It appears that this may be the case for sustainability practitioners as they face intense workloads from the explosion of upcoming environmental, social & governance (ESG) regulatory requirements. , the global sustainability manager at EnerSys 鈥� a leading industrial battery manufacturing and energy storage company 鈥� is one of these leaders at the forefront of leveraging AI. In fact, she and her colleagues have been using AI to enhance their company鈥檚 sustainability data collection and reporting processes for the last 18 months.

Their innovative approach first started with collecting Scope 1 and Scope 2 emissions and resource consumption data. EnerSys uses a platform called , which employs heat map-based machine learning to extract key information from utility bills at their 180 sites worldwide. This AI-powered system has significantly improved data accuracy, auditability, and efficiency in collecting Scope 1 and 2 emissions data; and, according to Sivulka, contacts at all 180 sites 鈥渦pload PDFs of their utility bills, which the AI then processes to extract data such as date range, usage amount, cost, and units of measurement. The AI also flags anomalies and variabilities, which has been instrumental in helping us collect our data in a traceable and auditable way.鈥�

The sustainability team at EnerSys is also piloting ESG Flo鈥檚 compliance platform, which contains project management tools supplemented by AI to help companies meet upcoming ESG regulations and disclosure requirements. The platform uses AI to populate answers to similar disclosure questions across different ESG frameworks, saving time and effort.

[Once contracts are uploaded] the AI then extracts data such as date range, usage amount, cost, and units of measurement. The AI also flags anomalies and variabilities, which has been instrumental in helping us collect our data in a traceable and auditable way.鈥�

In addition, EnerSys is using ChatGPT Enterprise to analyze large datasets related to sustainability metrics, including Scope 1 and 2 emissions, travel data, and waste data. This generative AI (GenAI) tool is helping the team members uncover insights more quickly than manual analysis. They are also using it to assist in answering customer questionnaires and surveys about their sustainability practices. By uploading EnerSys sustainability reports and internal policies to the ChatGPT Enterprise platform, the team can generate responses to customer inquiries more efficiently, although human review is still necessary to ensure accuracy. Sivulka estimates that the tool has cut the time spent on questionnaires by roughly 50%.

Looking ahead, EnerSys plans to explore using ChatGPT Enterprise to help write portions of the company鈥檚 next sustainability report and customize storytelling for various types of stakeholders. The team also is considering using AI to review its Climate Disclosure Project (CDP) questionnaire responses for potential improvements and gap identification.

Actions to overcome issues of trust and accuracy

With trust and accurate data continuing to be key concerns for using GenAI, Sivulka says that she and her colleagues are proactively addressed these issues through a couple key steps:

Prioritize internal collaboration from the beginning 鈥� EnerSys took a collaborative, cross-functional approach to address concerns and implement AI tools for sustainability purposes. When exploring the use of AI, they partnered with key stakeholders including the company’s IT, legal, internal audit, and compliance teams to thoroughly evaluate risks and establish proper controls. This allowed the company to customize cybersecurity and data privacy safeguards specific to their use cases. For example, EnerSys coded its ChatGPT Enterprise implementation to flag and reject requests involving proprietary or material information.

Provide training to employees 鈥� Employees utilizing AI at EnerSys received comprehensive training on the responsible use of GenAI tools like ChatGPT Enterprise. The training focuses on several key areas, such as how to effectively engineer prompts, learning cybersecurity best practices and data privacy protocols, and how to identify potential biases or inaccuracies in AI-generated content.

Further, employees were taught to always have a human review any AI outputs before using the data externally; and they were instructed on what types of information should not be entered into the system in order to protect proprietary data. Employees had to sign documents acknowledging their understanding of proper AI usage guidelines, while ongoing collaboration with IT, legal, and compliance teams helps the organization utilize AI safely and ethically.

Guidance to get started

Overall, Sivulka says that her advice to her peers at other companies is to leverage AI cautiously but proactively to stay ahead of the curve, as sustainability teams will likely need to adopt these tools to keep up with increasing reporting and data collection demands. Specifically, sustainability team leaders would be wise to:

Partner across the enterprise 鈥� Sivulka emphasizes the importance of cross-functional collaboration when exploring AI for sustainability purposes. She advises against operating in silos and recommends partnering closely with risk functions to scope out feasibility, mitigate risks, and set up AI tools safely. This collaboration was critical for her team in implementing AI solutions like ESG Flo and ChatGPT Enterprise among her team.

