ESG ratings as a continuous learning exercise

With the Corporate Sustainability Assessment (CSA) being an annual event, ESG teams are tempted to take a seasonal approach to the assessment, thereby losing out on a valuable opportunity to close any gaps in their sustainability program and inform stakeholders of the organization’s sustainability efforts.

By taking a step back to view the ‘bigger picture’, the CSA is a useful mirror providing organizations with continuous learning moments and requires year-round engagement from the team to make improvements each annual cycle. An organization’s material issues and sustainability strategy are the ideal starting point and should guide your sustainability program and efforts, but your CSA results are a great tool to measure your progress and boost internal learning, for example on any gaps and future priorities. ESG benchmarking and CSA expert Nikkie Vinke pointed towards S&P Global’s companion:

“The companion is a great tool to dive into the details with your topic experts, as for most questions it breaks down how they are assessed, helping you to improve on lower-scoring questions.”

In addition to this internal perspective, the ESG ratings such as the CSA also allow you to gain an understanding of investors’ interest in the different sustainability topics. Combining insights from the different ESG ratings provides your team with a broader reflection of this investor interest.

Driving sustainability across departments

Embedding this mindset internally and following up on the learnings from ESG ratings requires a solid sustainability governance structure. During the session, Nikkie elaborated that the challenges our clients face when setting up a successful sustainability department are due to resource scarcity, ‘The war on talent’, or a lack of know-how. She also discussed several best practices on how to establish ESG teams and manage sustainability performance within organizations.

Depending on your organization’s size, a way to structure your ESG governance can be to appoint either one employee or a small core team to coordinate the topic of sustainability on a tactical level. An essential step in setting this up is that the Sustainability Team has a mandate from the Executive Team or Board. The sustainability team needs this backing not only to promote a culture of sustainability within the organization but also to decentralize the responsibility for certain areas, e.g. protecting Human Rights in your value chain is done most efficiently if somebody within the Procurement department holds ownership over the topic. Ideally, this mandate is further strengthened by an executive remuneration policy that focuses on the business’ key targets, stemming from the broader sustainability strategy and agenda.

Once in place, a key concern becomes what topics to prioritize. Your learnings from ESG ratings are a great way to guide you in this. During the webinar, participants learned how to use their ESG results to draft up a heatmap which helps the team in setting priorities for improvement. The heatmap provides insights per topic into the gap between your result and the best performer, as well as into how heavily this topic weighs in your industry. “Don’t expect a perfect picture here; scoring a 100% everywhere is an unrealistic target. Align your learnings with your strategy and integrate your new priorities into existing roadmaps”.

How ABN AMRO uses the CSA as a mirror

A company that applies these principles and uses its ESG rating results for continuous improvements is Dutch Bank, ABN AMRO. Guest speaker Catalina Hammink, Sustainability Reporting Specialist, elaborated on the bank’s approach, stating that the company sees the CSA as the most extensive questionnaire that focuses on an organization’s impact, rather than risks. In the competitive banking industry, ABN AMRO is aiming to stay within 5% of the score of the industry leader, a goal that at the same time is a non-financial KPI to measure the performance of the board. To achieve this ambition, participation is coordinated from the Group’s sustainability department but involves over 20+ topic experts and their managers across different criteria.

Formulating such a clear ambition and target has helped the department in involving the executive board, engage with topic owners within the bank and clarify their responsibility. Each CSA cycle provides a new opportunity to identify gaps in best practices that have emerged, determining the core improvement areas for the organization. The results are communicated internally and externally to create ownership and accountability.

Three tips to tackle the CSA in 2023

One main piece of advice mentioned throughout the session is that improving your sustainability program and ESG ratings performance is a year-round and continuous process, meaning it’s never too early to start preparing for next year. To help you get underway, the session closed with three tips to tackle the CSA 2023.Download the document at the top of the page to (re)visit practical suggestions for how your organizations can approach this ESG rating in 2023.

A strategical approach to 2023 ESG Ratings

Finch & Beak supports organizations in developing sustainability strategies, meeting their ESG targets and thereby improving performance across ESG benchmarks. If you have any questions about our approach, we’re happy to get in touch. Feel free to reach out to Johana Schlotter at johana@finchandbeak.com or call +31 6 28 02 18 80.

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