes include an improved market leadership position, digital transformation of the enterprise and a safer, more sustainable and productive world.
When enterprise stakeholders can bring together information that is measurable, transparent, traceable and auditable, the benefits of sustainability maturity are realized.
Executing Operational ESG
Operationalizing ESG requires that organizations are functionally prepared to activate processes to take advantage of opportunities, face challenges and mitigate environmental, social and governance-related risks.
Such readiness includes building the capability to support commitments to voluntary targets, monitoring and measuring progress toward those targets and achieving compliance with regulatory standards. The processes and internal structures must be in place to maintain reputation and avoid being penalized by investors or regulatory bodies.
Operational ESG warrants the way to achieve those objectives is to bring together data at three levels—enterprise, operational and product—and store that data in a cloud-based data lake so that it can be readily verified in a manner that organizations can aggregate, visualize, report and review information. At the enterprise level, data is collected on corporate sustainability; diversity, equity and inclusion; corporate governance; and carbon accounting. At the operational level, data on greenhouse gas emissions; air, water and waste pollution; workplace health and safety; control of work; and maintenance, repairs and operations are collected and managed. At the product level, product carbon footprint data as well as data on product safety and compliance, supply chain risk management and hazardous materials management data is measured and monitored. Finally, the data is stored in the cloud, allowing organizations to apply AI analytics through software like SpheraCloud and use those insights to take prescriptive actions that result in effective and positive change toward achieving net-zero goals.
As the organization advances in each of these areas, it evolves along the sustainability maturity model from compliance to efficiency, optimization and ultimately to a position of ESG leadership.
An organization can make effective progress toward this goal by implementing a set of operational ESG programs that include:
- Enterprise Level
- Corporate Sustainability
- Diversity, Equity & Inclusion
- Corporate Governance
- Carbon Accounting
- Operational Level
- Greenhouse Gas Emissions
- Air Pollution, Water, Waste
- Workplace Health & Safety
- Control of Work
- Maintenance, Repairs, & Operations
- Product Level
- Product Carbon Footprint
- Product Safety & Compliance
- Supply Chain Risk Management
- Hazardous Materials
This key list of operational programs across an enterprise, when executed as repeatable processes, contributes to operationalizing the primary objectives of an ESG strategy. Data—whether collected from employees, IoT devices, weather monitoring or other sources—should be managed, reported, distributed and reviewed at a regular cadence. Once this process has been established, it becomes a vital aspect of operational ESG.
In summary, operational ESG is enabled when internal stakeholders can derive useful insights on every aspect of sustainability from one central environment and take action based on those insights. The holistic view that’s acquired through operational ESG is gained from a combination of software, content and consulting. An organization needs market-leading corporate sustainability software that enables streamlining and efficiency in executing ESG programs. Next, it requires information and robust data, including regulatory information, chemical data, LCI/LCA data and emission factors. Lastly, it will thrive with expert sustainability consulting that will help solve the more complex ESG needs and not just offer a fragment of the solution.
Operational ESG represents an integrated approach to sustainability, acknowledging that responsible business practices must be applied comprehensively throughout a company’s operations to create lasting positive impacts on the environment, society and corporate governance.
Performance of operational ESG consists of:
- Identifying the key metrics by which to measure activities.
- Establishing performance benchmarks and targets.
- Ensuring data collection, data quality and data transparency are integrated into the day-to-day activities of the organization.