Engage actively with software vendors 鈥� Sivulka encourages sustainability professionals not to be afraid to talk with AI software providers, even if the professionals don’t have a strong technical background in AI or coding. Many tools are designed to be user-friendly for non-technical users, and AI software providers are often eager to discuss new ways AI can help individual businesses and address specialized needs.

Make human review mandatory 鈥� Sivulka stresses the importance of treating AI tools like ChatGPT as you would a human employee, particularly when it comes to reviewing work. She notes that humans are not always accurate and can have biases, so AI outputs require similar scrutiny. “I think you just have to be aware of it,鈥� Sivulka says. 鈥淲e have been trained to know how to flag or how to see any sort of bias or lack of accuracy.” She advises having humans review all AI-generated content before using it, in the same way as managers review their employees’ work.

As AI continues to revolutionize sustainability practices, companies like EnerSys are at the forefront of this technological integration. By leveraging AI tools for data collection, reporting, and analysis, EnerSys demonstrates how these technologies can significantly enhance efficiency and accuracy in an organization鈥檚 sustainability efforts.

You can read more ESG Case Studies here.

, one of the leading global fine jewelry brands, made the decision to prioritize reducing its Scope 3 emissions 鈥� those that may come from its supply chains 鈥� over emissions coming from Scope 1 and 2 sources. Not to say that Mejuri isn鈥檛 working on reducing those emissions as well, but company leaders know that meeting its reduction targets depend on a focus on Scope 3.

Indeed, an analysis of the company鈥檚 greenhouse gas (GHG) inventory revealed that Scope 3 accounted for 97% of its total, which is consistent for the jewelry industry at large. 鈥淥nly 2% to 3% of the emissions came from Scopes 1 and 2,鈥� says , Mejuri鈥檚 vice president for sustainability and social impact. To put this in perspective, efforts by Mejuri in 2023 to reduce Scopes 1 and 2 emissions equated to a 40% reduction in just those emissions, compared to 2022. However, this only accounted for 1% of their total emissions for 2023. McHugh says that Mejuri will continue to address Scope 1 and 2 emissions, however, the company knows it will see more impact when working on Scope 3.

Mejuri鈥檚 commitment to prioritizing its value chain emissions is part of its larger sustainability strategy that is focused on people, planet, and product, according to McHugh. These initiatives include:

• • • pursuing its people goal by supporting the company鈥檚 growing team and community through authenticity, belonging, and connectedness for the internal team and the communities in which it and its upstream and downstream suppliers operate;
    • achieving its planet goal by committing to being climate positive by 2030 through both restoration and conservation in the company鈥檚 material choices; and
    • carrying out its commitment to product, by seeking 鈥�100% traceability of our precious materials,鈥� McHugh explains, adding that this is accomplished through Mejuri鈥檚 ability to trace the history, distribution, and location, of the materials it uses in the areas of human rights, labor (including health and safety), and the environment.

Co-investing across industries is key to emissions reduction聽

The innovation in Mejuri鈥檚 approach comes from pursuing partnerships by co-investing within its own industry and alongside other sectors and knowing that the power to influence outcomes within its supply chain is achieved through collaboration. For example, the jewelry industry has leverage in gold mining because 50% of all gold is purchased by the industry. However, jewelry-makers only represent about 20% of purchases of silver.

鈥淎s an industry we have some leverage to push the gold industry to do things in a way that that jewelry industry cares about, but we don鈥檛 have as much impact in the silver industry, making it harder to push for greener silver,鈥� McHugh says, adding that the jewelry industry also needs other industries at the table for titanium. 鈥淲e need the automotive and aerospace industries involved to achieve bigger impacts on the titanium industry.鈥�

鈥淔or us, we understand that the only way again to get this level of impact is to work with organizations where we’re hitting above our weight鈥�

 

, a new company set up with support from Mejuri and Apple as founding members, alongside other engineering & mining companies, is one of the mechanisms that Mejuri is counting on for its Scope 3 emissions reductions.

