For those of us basking in the glory of meeting our 2021 ESG reporting deadlines, I regret to inform you that it’s almost time to gear up again. I know, I know...it feels like we just finished! But while you may understandably be reluctant to reopen that dusty desktop folder you had been living out of not too long ago (and which you were all too happy to finally close), it’s never too early to start planning.
So let’s make this a little bit easier and start with something achievable: an annual ESG gap analysis.
An ESG gap analysis is a valuable tool that can help you take a step back, understand how you’re doing, and identify where you should invest more time and resources. Used in conjunction with a materiality assessment, a gap analysis can help you quickly determine the topics and considerations relating to ESG that should rise to the top of your list, allowing you to craft a meaningful action plan.
And while it can be helpful to differentiate your ESG programming gaps (i.e. your activities) from your ESG reporting gaps, we believe that both of these concepts inherently inform one another, and should be considered as two sides of the same coin. ESG reporting and disclosure requirements can serve as a blueprint for your broader ESG program, helping you structure and refine your efforts and revealing what your focus areas should be.
Below, we’ll walk you through a step-by-step process to identify key ESG priorities and information gaps so that you can identify the proper set of actions to take as you look ahead to next year. This high-level framework can serve as a starting point for taking inventory of where your ESG program stands today – and where you should take it tomorrow.
Remember: there is no single right way to approach ESG; every organization is different. Let our suggestions be a guide and tailor them to your circumstances as needed. Let’s get into it!
As with many things, we recommended starting your ESG gap analysis at the highest level and working your way down.
To start, jot down all of the ESG topics relevant to your business that you may be required to report on, and rank them in order of importance.
Here’s an example of what that might look like:
The goal is to create a list you can quickly scan through to see which topics rank as top priorities and which don’t. It can also be helpful to make note of topics where you have already made significant progress, and ones which may require a bit more attention going forward. And remember: you can’t do everything at once, so if you start to get overwhelmed with competing priorities, refer back to your materiality assessment to ensure you stay laser-focused on the topics that matter most.
Before springing into action, we advise that you next take the time toconduct an ESG disclosure gap analysis. This will allow you to catalogue the specific outcomes and key performance metrics you may be required to disclose, whether for voluntary disclosures and frameworks or for mandatory compliance purposes. Remember: disclosures inform actions, and vice versa – especially in the ESG world. From here, you will be able to easily identify gaps and overlaps in the information needed to satisfy the requirements of various ESG disclosures and benchmarks.
In the example below, we’ve taken our top “E” topic from Step 1 (Energy Management) and provided examples of relevant disclosures and frameworks – and the key performance metrics that each encompasses:
You can do this for all relevant ESG topics and frameworks to figure out which frameworks you should disclose to – or perhaps you already have an idea of the frameworks you’d like to focus on (e.g. GRESB and CDP) and want to limit this exercise accordingly. Either way, by identifying the gaps and overlaps between the metrics required for various disclosures, you can begin to understand the level of effort that each disclosure will require – and where it’s possible to kill a few birds with one stone.
It can be helpful to think about the information you need to gather for ESG disclosures across the following categories (which broadly correspond with an increasing level of effort):
In all, the goal is to take a step back, understand at-a-glance which ESG disclosures require which pieces of information, estimate the level of effort required to collect the information, and – with all that in mind – prioritize the right ESG disclosures for your organization.
This is a small, simple tactic that might seem redundant. But we’ve found it to be enormously helpful when it comes to breaking down work into digestible actions – especially work in the ESG realm, which can often seem nebulous or confusing.
When you’ve finished populating the sample table above for your desired topics and frameworks, and have identified your top list of ESG disclosures, rephrase each performance metric as a high-level action by tacking an action verb onto the beginning and parsing out any specific steps you know you will have to take in order to complete the activity.
In our continuing Energy Management example, let’s assume that we now decide we want to focus on GRESB and CDP. Here’s what our list of action steps might look like:
Voilà – we have a clear, actionable checklist that lays out exactly what we will need to do in which area to prepare for GRESB and CDP.
With all of this information in hand, return to your ESG priorities and gap analysis and work backwards, making informed decisions about which steps you can realistically take (and by when) to arrive at your desired outcomes (which could include anything from: successfully submitting to CDP for the first time, being ahead of the curve when it comes to GRESB next time around, or simply focusing on a specific performance metric to improve in 2022).
ESG as a business practice can frequently seem daunting and overly broad – but it doesn’t have to be. And ironically enough, ESG disclosures (labor-intensive though they may be in the moment) can actually help you reduce and simplify the amount of work required to build a forward-looking plan for your ESG program. While the framework we’ve shared above might require a little advance work, it should set you up for success in the long run. And whether you need to make the case to your executive management team for next year’s ESG initiatives, or just want to get a clearer picture of the areas you should be focusing on, we hope that this template can lend a hand and help illuminate the path forward for your organization.
ESG frameworks change annually, so we recommend repeating this process each year as a core playbook for your ESG program.
Looking for help to conduct a gap assessment and tie it back to your ESG strategy? Please email the author, Emily Christoff for more information.