How-to guide: How to approach and implement an ESG strategy (Global)

Introduction

This how-to-guide provides an overview of how an organisation can approach and implement an environmental, social and governance (ESG) strategy.

This guide covers the following:

Overview of ESG and why it is important to organisations
Collaboration on ESG issues within an organisation
Understanding what an ESG strategy might look like
Practical tips for lawyers

This guide can be read in conjunction with How-to guides: Understanding ESG, What general counsel (GC) need to know about ESG and How to consider and navigate the consequences of ESG risks.

Section 1 – Overview of ESG and why it is important to organisations

ESG is an overarching term used to refer to environmental, social and governance aspects of business activities. ESG is crucial for organisations as it goes beyond traditional financial metrics, providing a holistic view of the organisation’s sustainability and societal impact. Focusing on ESG-related issues is increasingly important in today’s global business landscape as key stakeholders – including investors, customers, and employees – are placing greater emphasis on ethical and responsible business conduct.

For further understanding of ESG in general, see How-to-guide: Understanding ESG.

Legislation requiring organisations to report in relation to ESG matters is developing at pace (eg, see How-to guide: Overview of climate legislation and regulation in the UK and Europe and Checklist: UK Modern Slavery Act reporting requirements: Section 54 (UK)). There are also numerous ESG frameworks which organisations can utilise on a voluntary basis (see How-to guide: What general counsel (GC) need to know about ESG). According to a 2024 KPMG Survey of Sustainability Reporting, 96% of the G250 companies report on ESG and sustainability.

In an era where ESG considerations are integral to both legal compliance and corporate success, organisations can benefit from implementing a comprehensive ESG strategy. There are numerous different elements to ESG, and a variety of risks and benefits involved. ESG impacts many parts of an organisation. Having an ESG strategy can enable an organisation to draw together the different elements of the business that contribute to ESG matters and ensure there is alignment across the organisation.

Organisations that prioritise ESG not only contribute positively to society but can also enhance their long-term resilience, reputation, and overall competitiveness with customers, job candidates and investors. Organisations may see the following benefits as a result of prioritising ESG issues:

Enhanced reputation and brand value: Consumers, investors, and employees increasingly value organisations that demonstrate a commitment to sustainable and responsible practices. Adopting strong ESG principles can enhance an organisation’s reputation and brand value.
More attractive to ESG-focused investors: Investors are increasingly considering ESG factors in their decision-making processes. Organisations with robust ESG practices may have better access to capital as they align with the preferences of socially responsible investors and funds. Additionally, many financial institutions are integrating ESG criteria into their lending and investment decisions.
Legal and regulatory compliance: Governments and regulatory bodies around the world are increasingly imposing requirements on organisations relating to environmental protection, social responsibility and corporate governance. Proactively adopting ESG practices helps organisations stay ahead of regulatory changes and ensures compliance with evolving legal requirements.
Better financial performance and more sustainable and adaptable business operations: ESG strategies and programmes can improve an organisation’s financial performance and increase its operational efficiency. This can be through ways such as reducing operating costs, energy bills and other expenses while also potentially driving higher sales. According to a 2023 McKinsey article, companies that achieve better growth and profitability than their peers, while also improving sustainability and ESG, outgrow their peers and exceed them in shareholder returns.
Increased customer loyalty: Customers are more likely to support organisations that demonstrate a commitment to ethical practices. ESG initiatives can foster trust among consumers, leading to increased customer loyalty and positive word-of-mouth marketing.
Risk mitigation: Addressing environmental risks, social issues, and governance concerns helps organisations to proactively manage potential risks. This can include regulatory fines, legal issues, legal claims, reputational damage and operational disruptions.
Economic return on investment: ESG strategies can generate long-term economic value by attracting investment, improving capital efficiency, and strengthening market positioning. Studies by McKinsey & Company (2023) and the UN Principles for Responsible Investment (2024) indicate that companies integrating ESG effectively experience higher total shareholder returns and stronger earnings growth over time, as sustainability performance increasingly correlates with financial outperformance. Beyond short-term cost savings, ESG-driven innovation and stakeholder trust contribute to lasting profitability and shareholder value creation.

Organisations that prioritise ESG considerations position themselves not only as responsible corporate citizens but also as entities that are better equipped to thrive in an evolving and socially responsible global marketplace.

Section 2 – Collaboration on ESG issues within an organisation

To implement an effective ESG strategy, it is first necessary to identify who in the organisation is, or should be, working on and overseeing ESG-related matters.

2.1 The role of the board of directors

The board of directors (or trustees) plays a central role in setting the tone for ESG direction and integration. Boards are responsible for establishing ESG strategies and goals, ensuring alignment with the organisation’s mission, and providing oversight to manage associated ESG risks. According to the 2024 UK Spencer Stuart Board Index, which analyses the board governance practices of the top 150 FTSE companies, 81 boards (54%) had a committee to oversee environmental and social topics. By actively engaging in the formulation of ESG policies and regularly reviewing the organisation’s progress, boards demonstrate a commitment to sustainable and responsible business practices at the highest level.