Regeneration aims to clean up legacy and abandoned mines, many of which were active 50 to 100 years ago, and in which inefficient methods were used for the mining of one mineral. Today, most mines involve the mining of multiple minerals, and decades-old, orphaned, and abandoned mines left behind rock tailings and waste that have valuable minerals in them. For instance, re-mining, cleaning up, and finishing up work in mines in the Yukon territory and Alaska has produced gold inputs for Mejuri鈥檚 .

In 2023, the collaboration through Regeneration resulted in the repair of 1,150 linear meters of stream and 20 acres of habitat in Alaska and the Yukon Territory. 鈥淔or us, we understand that the only way again to get this level of impact is to work with organizations where we’re hitting above our weight鈥� in the estimated 100,000 legacy mines in North America, says McHugh.

To collect the data on its Scope 3 emissions reductions, Mejuri is in the process of conducting a life-cycle assessment of the gold from Regeneration partner mines in order to capture the emissions impact from re-mined gold. Then, the company will compare that to the impact of recycled or newly mined gold. McHugh is hopeful that that the gold from Regeneration鈥檚 re-mining will identify fewer emissions than recycled gold.

Guidance for small enterprises

McHugh also encourages companies of similar sizes to take a similar approach in their own Scope 3 transparency and emissions reduction for an increased global impact. More specifically, McHugh advises company leaders to focus on operationalizing sustainability through engagement, training, and providing cross-functional partners with the information and knowledge that can help advance the company鈥檚 sustainability goals.

鈥淚t’s my job to get the right information into the hands of our designers and product development teams and our product supply and new store teams, to help them understand how to make the best [product] decisions鈥� with suppliers that enable emissions reduction, she says.

Further, McHugh says she think small enterprises should join industry and cross-industry partnerships to co-invest and gain a greater return on investment (ROI) in sustainability efforts and spending. Indeed, this often stretches the money that a company puts towards sustainability go even farther. also recommends for investments in sustainability.

In addition to Regeneration, Mejuri is also part of the Responsible Business Alliance鈥檚 , the and the .

These collaboration efforts and partnerships 鈥渕ake sure that we’re all having a much more positive impact on the entire industry because none of us can do it alone,鈥� McHugh adds.

You can find more corporations featured in our ESG Case Study series here.

In fact, Dell Technologies鈥� strategy includes impact areas, such as climate action, , inclusive workforce, upholding trust and digital inclusion (with the latter being focused on shrinking the digital divide.) To execute its overall strategy, Dell outlined nine key goals that are set for 2030 and beyond. In addition, its plan dictates how the work is done and which of the company鈥檚 function areas leads the work through the company鈥檚 Operating Model and Governance process, playfully nicknamed OMG to bring some levity to intense work moments.

The incoming CSRD expands the regulatory footprint of disclosure rules with a phased-in implementation schedule over the next few years. It applies to all large companies governed by EU law, or stock-listed in the EU, or created in EU-member state rules that meet certain minimum requirements around employees, annual revenue, and total assets. It will also apply to non-EU companies and small- to medium-sized enterprises in a few years.

Major areas of expansion of the CSRD are the inclusion of double-materiality assessments, supply chain (Scope 3) greenhouse gas reporting, detailed list of disclosure requirements per topic, and third-party assurance. In fact, affected organizations must furnish details in accordance with the , which are harmonized with the and the , regarding their governance and strategic measures aimed at tackling significant sustainability issues; the consequences, risks, and opportunities stemming from these issues; as well as quantitative metrics and objectives.

Dell priorities to prepare to meet CSRD requirements

Garber elaborates on the comprehensive ways in which Dell is preparing to meet major expansion areas of CSRD, including:

Double materiality

CSRD requires impacted organizations to conduct a materiality assessment from a financial standpoint and to analyze materiality through the lens of environmental and social topics (with the latter being a new obligation.)

The environmental impact assessment includes aggregating greenhouse gas emissions, including supply chain emissions, in line with the and results from lifecycle assessments outlined in product-level environmental footprints. Likewise, the social impact assessment includes aspects of human rights, working conditions, culture, and business ethics.

Currently, Dell is undergoing a double-materiality assessment to include environmental and social impact assessments, according to Garber, a move which expands the internal functions that are involved in the process. Indeed, the savviness of customers, in particular, has increased around making their buying decisions with regulatory considerations in mind, as well as product impact assessments, Garber adds.

