To drive continued sustainability progress, it’s important to keep a pulse on your key issues and the core elements of your strategy. For novices and leaders alike, conducting an ESG strategy benchmark to identify risks and opportunities around your sustainability strategy is an effective annual practice. A strategy benchmark is a comprehensive assessment of publicly available ESG policies, commitments, progress, and data used to determine your company’s performance and transparency compared to peers.
The benchmark analysis identifies gaps and opportunities across sustainability topics in areas such as: the climate crisis, human capital, industry-specific issues, disclosure frameworks, stakeholder engagement, communications, impact, governance, priorities, and metrics.
There are four steps to completing a successful strategy benchmark and ESG gap analysis:
Conduct an audit of current programs, policies, reporting, metrics and data. Identify what activities, metrics, and programs your company currently gathers and undertakes. You may be surprised by how things your company already does can fit into your sustainability strategy. For example, if your company currently invests in renewable energy projects, you may be further along on your climate journey than you expected.
The internal audit will also enable you to have a clearer picture of current gaps in your sustainability strategy. Perhaps you have no whistleblower strategy, or formal, regular ESG oversight from the highest governing body, both of which are critical elements of the Governance piece of your strategy.
Perform peer and competitive benchmarking by looking at ratings and rankings, programs, policies, data, metrics, reporting, and storytelling. This is the time to look to third-party organizations, like the Sustainability Accounting Standards Board (SASB) or Morgan Stanley Capital International (MSCI) to identify key trends, material topics and sustainability performance in your industry and peerset. By looking directly at your competitors and third-party assessments of your business ecosystem, you can better determine how well your industry is performing on ESG strategy and communication.
Keep in mind that if your industry and/or peer set is underperforming on ESG issues, this does not mean that you do not need to concern yourself with creating a strong ESG strategy. If anything, identifying industry and competitor shortcomings affords your company the opportunity to chart a course to be an industry leader and set an example and raise the bar for other companies in your industry.
Based on the information gathered from steps 1 and 2, you are ready to conduct a gap analysis. To do this, compare your company against your peer set across your key issues and areas. You’ll want to look at who is currently addressing this issue, how, and to what degree. It’s valuable to assess both how you compare to your peer set (i.e. How many peers are measuring and disclosing Scope 3 emissions? Making a net zero commitment?) as well as the degree to which your company is leading or lagging (i.e. the leader has a comprehensive data privacy and security policy, whereas the laggard has none). This allows your company to reflect on where it would like to sit among peers, and gain awareness around potential reputational risks and opportunities.
After you’ve collected and analyzed all of the benchmark data and examples, it is time to generate insights and recommendations for action. In areas where you already perform strongly against peers, there may be an opportunity for stronger communication, reporting and storytelling so that key stakeholders recognize the great work that you are already doing. In areas where you identify gaps in your sustainability strategy, communication and reporting, look to best-in-class peer examples for inspiration on how to move forward successfully. The goal is to create a roadmap that can be used to advance your sustainability strategy and goals. You will likely not be able to complete everything, all at once, with the same level of attention, so here are some tips as you develop your action plan:
- Prioritize topics and issues: Use your sustainability strategy and the topics identified as most material by your stakeholders to prioritize what to focus on first.
- Categorize key areas: You can divide the gaps and opportunities into broad categories, such as disclosure and reporting, stakeholder engagement, policies, strategy, metrics or communication in order to organize the recommendations in a strategic way and divide responsibilities among your team.
- Identify timing: Some gaps and opportunities will be “low hanging fruit,” or items that will not require a significant amount of time or labor, while others will be longer-term and/or more labor intensive. Clearly describing the time frame and labor involved in the recommended next steps will help you and your team create a road map for immediate, short, medium, and long-term activities.