From ESG-Compliance to strategic impact – Overcoming challenges
Corporate purpose, collaboration, shared ownership, and a skilled top are critical success factors for positive change. By re-thinking purpose, structures, and processes, compliance tasks can be leveraged for the proactive management of ESG.
By Sabine Fortmann and Mario Wernly
Climate change, social inequality and the unsustainable use of resources jeopardise global prosperity. Accordingly, ESG regulation is on the rise but already leads to a push-back by companies, who are worried about spending resources on compliance rather than on dealing with these pressing issues. The experience with Givaudan’s first-ever double materiality assessment in preparation for the upcoming CSRD requirements shows: integrating ESG thoroughly into corporate purpose, governance and processes can help to resolve this balancing act.
In 2023, LRQA assisted Givaudan in the in-depth analysis of outward-facing ESG impacts and inward-facing sustainability risks and opportunities. Reflecting on this experience, we isolated four success factors.
Corporate Purpose
Incredibly helpful is a corporate purpose that reflects the meaning of ESG for your business model. Givaudan aligned the corporate strategy with ESG in 2019 to reflect the strategic importance given to a future-proof and resilient business model. The purpose “Creating for happier, healthier lives with love for nature. Let’s imagine together” already embraces the notion of “double materiality”, focusing on impact and business relevance equally, and was a consequent step after Givaudan’s first sustainability report published 15 years earlier. A clear view of the ESG ambition facilitates decisions on budget, resources and content and enables companies to act more decisively.
Collaboration
ESG-related tasks can only be fulfilled through collaboration between different functions. For conducting a double materiality assessment, Givaudan set-up a cross-functional team to lead the process. Coordinated by the sustainability function, finance, legal & compliance, and communications were equal members of the core team. This ensured that all relevant views were covered. Further, it helped anchor the process, reinforcing the credibility of the outcomes. Including many internal stakeholders throughout the project made the best possible use of relevant skills and knowledge. As such, the process was also a catalyst to strengthen internal cooperation on ESG topics overall.
Shared ownership
Not every task that has ESG in its name must be taken by the sustainability team. While clear responsibilities are crucial, they can be distributed between departments with the competencies needed. Givaudan’s responsible sourcing programme “Sourcing4Good” follows an integrated operation model embedded in the company’s procurement functions and supported by the expert Responsible Sourcing team. Data collection and reporting in an assurance-proof way is a core competency of the financial reporting function. The identification of sustainability-related risks is best done with the risk management function to ensure alignment with the overall enterprise risk management.
“A clear view of the ESG ambition facilitates decisions on budget, resources and content and enables companies to act more decisively.”
Skilled for responsibility
Upskilling board members and executives can be facilitated by internal experts, but companies should also consider recruiting for such skills when filling strategic positions. The legally prescribed accountability for ESG can only be performed based on sound knowledge and expertise, supported by adequate structures. For example, Givaudan puts ESG on the agenda at every board meeting and each strategic purpose ambition has an owner in the Executive Committee who also works closely with the sustainability leadership team. To reflect ESG responsibility and the corporate purpose alike, Givaudan’s non-financial targets are aligned to GHG emission reduction, employee safety and diversity in senior leadership.
Admittedly, purpose, structures and processes cannot be built in one day. However, at Givaudan, the execution of compliance tasks is supported, which can then be further developed to drive the corporate agenda forward. This is also externally recognised and Givaudan’s commitment to transparent and effective communication has recently been quoted by the World Business Council for Sustainable Development (WBCSD) as one of the best-practice examples in business and as a CSRD early adopter by the We Mean Business coalition.
Consider investing in these four success factors to fully leverage the opportunities of ESG-related legislation
Purpose: position ESG clearly in the core business strategy
Collaboration: foster cross-functional collaboration to ensure diverse perspectives and strong internal cooperation
Ownership: distribute tasks and responsibilities as this is not weakening your position, but strengthens everyone’s ability to focus
Skilled top: support the board and senior management in proactively living up to their ESG accountability
Sabine Fortmann
is Head of Sustainability, Taste & Wellbeing at Givaudan. She is working with stakeholders across the division as well as with Givaudan’s customers to advance sustainable practices in the industry. She also led Givaudan’s double materiality assessment project in 2023.
Mario Wernly
is Senior Sustainability Consultant at LRQA’s Sustainability Strategy and Disclosure Team in Zurich. He supports companies in meeting their reporting and disclosure requirements, in developing their sustainability strategies, and in conducting double materiality assessments.