Governance of sustainability program

European sustainability reporting standards also outline requirements for sharing companies鈥� sustainability strategy and business model. Details of the G in ESG issues include a description of sustainability policies, processes, external and internal control, and risk management.

Garber says that she and her team spend a significant amount of time preparing and making certain they have the tools to ensure compliance with the myriad regulations and requirements required for a global company like Dell. This includes data mapping and analysis to make sure that processes can outline where raw data originates, how such data is aggregated and validated, and which company function areas are involved in data gathering, analysis, and verification.

As a result, the organization tracks more than 600 issues in a spreadsheet across three main regimes, which include those required in CSRD and the U.S. Securities and Exchange Commission鈥檚 (SEC鈥檚) proposed climate rules, as well as the International Sustainability Standards Board (ISSB) to identify overlapping requirements and increase efficiency.

Another aspect of CSRD that Dell and other companies must address is around areas of environmental impacts that, for many, are newly elevated expectations. These include topics like circular economy, biodiversity, and healthy ecosystems.聽Because Dell鈥檚 approach to ESG is comprehensive, it already includes climate action and driving a circular economy; therefore, while compliance with an evolving regulatory landscape will require significant resources, directional steps to comply with some of the additional reporting requirements are already being addressed, says Garber.

Detailed governance and higher purpose will ensure success

Of course, it can be difficult to remain optimistic when complying with multiple frameworks and standards. Bringing sophistication to data gathering and analysis, staying abreast of changes in ESG rules and regulations, and acknowledging the general perception that we aren鈥檛 doing enough fast enough to slow climate change are issues that sustainability practitioners are faced with every day. Garber explains that she and her team have ways to maintain their optimism.

To manage the complexity of multiple reporting regulations, for example, details are critical. 鈥淲e have put a level of detail around our governance, which is truly the reason I feel confident and comfortable we will navigate this stage successfully,鈥� says Garber. For example, the detailed Dell OMG plan maps the company鈥檚 governance process from the board, the executive team, and cross-functional councils. Each council has proper charters, clarity of roles and responsibilities, and a cadence for how often they meet to share progress.

To stay connected to every business unit in every region, Garber launched an ESG Interlock, which includes representatives from almost every single function area within the company. 鈥淚n every single business unit and every major region, a specific role has been identified to lead sustainability and ESG for their area,鈥� she says. 鈥淭hey are a part of the discussions, a regular series of events and updates to ensure information is exchanged throughout the organization and we are making the progress we need to stay on track with our commitments.鈥�

In addition, Garber says she and her team remember the bigger picture for what they are trying to achieve. 鈥淭he biggest opportunity we have is to move faster together to address systemic change and meaningful outcomes,鈥� she says. 鈥淲hat is happening right now with regulations and with customer and consumer demand is forcing the conversation about why this work is good for business and society 鈥� both now and in the long term.

鈥淎nd building environmental and social considerations and performance deeply into business models is how we’re going to achieve real, sustainable change.鈥�

One critical function of the corporate law department that spans all of these areas is the legal function鈥檚 central role in ensuring organizational compliance and robust corporate governance. And an increasing focus on proper corporate governance 鈥� a key pillar of the G in ESG 鈥� suggests that corporate law departments鈥� role in enterprise ESG strategies within their companies will increase.

, General Counsel and Board Secretary at . 鈥� the largest independent containership owner and operator in the world 鈥� can attest to this. Derksen joined Atlas in 2022 and is based at the corporate executive offices in Hong Kong and spends significant time at the company鈥檚 operating offices in Vancouver. He came to the company with two decades of international management and functional experience in聽 the oil and gas, automobile manufacturing, and renewable energy industries, following his time as a corporate lawyer at Faskens in Toronto and Herbert Smith Freehills in Paris.

Supporting Atlas鈥� ESG strategy

With physical operations in Hong Kong, Mumbai, and Vancouver and more than 140 existing containerships and 45 vessels under construction (with a total fleet value in excess of $10 billion), Atlas moves containers for the world鈥檚 largest liner brands across all oceans. Atlas contracts with its customers on long-term charter-party agreements (with contracts of often 10 years or longer), giving the company a long-term view on its strategy, financial performance, and operations.

