Environmental, social, and governance (ESG) is more than just the noise it's been making lately — "it is the most important macro business trend, and both enterprises and their service providers are increasingly committed," according to GlobalData analyst Robert Pritchard.

A recent GlobalData survey found 96% of tech companies say ESG plays an important role in decision making. This spike in ESG momentum stems from both the coronavirus pandemic and changes in the work environment like the Great Resignation, Pritchard explained. With those trends in mind, it's in every enterprise's best interest to start tackling ESG.

But with ESG in its relative infancy and without standardized regulation to prevent this area from feeling like the wild west at times, what's the best way to address ESG? Here are a few tips for winning the sustainability race.

1. Start With A Materiality Assessment

A common way to get started on ESG is by conducting a materiality assessment to identify which ESG-related issues matter most. Materiality refers to the significance of a certain metric within an organization’s overall ESG analysis. For example, what might be material to an oil company isn’t the same as what’s material for a software company.

Materiality assessments often prioritize issues by considering their importance to stakeholders and overall business impact on an x- and y-axis. Importance to stakeholders represents the desire for ESG-related action from a company's investors, employees, customers, or the broader public. Business impact represents the potential an ESG issue has to positively impact a company's business operations, or in other words, save a company money.

For example, circular economy might score highly on importance to stakeholders and business impact, which means circularity should be a prioritized initiative. Issues like social inclusivity or culture, however, may score highly on stakeholder importance but not as highly in regards to business impact. In this way, a materiality assessment grants a company visibility into how much money to invest toward each issue, and that's a solid jumping off point.

2. Build Accountability, Not Just Marketing Campaigns

Despite the recent influx of ESG action, mass skepticism still pervades corporate ESG commitments. Research from GlobalData found that only 17% of business respondents believe the majority of companies are sincerely committed to sustainability, and almost 60% of GlobalData’s sample held a somewhat cynical view on sustainability commitments, believing them to be a ‘greenwashing’ marketing exercise in some or most cases.

VMware’s ESG VP Nicola Acutt says a bit of healthy skepticism is needed to hold companies accountable to their ESG commitments. “There is no time for greenwashing and insincerity anymore,” Acutt said in an earlier interview with SDxCentral. “And companies that play that game will get called out in the world [in which] we’re operating. You can’t hide anymore.”

Measuring and reporting ESG metrics — particularly environmental ones — is one of the clearest ways for a company to prove its ESG efforts are more than just a landing page or ad campaign.

Although there isn't a unified standard for reporting sustainability metrics, the Global Reporting Index and the Sustainability Accounting Standards Board are both globally respected standards bodies that provide established standards and metrics for ESG reporting.

The Science Based Targets initiative (SBTi) is another organization that defines best practices in emissions reductions and net-zero carbon targets in line with climate science, and many companies seek out the SBTi for an independent assessment and validation of climate targets.

3. Don't Forget Social and Governance

The sustainability side of ESG often takes center stage, but adequate attention must still be paid to its social and governance counterparts. Too narrow a focus on one aspect of ESG runs the risk of pushing away customers and investors who might strongly prioritize other ESG pillars, Gartner explained.

4. Understand Results Take Time

Gartner recently found sustainability in its current form is only increasing revenue for 4% of executives. This highlights that the financial benefits of operating sustainably might still be further down the line.

One reason for this, according to the analyst firm, is the long-term development and return lifecycles of sustainability initiatives, which — just like any type of new innovation — often take years of development and testing before returning positive financial results.

But that doesn't mean ESG efforts and investments are in vain. An EY study found 82% of chief executives expect ESG to drive value to their businesses over the next few years, and more and more companies are sharing their progress toward ESG targets across all three pillars.

Rather, this is an indication that businesses in all industries are shifting toward a stakeholder or customer value model where results aren't deemed positive or negative based on immediate costs and returns but on how effectively a company's actions generate long-term benefits for employees, customers, and society as a whole.

According to Gartner, implementing and reaping the eventual benefits of ESG initiatives "will create a more vibrant and dynamic organization, capable of finding and creating new customer value and outperforming the competition."

Although robust ESG programs provide a competitive edge, it's still a global collaborative effort. “We need every company,” Acutt said. “This is not about one company saving the world, because that’s not feasible. It’s everybody doing that part.”