2.2 Other stakeholders

Effectively managing and overseeing ESG-related matters necessitates a collaborative effort among various stakeholders within a business, including:

Lawyers: Legal professionals play a crucial role in the development and execution of an effective ESG programme. Lawyers play a critical role in ensuring compliance with evolving ESG laws and regulations, navigating complex legal frameworks, and advising on risk mitigation strategies. Expertise in navigating legal complexities and regulatory requirements is essential for organisations seeking to integrate sustainability principles into their practices.
Consultants: Consulting professionals are pivotal in providing strategic guidance, implementation support, and expertise in ESG management practices. Consultants bring external expertise and can offer insights into industry best practices, facilitate stakeholder engagement, and support organisations in achieving their ESG goals. One such example is conducting a gap analysis of an organisation’s ESG policies and procedures to gain a greater understanding of where focus and resources should be targeted to have the greatest impact.
Human resources: HR professionals are responsible for people and talent management, employee engagement, and diversity and inclusion initiatives—all of which are integral components of a comprehensive ESG strategy. By fostering a workplace culture that prioritises ESG values, HR contributes to attracting and retaining top talent, enhancing organisational resilience, and ensuring the longevity of ESG initiatives.
Procurement and supply chain professionals: Given how complex and fragmented global supply chains are, organisations’ most significant environmental and social impacts usually fall within their supply chains. Procurement and supply chain professionals ensure that ESG principles are embedded throughout the organisation’s supply chain, and have the ability to build resilience, align strategic goals, and drive sustainability across the different components of the supply chain.
Marketing: Marketing teams are instrumental in communicating an organisation’s ESG efforts to external stakeholders, including customers, partners and the broader community. Crafting and disseminating compelling narratives about the organisation’s commitment to ESG principles not only enhances brand reputation but also attracts socially conscious consumers.
Investors: Investors wield significant influence in shaping an organisation’s ESG strategy. Institutional and individual investors increasingly consider an organisation's ESG performance as a key factor in their investment decisions. As ESG considerations become integral to shareholder value, investors play a vital role in incentivising organisations to prioritise sustainable and responsible practices.

2.3 Cross-functional ESG teams

ESG programmes necessitate collaboration across various business functions. Cross-functional teams, comprising representatives from legal, finance, operations, marketing, and other departments, often work together to ensure an integrated approach to ESG across the organisation. This collaborative effort is essential for aligning business objectives with ESG goals and addressing challenges that may arise from different functional perspectives.

Section 3 – Understanding what an ESG strategy might look like

Developing a robust ESG strategy involves a comprehensive and systematic approach that encompasses environmental stewardship, social responsibility, and strong governance practices.

3.1 Benchmarking assessment

It is important to first establish a baseline of how the organisation is currently engaging with ESG issues by carrying out a benchmarking assessment of any gaps. A benchmarking assessment involves comparing an organisation’s ESG performance metrics against those of its peers, industry standards or leading practices with the purpose of assessing how well the organisation is integrating ESG considerations into its business operations relative to others in its industry or sector. This benchmarking assessment is critical as it will allow the organisation to measure and evaluate the progress of its current ESG efforts. The assessment should look at current practices, policies, performance levels and statistics.

A benchmarking assessment may reveal, for example, a lack of understanding of the organisation’s supply chain, a poor governance structure or a lack of preparation for forthcoming ESG reporting requirements.

An example of a benchmarking exercise carried out by an external organisation is the CCLA Modern Slavery Benchmark. Published in late 2024, the benchmark created an objective assessment of corporate modern slavery performance that has been aligned with statutory requirements, government guidance and international voluntary standards on business and human rights. In 2025, CCLA expanded this with a Global Modern Slavery Benchmark Pilot, assessing the modern slavery disclosures of the 100 largest global companies supplying goods or services in the UK; the average global company scored lower (30/62) than the average UK company (36/62), and only 23 disclosed they had found modern slavery cases (fewer still disclosed how they remedied these cases).

3.2 Assessment of material ESG issues

Another key feature of developing an ESG strategy is to carry out an assessment of material ESG issues relevant to the organisation’s industry, business operations and stakeholder expectations. A materiality assessment enables organisations to prioritise ESG issues based on their potential impact on the organisation’s financial performance, reputation and long-term sustainability by taking the actions that drive sustainability and better manage risks, creating long-term value.

For example, a materiality assessment might reveal that the organisation does not have suppliers in any countries or industries with a high modern slavery risk, but it does have high carbon-emitting suppliers. Due to the difference in risk to the organisation, the organisation could then prioritise implementing energy efficiency measures to reduce carbon emissions among its suppliers, before conducting due diligence on suppliers to ensure compliance with labour standards.

A double materiality approach should be taken to comprehensively assess ESG risks, impacts and opportunities, and to encourage accountability for business impacts. Double materiality means taking into account both the impact on an organisation’s financial value and on society in general. Double materiality assessment is the first step towards compliance with Regulation (EU) 2022/2464 – the Corporate Sustainability Reporting Directive.

