September 29, 2023 | Risk Management
In a rapidly changing business climate, environmental, social, and governance (ESG) goals have become imperative for business success and sustainability.
Financial services companies, with their special position in the global economy, have a key role to play in embracing these goals.
In this blog post, we examine how banking, financial services and insurance companies can do a compelling job of meeting ESG goals by focusing on three pillars: addressing supply chain emissions, promoting supplier diversity, and implementing effective governance.
Financial services companies can improve their ESG performance by addressing supply chain emissions.
Key strategies include understanding the scope, baselining current emissions, engaging suppliers, and reporting.
Recognizing the scope of emissions within the supply chain, including scope 3 emissions, which often go unnoticed but are critical for an ESG strategy, is crucial.
Companies should start by establishing a baseline of supply chain emissions to understand the starting point.
Next comes collaborating with suppliers to reduce emissions. Including environmental criteria in supplier selection can help foster a more sustainable supply chain.
Finally, BFSI firms should regularly monitor and report on progress, both internally and externally, to show commitment to reducing emissions.
Supplier diversity is not just the morally right thing to do, but a strategic move that can level up ESG performance.
Here's how financial services companies can promote supplier diversity: setting clear goals, auditing suppliers, incorporating diversity criteria, and reporting.
BFSI firms should define specific, measurable goals for supplier diversity; decide which underrepresented groups they want to incorporate; and add metrics to their objectives.
Conducting audits of the existing supplier base helps to identify areas for improvement and opportunities to engage with diverse suppliers.
Also, companies should integrate diversity and inclusion criteria into the supplier selection processes to seek out diverse suppliers.
Finally, regularly reporting on supplier diversity efforts demonstrates commitment to stakeholders and the broader community.
Strong governance mechanisms are critical for ensuring that ESG programs operate efficiently and effectively.
Here's a road map for setting up effective governance: set clear objectives; appoint dedicated teams; set up key performance indicators (KPIs); develop policies and procedures; and engage with stakeholders.
Measurable and time-bound ESG goals aligned with the company's mission and values should be communicated to teams.
Appointing special ESG teams reporting to senior management to oversee program implementation helps keep it on track.
Another step that keeps the momentum going is to define KPIs to track progress toward the objectives.
Also, financial services companies should create comprehensive policies for environmental, social, and ethical practices based on industry standards and regulations.
Finally, they should seek feedback from customers, employees, suppliers, investors, and communities.
By addressing supply chain emissions, promoting supplier diversity, and executing effective governance, financial services companies can enhance their reputation, boost long-term sustainability, and contribute to a more sustainable and equitable global economy — and achieve business success.
To learn more about how BFSI firms can create and implement a compelling ESG program, download our white paper, How Financial Services Companies Can Excel in ESG Goals.