What Is Operational ESG?

Today, more than 80% of companies have a formal ESG program in place. Despite this, only 50% believe their company performs effectively against environmental metrics. Even fewer rate their company as effective on social and governance metrics. Clearly, there’s a big gap between the strategic planning that’s happening in boardrooms and execution at the operational level. The challenge for companies today is to effectively operationalize their ESG targets so they can deliver on the sustainability promises they’ve made. So what is operational ESG? And how does it differ from a business’ high-level ESG strategy? Let’s take a closer look.

What is operational ESG?

Operational ESG is a set of tactics and actions implemented to reach the Environmental Social Governance targets defined in the company’s strategy. It consists of concrete tasks, activities, and measurements that are carried out on a day-to-day basis.

Operational

ESG is all about executing the company’s ESG strategy to ensure it stays on track to meet its goals. Some of the tools of operational ESG include:

• Assessments
• Audits
• Inspections
• Employee observations

How is operational ESG different from strategic ESG?

Unlike operational ESG, strategic ESG is concerned with identifying opportunities, setting goals and priorities, and creating policies that advance the company’s sustainability mission and vision.

Below are some of the key differences between operational and strategic ESG:

Short- and medium-term vs. long-term

Strategic ESG lays out the company’s vision for the future, while operational ESG focuses on how you’ll get there on a daily, weekly, or monthly basis.

Take Google, for example. The tech giant has set a goal to operate on 24/7 carbon-free energy by 2030. This is a long-term goal that Google CEO Sundar Pichai says is the company’s “biggest sustainability moonshot yet”. Google’s carbon-free goal would be considered part of the company’s strategic ESG plan.

To achieve this goal, Google has outlined more immediate actions it will need to take in order to source reliable carbon-free energy everywhere, at all times of day. This includes pairing renewable power sources like wind and solar together to provide round-the-clock carbon free energy, increasing its use of battery storage, optimizing energy efficiency and scheduling energy-intensive activities based on carbon-free energy availability. These are all part of the company’s operational ESG plan.

Top-down vs. front-line

Another difference between these types of Environmental Social Governance is that strategic ESG decisions are usually made at a higher level. For example, the decision to issue sustainability bonds or set a sustainability target related to workplace safety is usually made at the highest levels of the company. These strategic decisions then get pushed out to individual departments to ensure they are implemented successfully.

Each department plays a role in helping the company achieve its objectives. For example, the EHS department might be responsible for investigating, recommending, and deploying safety measures to reduce incidents and injuries. In turn, they may rely on front-line supervisors and workers to implement these measures and collect operational data through audits and inspections, risk observations, and other measurements. These represent the operational side of ESG.

Big picture vs. small details

The third key difference is that strategic ESG looks at the big picture, while operational ESG is focused on the smaller details. In other words, strategic ESG is a 50,000-foot view of the forest, while operational ESG is a ground-level view of the trees.

Going back to our example from Google, CEO Sundar Pichai’s vision is to become the first company to operate entirely carbon-free. This vision applies to the company as a whole, rather than specific departments. On the other hand, Google’s operational plan to achieve carbon-free energy outlines what actions different teams need to take in order to achieve the company’s big picture sustainability vision.

Your takeaway

Some businesses focus heavily on the strategic side of ESG, without investing enough time and resources in operational tactics. However, both strategic and operational ESG are vital to a business’ sustainability success. And you can’t have one without the other.

By understanding the difference between strategic and operational ESG, you’ll be in a much better position to operationalize ESG and make your company’s strategic vision a reality.