With its vessels continually operating in all four hemispheres and with dozens of different ports of call as part of regular vessel loops, it is of central importance to Atlas to remain strong in its ESG commitments in order to retain social license to operate 鈥� and more specifically, in order to not only comply, but to lead the industry as an ESG-focused vessel operator and owner. Derksen indicates that Atlas prides itself on staying ahead of its competitors in terms of its ESG strategy, technology, and innovation.

For example, Derksen says that Atlas designs its vessels using cutting-edge naval architecture and technology, leveraging the most advanced paints on the body of vessels to reduce the company鈥檚 fuel consumption. What paint is used on vessels matters because certain types move through the water easier, reducing friction and using less fuel in the process, he explains.

Further, the company is designing and providing low carbon emission dual -fuel propulsion systems on its vessels. Increasingly, the company is deploying methanol, dual-fuel LNG engines (those that use natural gas is stored in liquid state), and in the future, will potentially use ammonia and other non- or low-carbon emitting vessels. In addition, Atlas offers technical solutions (such as methanol retrofits) and guidance to its customers to help them convert their carbon-based fuel systems into methanol fuel systems to help the shipping industry as a whole reduce its carbon footprint.

Role of the in-house legal team

The in-house team under Derksen鈥檚 leadership plays a major role in Atlas鈥� ESG strategy, supporting the company鈥檚 technical and operating leadership and executing on the company鈥檚 corporate and public obligations. The executive leadership team decides on strategic priorities and makes the commitments for individual ESG issues and for regulatory obligations, which are set by the company鈥檚 primary regulator, the International Maritime Organization, as well as the various port state authorities, international agencies, and other stakeholders with whom Atlas works. The legal and compliance function helps to execute these priorities, ensuring proper corporate governance around the environmental and social goals.

In a sense, the legal team acts as a guardian over the company鈥檚 ESG activities, making sure that regulatory discipline is strong. 鈥淲e are informed by the different stakeholders. One of my jobs as GC is to survey forces and factors shaping the larger environment within which we operate, to discern the trends impacting the company over the short-, medium- and long-terms, and to help lead and set a path for the company,鈥� Derksen explains. 鈥淧ractically, that means knowing what is coming from the regulators and customers to support our commitment to being a best-in-class provider and that means staying ahead of the curve as a brand differentiator from our competition.鈥�

The legal and compliance departments work closely with internal stakeholders and the community, for example, to make sure that Atlas鈥� procurement processes are best practice. 鈥淲e carry out audits on clauses and within crew-manning agreements (as many of our crew come from the Philippines or India), apply best-in-class standards in regard to issues such as anti-corruption and Modern Human Slavery compliance,鈥� says Derksen. 鈥淚t is critical that crew get fair treatment during the hiring process, that their rights are upheld and conditions are fair, and that we implement processes and procedures to minimize the risk that workers are taken advantage of, even prior to their being hired by Atlas, such as by local brokers and agents.鈥�

Collaboration plays a vital role

Outside law firms are important partners to the legal function as it supports Atlas in its quest to maintain a competitive edge with its responsible business strategy and compliance. Derksen describes on how he relies on law firms to assist in areas such as:

• • • advising on Securities and Exchange Commission reporting and the accounting and auditing rules as a public company listed on the New York Stock Exchange;
    • ensuring the in-house legal team is meeting all of its reporting requirements for international regulations and for the jurisdictions in which Atlas operates; and
    • supporting the auditing of governance and operational practices around specific ESG issues, such as the Foreign Corrupt Practices Act in the United States and the Modern Slavery Act in the United Kingdom.

While we often hear from US law firms that ESG is not a money-maker, outside of the US, it does generate work from companies such as Atlas. Indeed, ESG strategies could be a growth area for law firms if they choose to pursue it.
Perhaps by adopting a key pillar from Atlas鈥� strategy to take a long-term view is necessary when it comes to ESG as a money-maker, law firms may be able to demonstrate greater purpose to the Earth and humanity, while highlighting great client service.

鈥淥ur role [in company鈥檚 ESG strategy] is not just compliance,鈥� Dersen says. 鈥淚t is to lead and help us to act as a responsible community member.鈥�

In a recent interview, , head legal and sustainability officer at , underscored the importance of these issues for the company鈥檚 own ESG journey. Grinnell, who joined the company in early 2022 with a multitude of in-house legal experience across a number of industries, took responsibility for the packaging retailer鈥檚 ESG strategy later than year.

