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The ABCs of ESG: How to build a successful ESG strategy
by Amelia Zimmerman | May 16, 2022 | Data & transparency
Starting down an ESG pathway can feel overwhelming. Creating and implementing an ESG strategy for a fashion brand requires a wide-reaching approach — one that considers your company’s environmental performance and carbon emissions, its social impact (such as community involvement and employee health and safety), and corporate governance factors like board structure and diversity.
With so many factors to address, think of ESG as a long-term game. By setting manageable milestones and putting the right processes in place, you’ll make steady progress over realistic timeframes. In this article, we’re diving into the ABCs (or, really, the ABCDEFGs) of ESG for the fashion industry, revealing our best insights on creating and implementing an ESG strategy.
But first, let’s take a look at why ESG matters for fashion brands.
For corporations of a certain size, disclosing ESG scores is mandatory. But for those fashion brands that aren’t yet required by law to report on their ESG factors, the benefits of doing so are numerous. And even for brands big enough to already be required to disclose their impact, there’s more to ESG than annual scores.
For fashion brands in particular, taking a keen interest in ESG can put you at a powerful advantage with a new generation of consumers. In the wake of the pandemic, nearly 2.5 times more consumers plan to shift their spending to more sustainable brands, and millennials expect brands to actively talk about their sustainability practices. As a fashion brand, getting your ESG right can be a fast-track to market leadership — and that’s not the end of the story.
Nancy Landrum, Professor of Sustainability Management at Loyola University Chicago, explains: “Research shows that companies with the best ESG strategies have better managed operations, have better risk management, and execute strategy better; there is a positive correlation between ESG and financial performance. Rather than viewing ESG as a reactive response to outside pressure, ESG should be viewed as a proactive approach to managing risk and value creation.”
In fact, with ESG investments becoming such a popular sector, and more candidates looking for employers that take corporate social responsibility seriously, companies that don’t make it a priority put themselves at a strategic disadvantage.
ESG is a complex undertaking, so let’s break it down with a simple alphabetical framework.
A is for Align
Any ESG strategy requires company-wide alignment — both vertically and horizontally.
Daphne Biliouri-Grant, a Senior ESG Adviser at Sibylline Ltd, suggests aligning through shared goals. “The simple answer is to listen to your stakeholders and team members and discover what is important to them,” she says. “It’s important to identify the issues that matter to them and the ones that they can relate to, whether it is air pollution, mental health or a transparent supply chain. Giving them the opportunity to take ownership of that one issue and help support its promotion through a vigorous ESG strategy, will inevitably allow them to embrace the implementation of ESG strategy as a whole.”
Set up meetings with key team members from each department — from sourcing and procurement, to design, to marketing — and clearly demonstrate how your ESG initiatives and goals align with and support the goals of each department and stakeholder.
B is for Baseline
Before you set goals or make any plans, it’s important to establish a clear baseline for your firm. Establishing the baseline requires total clarity on ESG performance in every area of your business.
The first step in establishing a baseline is conducting a materiality assessment. Materiality assessments identify problem areas and relevant opportunities for your company, revealing clear ESG priorities for your firm. You’ll also gain insight into your standing amongst your competitors (more on that below).
The second step in finding your baseline is assessing your existing policies and initiatives for their environmental impact, social influence, and governance factors. This will require working with cross-sectional teams, so it’s helpful to have them on board and aligned from the beginning. You can find information in reports, databases and policies, and follow this up by sitting down with internal stakeholders to find out more.
C is for Competitors
Once you’ve got your baseline, looking to competitors is a great first step in setting goals and targets for where you want to go. Assess your competitors’ environmental performance, ESG targets, strategies and performance to get a clear picture of where your own company is lagging or leading, which strategies or initiatives are proving popular in the market, and which avenues and ESG metrics might offer opportunities for becoming the market leader.
D is for Data
The backbone of any successful ESG strategy is data. Without access to the right data, your fashion brand risks greenwashing, noncompliance, or spending significant resources on the wrong thing. Transparency in the fashion industry is a hot topic right now, and it’s crucial to your ESG strategy.
“Without transparency, the data lacks authenticity, honesty, accuracy, and timeliness,” says Landrum. Additionally, a company risks being labeled as “greenwashing” if it is not forthright with information. Transparency will help build credibility and trust. Ultimately, transparency in reporting contributes to a company’s image and reputation.”
Data will help you not only get a clear picture of what’s happening now, but it will also help you set goals and discover the best next steps and quick wins for your firm, because it will show you the smallest actions you can take that will lead to the biggest results. You need data to give you a clear picture of your current baseline, but you also need the right tracking and measurement tools in place to give you real-time insights as you move forward, and provide data in the right format and level of detail for your reporting needs.
Collecting and processing the right data is no small feat, which is why we recommend partnering with a technology solution that can help you get everything you need – both internally, and throughout your supply chain. Green Story has worked with hundreds of leading fashion brands and helped them accurately quantify and show the environmental performance to stakeholders. Check out our customer stories here.
A quick note on supply chains
Supply chains are notoriously difficult to measure and manage from an ESG standpoint. In our global economy, a single product’s supply chain can span many continents and many organizations, and getting the right data from each of these players and holding them to universal standards is a long-term mission. But although supply chains might be a future focus for firms just starting out with ESG, for fashion brands, they’re crucial to get right. From an environmental perspective alone, greenhouse gas emissions from supply chains can count for up to 90% of a company’s carbon footprint. A thorough life cycle assessment can help you to quantify the environmental impact of a product, from supply chain to end of life.
