The increasing importance of an ESG strategy

A strategy is a plan designed to achieve a particular long-term aim. An ESG strategy is a guide to integrating sustainability issues into everyday practice and performance. In ESG strategies, we see a company’s understanding of how it can best use its products and services to help society achieve a greener, more equitable and more sustainable future.

The COVID-19 pandemic has shone a light on the link between ESG and the resilience of a company’s business model. A resilient ESG approach is no different from any other business strategy created to propel a company forward in the context of its risks and opportunities.

Leading ESG approaches share a common thread starting with purpose, outlining oversight structures, defining an ESG strategy and communicating that strategy through policies, programmes and metrics. Our latest issue of ‘Reporting Matters’ reveals the findings of our research in the FTSE 100 on how leading companies are adopting such approaches.

Our findings

In the context of our ‘Reporting Matters 7’ study, our key findings are as follows:

• The majority of companies presented a separate ESG strategy in their Annual Report – so much so that 15% more companies published a separate ESG strategy as opposed to integrating ESG fully into an overall Group strategy.
• 13% of our sample presented no explicit ESG strategy in their Annual Reports.
• 20% of sampled companies included traces of ESG information in an overarching group strategy.
• Less than 10% of our sample consider ESG as an important part of their purpose.

Our recommendations

• Define what your audience needs to understand about your ESG efforts.
• Act on the ESG issues that are significant for your company, as identified by your materiality assessment, by developing a clearly defined ESG strategy.
• Ensure that your ESG strategy aligns with your corporate strategy and purpose.
• Consider how you can demonstrate the success of your ESG strategy.

At our launch event on 13 July, Luminous’ Stephen Butler, Investor Engagement & ESG Disclosure Director, Rachel Madan, Sustainability & Impact Director, and Nina Kefer, Consultant, along with Richard Davies, Managing Director of RD:IR, shared the outcomes of our proprietary research. They also offered practical advice on defining, reporting and engaging around ESG strategy, as well as how to optimise your ESG in your Annual Report and investor days.

If you would like to access the recording and slides from our event, please get in touch.

Stephen.Butler@Luminous.co.uk