3.3 Develop ESG goals

The next step is to develop measurable goals for ESG initiatives. Whether this is reducing carbon emissions, improving diversity and inclusion, or enhancing governance practices – setting clear objectives allows for effective tracking and reporting. The goals should be aligned with the organisation’s overall business strategy and any current or forthcoming legal requirements, to ensure a cohesive and integrated approach.

3.4 Create an ESG roadmap

Following goal setting, an ESG roadmap sets a holistic and proactive approach to improvement within the organisation. Depending on the organisation’s operations, sector and objectives, this will look different for every organisation. The roadmap can include aspects such as:

legal compliance deadlines;
key performance indicators with timelines for measuring improvements;
capacity building and training;
setting milestones; and
allocation of responsibilities.

The overall goal of the roadmap is to break down the ESG goals into actionable steps for the organisation to create realistic goals with actual impact.

3.5 Create a central ESG team

A key aspect of an ESG roadmap is the creation of a central ESG team that will manage the planning and implementation. Deutsche Bank, who established an ESG Centre of Excellence (COE), provides an example of how this team can operate. The goal of the Deutsche Bank’s COE is to work across all the business divisions of the bank and to focus on the execution of ESG transactions, new product development, and advisory services.

3.6 Select reporting standards and frameworks

Another key aspect of the ESG roadmap is to choose the reporting standards and frameworks the organisation will adopt to effectively demonstrate to key stakeholders the organisation’s commitment to transparency and growth. Examples of such reporting frameworks include:

3.7 Development and monitoring

An ongoing part of an organisation’s ESG strategy is the development and monitoring of key performance indicators (KPIs) to gauge progress on ESG objectives. Processes must be developed to collect and analyse data on these KPIs, which can then be used to provide reports to stakeholders. This can be done on an annual basis, but internal updates on progress to senior management and the board should be done more frequently. It is important to regularly revisit and reassess the strategy based on changing business landscapes, stakeholder expectations, and emerging sustainability trends. Organisations should embrace a culture of continuous improvement, seeking opportunities to enhance the positive impact of their ESG initiatives and address new challenges as they arise.

Section 4 – Practical tips for lawyers

As noted above, lawyers play a critical role in both ensuring compliance and more broadly, in helping businesses shape and implement their ESG strategy.

Some practical steps for lawyers to consider are as follows.

Ensure a comprehensive understanding of ESG principles and how they apply to different industries. This includes staying up to date with evolving regulations, standards and best practices related to ESG.
View ESG management as an ongoing journey, rather than perceiving it as something that should be micro-managed or ticked off a list.
Approach ESG matters from a multi-disciplinary perspective and utilise the strengths and capabilities of those from across the organisation.
Improve decision-making, transparency and accountability, facilitate engagement with relevant stakeholders, including investors, customers, employees and community members, by understanding their expectations and concerns regarding ESG issues.
The rapid evolution and growth of ESG, and the diversity of ESG issues, mean that to stay on top of ESG matters, organisations must ensure that they have the necessary expertise supported by sufficient resources and investment.

^* This practical resource was produced in partnership with Ardea International.

Additional resources

Deloitte, The lawyer’s role in ESG transformation
Tech Target, ESG strategy and management: Complete guide for businesses
KPMG, Survey of Sustainability Reporting 2022
NYU STERN, ESG and Financial Performance
KPMG, KPMG ESG Assurance Maturity Index 2023
CCLA, Modern Slavery UK Benchmark
Deutsche Bank, Deutsche Bank establishes ESG Centre of Excellence in Singapore
Global Reporting Index (GRI) standards
Principles for Responsible Investment (PRI)
International Sustainability Standards Board (ISSB)
Sustainable Accounting Standards Board (SASB)
Carbon Disclosure Project (CDP)
UN Global Compact
UN Guiding Principles on Business and Human Rights
OECD Guidelines for Multinational Enterprises
International Financial Report Standards (IFRS) S2 Climate-related Disclosures

Reliance on information posted:

While we use reasonable endeavours to provide up to date and relevant materials, the materials posted on our site are not intended to amount to advice on which reliance should be placed. They may not reflect recent changes in the law and are not intended to constitute a definitive or complete statement of the law. You may use them to stay up to date with legal developments but you should not use them for transactions or legal advice and you should carry out your own research. We therefore disclaim all liability and responsibility arising from any reliance placed on such materials by any visitor to our site, or by anyone who may be informed of any of its contents.

How-to guide: How to approach and implement an ESG strategy (Global)

Introduction

Section 1 – Overview of ESG and why it is important to organisations

Section 2 – Collaboration on ESG issues within an organisation

2.1 The role of the board of directors

2.2 Other stakeholders

2.3 Cross-functional ESG teams

Section 3 – Understanding what an ESG strategy might look like

3.1 Benchmarking assessment

3.2 Assessment of material ESG issues

3.3 Develop ESG goals

3.4 Create an ESG roadmap

3.5 Create a central ESG team

3.6 Select reporting standards and frameworks

3.7 Development and monitoring

Section 4 – Practical tips for lawyers

Additional resources

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Global

Environment & Climate Change

Company & Commercial