E is for End Goals
When you set ESG goals for your firm, make sure they’re challenging, clearly defined, and consistent with your business objectives.
We believe you should set objectives that will inspire and motivate your team. Don’t set the bar too high, but don’t skimp on what you could achieve, either. Set realistic timeframes, and detail milestones for bigger goals to map out the path to success.
Set benchmarks by looking to well-known industry certification standards for guidance, such as:
At the same time, you can’t address everything. Although it’s admirable to want to ‘save the world’, keep your focus on the things you can control (and the ones that will make a difference). For fashion brands, this might look like choosing the right suppliers, sourcing sustainable materials, and addressing your policies on diversity and inclusivity.
Clarity is crucial for ESG goals. Explain outcomes using numbers and precise language — otherwise, it’ll be hard to measure success when the time arrives. For example, rather than “reduce our emissions significantly,” go with something like “reduce Scope 1 and 2 emissions by 50% in the next 5 years.”
Compatible with your business strategy
Consider how your ESG goals will align with and support your existing business goals. In practice, you can align ESG goals with corporate goals in several ways.
Firstly, ensure your ESG principles are deeply aligned with your company’s corporate purpose. “This simply means that if you want to embrace ESG objectives as part of your overall business ethos, you need to inject integrity, honesty, transparency, and accountability in the way you operate as a company,” says Biliouri-Grant.
Then, having discovered which ESG goals matter most to stakeholders during your alignment phase, choose the ones most pertinent to your business and industry to focus on. Knowing this will allow you to select the right KPIs for measuring impact, leverage technology and establish processes to monitor progress, and help you align incentives to ESG goals.
Bridget Thorpe, Founder + CEO at SOL VAE, a responsible athleisure brand, believes in the power of incentives. “Organizations such as Chipotle and McDonald’s have already tied executive pay to ESG goals,” she explains. “And it’s because investors, activists, and regulators care that tangible progress is being made. It’s critical to have a solid governance structure in place, as both top-down and bottom-up strategies are necessary to move ESG initiatives forward.”
As you move forward with ESG, your goals are likely to change — and that’s okay. ESG is a moving target that will evolve alongside your business and industry. But outlining a long-term vision and an initial set of goals helps get everyone on the same page, which is crucial for long-term success.
F is for Framework
Now that you’ve collected data, established a baseline, and determined an end goal, it’s time to choose a reporting framework. Although public companies are required to disclose their ESG scores, ESG frameworks go beyond what is required by law.
Adopting an ESG disclosure framework improves brand image, gives investors and stakeholders deeper insight into your ESG goals and activities, and demonstrates a genuine commitment to ESG.
There are several frameworks to choose from.
Some popular ESG frameworks include:
- SASB (Sustainability Accounting Standards Board — a great starting point)
- GRI (Global Reporting Initiative — another good starting point)
- SBTi (Science Based Targets initiative — offers net zero standard)
- TCFD (Task Force on Climate-Related Financial Disclosures)
- CDP (Carbon Disclosure Project — provides a helpful survey)
- UNGC (UN Global Compact — network of companies dedicated to SDGs)
- B Corp (not strictly an ESG framework, but can be a stepping stone)
- Green Story (not strictly an ESG framework, but a great place to start)
Choose the framework that’s right for your company and your current situation. We recommend opting for an initial framework that requires as little detail as possible, and working towards a more complex option over time. If in doubt, consult with an ESG advisor.
G is for Going Public
Publishing ESG data goes beyond annual reporting. If you communicate it well, you can use your ESG progress to your advantage in the marketplace.
Work with marketing teams to find innovative, accessible ways to tell your ESG story through your communications and branding. For more on selling your sustainability story, download Green Story’s Guide to Green Marketing.
Integrate your ESG story into your business development initiatives to help you secure strategic partnerships and opportunities. Collaborate with human resources to use ESG to your advantage in attracting top talent.
Finally, make your ESG reports and targets easily available on your website (we recommend easily downloadable PDF formats) for investors. The more accessible and available you can make your ESG data, the further your investments will pay off.
A final word on ESG
Unfortunately, building an ESG strategy from scratch isn’t as simple as reciting the alphabet. It requires alignment across your entire company, significant resources, and a lot of planning and maintenance, but the benefits are tangible, and they’re growing daily.
If you need help with ESG, talk to Green Story. We partner with pioneering fashion brands, helping them to de-risk their businesses and stay ahead of the curve. With our signature technology and LCA methodology, we future-proof your business and make it compliant with global anti-greenwashing regulations, helping you avoid greenwashing, and give your customers full transparency into your ESG story.
Our mission is to empower 1 billion consumers to know their impact and make choices that are better for the planet and the generations to come. We’ll help you quantify and visualize the environmental impact of your products, and offset your products’ emissions through verified carbon credits. We’ll also make sure your customers are along for the journey by telling your sustainability story in ways your consumers can easily grasp, integrating your story into every aspect of your communications, and achieving market-wide buy-in for your sustainability mission.
About Amelia Zimmerman
Amelia Zimmerman is an ESG and sustainability writer. She lives in Toronto with her puppy and her partner, and she is passionate about using storytelling techniques to help people understand and act on climate change.
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