Three key drivers contributed to the decision to place ESG under The Container Store鈥檚 corporate legal function, Grinnell says. The legal team already was providing regulatory compliance for financial data, advising on product liability and safety, and had become central to ensuring the company鈥檚 ESG compliance to internal standards for new stores and the stores鈥� suppliers.

Key governance moves

The ESG program at The Container Store is still in its early days, Grinnell explains, with the strategy officially starting in 2021 with its initial ESG commitments reported in its first sustainability report in 2022. During that year, the company conducted a materiality assessment, which identified and prioritized areas of risk and opportunities across ESG topics important to the business.

One of Grinnell鈥檚 top priorities when assuming responsibility for the enterprise ESG strategy was to ensure the governance of the program was set up for success. At The Container Store, the ESG steering committee is the approving body of the company鈥檚 strategy set-up and execution. All of the voices of internal and external stakeholders 鈥� employees, investors, suppliers, and others 鈥� are represented to ensure full stakeholder feedback is considered on every initiative. 鈥淥ur ESG leadership council is integral in The Container Store鈥檚 governance structure and is responsible for strategy execution,鈥� Grinnell says. 鈥淥ur leadership council consists of subject matter stakeholders from all areas of the business, including our leadership team, our associates, our suppliers, key business partnerships, our investors, customers, nongovernmental organizations, and our SG [social and governance] evaluators.鈥�

The next priority areas for Grinnell that are currently underway, is memorializing comprehensive policies and programs that outline the environmental and social responsibilities for the company. For example, one of the recently updated key policies and procedures involves calculations of the baseline greenhouse gas (GHG) emissions for Scope 1 and 2 of the company鈥檚 stores, utilizing the Greenhouse Gas Protocol to calculate emissions. The policy execution also includes the company鈥檚 efforts to offset power usage of its stores, as well as its distribution and support centers, which derive 100% renewable energy from wind.

Coping with big challenges

No matter where companies are in their ESG journey, managing big challenges with a small team is almost universal. The Container Store鈥檚 ESG team is another example of the corporate adage that 鈥�1 equals 3鈥� 鈥� the idea that one great employee is three-times as productive as a single good employee. Grinnell made it clear that the positive trajectory would not be possible without the everyday contributions of Ivet Taneva, the company鈥檚 Senior Director of ESG, and Ann Cunningham, a Senior Paralegal working as the internal ESG Project Manager. Both report directly to Grinnell.

Data volume and lack of automation slow progress 鈥� One of the biggest challenges for Grinnell and her 1陆-person ESG team is the volume of data and lack of automation. Grinnell and Taneva now are in search of an enterprise solution that can capture all of the company鈥檚 ESG metrics. 鈥淐urrently, we must work with several tools to streamline our key performance indicators 鈥� our aspiration is to move to digital when it comes to ESG,鈥� she adds.

The team is using automation for efficiency in visualization and modeling around emissions and waste reduction reporting. To make sure the tool continues to meet the needs of the ESG strategy at The Container Store, a member of Grinnell鈥檚 team sits on the customer board of the company鈥檚 software partner to ensure the product fits its needs and external standards.

Employee education key to earn buy-in 鈥� Another challenge that The Container Store is prioritizing is employee education from the top of the organization down to local management of stores. 鈥淥ne of biggest hurdles is making sure those who have responsibility to report ESG information at the local level understand the purpose and value of the information that we are requesting, so that we’re receiving material information back from the business units in a timely manner,鈥� Grinnell explains.

A key mechanism to strengthen the commitment and messaging to employees is the chief merchandising officer鈥檚 participation on the sustainability committee. The corporate merchandising division oversees a separate sustainability committee that the ESG team reinstated. The sustainability committee ensures that a good portion of The Container Store鈥檚 stock falls into the sustainable category. Having the chief merchandising officer on this committee is a critical tie-in to the corporate ESG strategy and helps ensure that products are sustainably sourced and that employees know about and understand the value and importance of sustainability.

Looking ahead, The Container Store is committed to meeting and exceeding benchmarks and standards that have been set by U.S. regulators, once they are finalized. Grinnell is confident in the team鈥檚 ability to execute, largely because of the intentional and strategic nature in which the ESG strategy and function was founded.

