5 steps to create a cross-functional ESG team

Most organizations that have communicated their ESG progress and goals have done so in sustainability and other reports on their websites. This voluntary reporting is most often managed by investor relations and marketing, perhaps with support from the sustainability leader or team, depending on the level of resources at the company. Now, ESG is front and center, and it’s evolving from selective narratives to mandatory, data-driven reporting that will be scrutinized by regulators, investors, ratings agencies, and a variety of other stakeholders.

Given the increasing demand for transparency and the associated regulatory risks and potential market opportunities, it’s vital to create an ESG team with representation from across the organization’s functional areas. This cross-functional team or steering committee can then inventory existing capabilities and identify strengths as well as any gaps in processes or data. Additionally, a robust ESG team can be well positioned to perform a proper materiality assessment, engage with stakeholders, and create a comprehensive road map to execute the organization’s ESG strategy.

While many companies have (or are recruiting for) an ESG lead to oversee this type of team, leadership is often dictated by resources that currently are in place and by topics that are important to stakeholders. The ESG leader must recruit support from colleagues across the organization, build consensus on execution, and solidify executive commitment to the strategy and goals.

Who in the organization can best articulate why ESG matters to the organization? The right person can make the case for ESG, identify risks and opportunities, and garner support across the entire organization.

The time to assemble this team is now. Is your organization prepared to address upcoming regulations, stakeholder demands, competition, and other goals? ESG data and reporting needs are evolving, and they arise at different levels of the organization, so it’s critical to establish processes to identify, triage, and plan for stakeholder expectations. This is no small task, as it takes time to assign responsibility, select technology, consider external support and managed service options, and fill internal staffing needs.

It’s also important to pay attention to the full spectrum of stakeholder demands – not just regulators and customers, but investors, employees, activists, and ratings agencies, too. The more information an organization has about competitive behaviors and best practices, the more effectively it can create a right-sized, customized ESG strategy.

The SEC has made it very clear that ESG information rises to the level of investor disclosure, which is a seismic shift in policy that cannot be overstated. As the ESG, regulatory, and financial reporting worlds collide, your obligations will increase, but your team can be well positioned to succeed.