What is an ESG Policy? (Overview, Definition, and Examples)
Interested in building an ESG policy for your organization? A well-written policy provides a blueprint for sustained, effective governance.
Today’s regulators, investors, and consumers care deeply about organization’s efforts to show responsibility and accountability to environmental, social, and corporate governance (ESG). You risk damaging your reputation when you disregard ethical practices like upholding human rights, avoiding discrimination, and reducing your carbon footprint. For those reasons, the board of directors is often tasked with creating an ESG policy for its organization. Read on to learn more about the key components to include when writing an ESG policy.
What is an ESG Policy?
Today’s consumers shop and support their values. In addition, investors want to support environmental- and socially-conscious organizations, making ESG more important than ever. ESG policies show that a company is committed to doing more than making a profit.
The ESG policy outlines all business practices related to environmental, social, and governance issues. The document should serve as the navigational North Star for all business leaders, including the board of directors.
Being a relatively new addition to business terminology, many companies may still lag when setting, documenting, and measuring compliance to ESG policies. But a sound ESG policy helps organizations stand out from competitors and attract and retain new talent.
Elements of an Effective ESG Policy
Your ESG policy framework must strive to empower all stakeholders to initiate sustainable policies and practices, and serve the communities around you. Your policies must fit in the following three categories:
These are standards surrounding the use of energy resources, procedures for waste management, and impact and efforts toward slowing climate change.
Social policies focus on how your company interacts with employees, consumers, and the world around them, and should consider human rights, workplace policies, workers’ rights, DEI, wages, and employee wellness and training.
Standards for governance encapsulate issues and efforts that involve decision-making and corporate cultures, such as transparency, accountability, inclusivity, and compliance. This could also include how the company relates with stakeholders, investors, and consumers.
An effective policy must do the following:
Set clear and concrete policies for improved governance.
Remember that the policies guide your operations, and to be successful, they must be clear and measurable.
Offer a distinct worldview of positive change.
Through your policies, you get to show your commitment to adding value to the world. Define this, but also show how your organization will implement and maintain these policies.
Serve as a single source of truth for improved governance.
A clear and outlined policy accessible throughout the organization creates a governance framework to guide daily actions.
Consider all members of the organization and how they might work in tandem to create improved governance.
ESG policies do not work in isolation; they are aligned to your overall company goals and objectives. Make sure your policy clarifies everyone’s role.
ESG Policy Example
Douglas Emmett, a leading provider of Class-A properties throughout California and Hawaii, provides an excellent ESG policy example:
“Environmental factors will continue to be closely linked to the health and well-being of our tenants, employees and surrounding communities, particularly in the face of climate change,” Emmett cites in the 2021 Environmental, Social, and Governance Report.
What Changed for Boards in 2022?
Improve Document Management With OnBoard
To allow the entire organization to access your ESG policy, store it securely and digitally with a board management platform. A tool like OnBoard provides a system of record backed with intuitive data and analytics to get work done faster, build board materials easier, and communicate more effectively.
Ready to empower your organization with the tools they need to succeed? Request a free trial of OnBoard today.
About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
- Board Management Software2023.05.25How to Write a Strategic Plan (Step-by-Step)
- Board Management Software2023.05.24What is a Standing Committee? (Overview, Roles, and Responsibilities)
- Board Management Software2023.05.19Board Voting by Email: 3 Major Risks
- Board Management Software2023.05.17What is Cronyism? (Overview, Definition, and Examples)