鈥淭he Container Store recognizes the importance of our impact on people, the planet, and the communities in which we operate, and we believe that it’s imperative to the success of our business to continue learning, proving, and advancing our vision in that area,鈥� she says. 鈥淥ne way we’ve done that is by placing the ESG strategy into the legal department so that we can really implement and execute a strong, legally sound, and thoughtful strategy.鈥�

To give a glimpse into how some banks are coping with the challenges, we spoke with , vice president of ESG at the Canadian Imperial Bank of Commerce (CIBC). Dhaliwal started at the bank in 2021, leading the Enterprise ESG team that was responsible for the delivery of the bank鈥檚 ESG strategy.

Dhaliwal reports to the bank鈥檚 Chief Legal Officer, which is one of the three typical corporate leaders to which the head of ESG at most companies reports. In running the ESG strategy for the bank, she leads a large strategic initiative across four broad buckets of activity 鈥� strategy development & delivery, governance, disclosure, and policies.

Building & executing strategy simultaneously

Upon joining CIBC, Dhaliwal and her team concurrently had to take stock of the ongoing activities around ESG within the bank while further building a cohesive strategy and determining what opportunities to pursue based on rapidly evolving stakeholder demands. To be both efficient and successful, the team had to prioritize efforts in key areas, something that it continues to do so today.

Building on the materiality assessment 鈥� An essential step in building and executing an ESG strategy is a materiality assessment to identify, prioritize, and validate ESG topics of importance to the bank and its stakeholders. CIBC had recently completed a materiality assessment just before Dhaliwal joined in 2021, and she and her team are continuing the process of stakeholder engagement. For example:

• • • Dhaliwal regularly interacts with investors and institutional groups as part of her role (because ESG is one of the hottest topics for shareholder proposals), to see how material issues from their perspective might have evolved. 鈥淲e engage with investors directly on a regular basis to hear about their priorities and answer any questions they have about our approach,鈥� she says.
    • She also holds ongoing, proactive engagement with diverse stakeholder groups to continue to expand the bank鈥檚 ESG strategy in order to reflect the priorities of shareholders, clients, team members, suppliers, government, regulators, and communities.

Collaboration with internal teams 鈥� To build the strategy while executing at the same time, the Enterprise ESG team collaborates across multiple internal corporate functions, such as:

• • • CIBC鈥檚 ESG team maintains good working relationships with the bank鈥檚 internal risk team, which is a key partner in assessing emerging risks and regulatory changes.
    • CIBC鈥檚 Senior Executive ESG Council, chaired by the Executive Vice-President and Chief Legal Officer, comprises Executive and Senior Vice Presidents from across the bank to champion the enterprise-wide ESG strategy.

Evaluation of ESG frameworks 鈥� Another aspect of executing an ESG strategy involves staying abreast of external ESG frameworks and how they are changing. The biggest driver of this challenge, according to Dhaliwal, is the constant evolution in standards, which include those outlined in the , the , the (ISSB), and the , as well as the ongoing convergence and alignment of standards among some of these organizations. 鈥淚t’s an interesting time with the ISSB standards coming into place and maintain[ing] the pulse of what U.S. and Canadian regulators are thinking,鈥� she adds.

Coping with big challenges

Creating and executing an ESG strategy is complex and entails big, multifaceted challenges around ESG. As the regulatory requirements evolve, there is an increasing need to train employees broadly on ESG, such as what net zero means. Currently, the ESG team at CIBC is conducting a broad education initiative across the bank on ESG concepts and what ESG means to the bank.

Data governance is another focus area, of course. Dhaliwal details the importance of specifying the holistic processes, the ESG process owners, data owners, and their specific roles and responsibilities through the data journey across internal functions. More specifically, this entails:

• • • documenting each of the bank鈥檚 ESG commitments;
    • determining the processes needed to achieve those commitments;
    • identifying what data is needed, as well as the owners of the data and the IT data systems involved; and
    • outlining the roles of risk, compliance, and finance teams in disclosure reviews.

Unfortunately, these challenges are unlikely to dissipate any time soon, and the cost of compliance with ESG regulation is likely to grow for companies. Not surprisingly, it is easy to see from Dhaliwal鈥檚 description of the complexity in creating and executing an ESG strategy how the investment in both time, effort, and technology is becoming a real necessity.

