News and Views

Why private companies should invest in an ESG strategy

Nicole Speciale
September 21, 2023
News and Views

Why private companies should invest in an ESG strategy

“Is an ESG strategy necessary to our business?” 

This is one of the most common questions we hear when working with privately-held companies that are beginning their ESG journeys. As a full-service sustainability and communications consultancy, thinkPARALLAX collaborates with a broad range of clients–public and private.

While the answer may be more obvious for public companies—i.e., due to SEC regulation preparation, increased stakeholder pressure for sustainability matters, etc.—we encourage our private clients to think similarly. 

Here are five key reasons why private organizations should invest in a comprehensive ESG strategy: 

Preparing for an IPO

If your organization is thinking about, or going to  go public, it is best to start creating and implementing an ESG strategy sooner rather than later. Once companies IPO, they tend to face greater expectations to disclose their environmental impact, their diversity, equity, and inclusion (DEI) strategies, and governance practices. To start, private companies may want to consider the following ESG efforts:

  1. Hire a dedicated ESG person 
  2. Calculate Scope 1 and 2 emissions; waste generated; and water consumption
  3. Evaluate your current DEI approach and ensuring proper resources are allocated to own and evolve this workstream
  4. Develop essential governance policies, like business ethics and data privacy & security
  5. Report to material frameworks, like SASB and TCFD

Reinforcing your legacy and reputation

When people hear the name of your company, what do you want them to associate with it? A well-rounded ESG approach can augment your reputation as a sustainable leader and create a positive impression on the businesses and consumers you serve. Developing an ESG strategy and ensuring that relevant ESG policies and communications are in place can engage your broader community while guarding against the risk of greenwashing. Not sure where to start? Check out our ESG Field Manual Part III: From action to amplification

Accounting for stakeholder expectations

You may be experiencing stakeholder pressure to share more about your approach to environmental, social, and governance issues. Depending on your industry, stakeholders of interest may include customers, suppliers, employees, and investors, among others. Keep in mind that each of these groups have different expectations of your organization. A robust ESG strategy will prioritize the key issues for your organization, taking into account all stakeholder perspectives. If you aren’t certain where your stakeholder expectations currently lie, consider conducting a materiality assessment. This can serve as a compass for building a strategy roadmap.

Understanding your environmental footprint

As more companies calculate their scope 3 (upstream and downstream) emissions, they need to request emissions data from their supply chain. If your organization falls within the supply chain of a company that reports its scope 3 emissions, then you will need to understand and share data about your own operational footprint. At the very least, put a plan in place to calculate your scope 1 and 2 emissions, so that you can be prepared when data requests come through.  

Planning for the inevitable

Bottom line, getting prepared now can save your organization additional stress and reputational risk in the future. A robust ESG strategy not only mitigates risk, it also enhances the financial and perceived value of your organization. ESG regulation will continue to expand, and not just for public companies. The ESG-related impacts we observe for public companies typically indicate what we can expect to see for private companies over the next several years. 

If you’re ready to explore the opportunities for your organization’s ESG strategy, send us a message. We can collaborate to find solutions specific to your unique needs. 

Why private companies should invest in an ESG strategy
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