While talent issues remain high on the board agenda for many companies, organizations need to do more to explicitly tie the well-being of their people and corporate purpose directly to corporate ESG activities on a consistent basis. Indeed, measuring social impact 鈥� the S in ESG 鈥� through the lens of people鈥檚 well-being is not yet mainstream, although it is gaining traction.

Multinational food manufacturing giant the Kellogg Company (碍别濒濒辞驳驳鈥檚) is among those companies that consistently link their global purpose platform to their sustainability agenda and ensures their purpose is centered on the well-being of their employees and other stakeholders. More specifically, the company, through its 碍别濒濒辞驳驳鈥檚 Better Days Promise, aims to advance sustainable and equitable access to food by addressing the intersection of well-being, hunger, sustainability, and equity, diversity & inclusion to create better days for 3 billion people by the end of 2030.

Enacting a multi-pronged stakeholder engagement strategy

碍别濒濒辞驳驳鈥檚 also embeds its corporate purpose into its growth strategy. This definitive integration of purpose and growth dates back a century to its founder and is well entrenched within the organization鈥檚 business and culture today, says , Senior Director of Philanthropy and Social Impact at the Kellogg Company.

The Better Days Promise is a key element of 碍别濒濒辞驳驳鈥檚 Deploy for Balanced Growth strategy, which includes consideration of the varying sustainability-related preferences, needs, and desires of the company鈥檚 multiple stakeholder groups 鈥� employees, customers, consumers, investors, and the communities in which the company is based and operates.

With the recognition that the 鈥渃ompany should and can do well by doing good,鈥� 碍别濒濒辞驳驳鈥檚 has taken a proactive approach to engaging with stakeholders to communicate how its corporate ESG strategy remains central to its operations and growth strategy through a people well-being lens, Slingerland explains.

碍别濒濒辞驳驳鈥檚 has seen positive implications by intentionally collaborating with stakeholders to integrate the organization鈥檚 corporate purpose and social impact into its ESG strategy in a variety of ways, including:

• • • Cross-stakeholder ESG initiatives 鈥� Honoring World Food Day is a month-long event at 碍别濒濒辞驳驳鈥檚. It is an opportunity for the company to engage with many of its stakeholders, including food banks, retail partners, and employees, through workplace and community volunteering opportunities, donation drives, communications, and events.
    • Employees 鈥� 碍别濒濒辞驳驳鈥檚 employees regularly engage with ESG initiatives over the course of the year. Indeed, cultivating employees as ambassadors through the promotion of the Better Days Promise to employees鈥� networks, customers, and partners enables a multiplier effect on the company鈥檚 ESG communications and social impact.
    • Consumers & community 鈥� 碍别濒濒辞驳驳鈥檚 has a long history of involving consumers in its philanthropic activities. In the summer of 2022, for example, the company鈥檚 launch of the Build for Better program and competition, executed in partnership with Minecraft and the nonprofit KABOOM!, allowed consumers to design a virtual playground on Minecraft and submit it for the chance to see it built in real life. The winning design was built at a Boys and Girl Club of America in Marietta, Georgia in November 2022.
    • Customers 鈥� Likewise, the company鈥檚 retail customers recognize the importance of ESG initiatives and are eager to partner on Better Days Promise. For example, 碍别濒濒辞驳驳鈥檚 collaborated with a retailer to launch 碍别濒濒辞驳驳鈥檚 InGrained, a program that helps rice farmers reduce climate impact. Another retail partner, recognized 碍别濒濒辞驳驳鈥檚 commitment, investment, and partnership on philanthropic, sustainability, and well-being initiatives, named the company the first-ever ESG Supplier of the Year.

Storytelling & data are essential

Data and storytelling are key to executing holistic, multi-pronged communications to a wide variety of stakeholders. While it is sometimes tricky to address all audiences鈥� preferences and expectations, 鈥渟haring stories about the people behind our strategy who have such a passion for their work, or the people that the initiative impacts, resonates the most,鈥� Slingerland says. 鈥淒ata helps to contextualize the impact of the stories.鈥�

One of the most common challenges in implementing an ESG engagement strategy is how to influence late-comers or those who question the validity of the widespread attention that ESG is receiving. To make progress, companies should stay focused and highlight the positive impact company initiatives can have on the surrounding communities, and how these initiatives help drive company鈥檚 growth, Slingerland advises.