Environment, social, and governance (ESG) initiatives have become a priority for businesses around the world. With more consumers and investors wanting to understand how the companies they buy from or invest in take care of the world around them, the time to turn your ESG aspirations into reality is now.
This means having a clear strategy to achieve your ESG goals, so you have real results to report on. This is in contrast to greenwashing – when companies focus more on branding themselves as ESG friendly, as opposed to doing the difficult work of becoming so.
Specifically, it relates to environmentally friendly branding, but the concept also relates to companies who may posture around other ESG issues such as social justice. Why do companies do this? Likely because achieving ESG goals and ESG strategy is no easy task.
When you have multiple priorities, the most important being to keep your company afloat, fulfilling ESG commitments can seem like a side project — at least compared to the urgency of operating and growing the business. But there is a way you can do both using frameworks that allow you to bridge the strategy execution gap. In this article, we’ll show you how and why you should use the OKR framework to achieve your ESG goals.
What are ESG goals and why do they matter?
Businesses exist to serve society and are rewarded in the form of profits. But we sometimes forget, our society is part of an interrelated ecosystem of other societies and the natural world around us. As we grow collectively, more emphasis is placed on the importance of businesses serving the broader stakeholders of our world — the people and the planet. The public, governments, and NGOs are putting pressure on business leaders to take a more sustainable, ethical, and people-conscious approach to their operations.
As a result, businesses need to create and execute strategies that allow them to achieve certain outcomes when it comes to ESG. This could be initiatives like improving workplace diversity, equity, and inclusion, investing in local communities, and reducing waste. ESG goal achievement is no longer negotiable — failure to do so leads to regulatory action, less funding, consumer boycotts, and contribution to an unsustainable system. One study found that 49% of investors express willingness to divest from companies that aren’t taking sufficient action on ESG issues.
Need a refresher on ESG? Check out this article for more information about what ESG is and why it matters
Why use OKRs for ESG goals?
OKR stands for objectives and key results. It’s a goal-setting framework that all companies regardless of size and industry can adopt. At its core, OKRs allow your team to identify, define, and execute the right goals in the most effective way.
Here are the key reasons why OKRs help with ESG goals and ESG strategy.
1. OKRs enable transformative ESG goals instead of incremental
Part of the OKR method is to write goals that push the capabilities of your team. These are referred to as “stretch goals” and are usually aspirational and difficult to achieve, although still within the realm of possibility. When it comes to ESG goals, many of the challenges we collectively face require us to dig deep to find the resources to solve them. Dealing with climate change, creating a more equal economic system, and defeating social ills like racism and sexism will require a complete transformation of the status quo.
At the local level, the ESG challenges specific to your company may also require radical changes to your company culture and operations. OKRs as a method have been designed with transformative goals in mind and requires you to think big and aim for “moonshots”. This enables you to gain the most value from your execution by evolving your capabilities to meet the goal. In addition, the tracking mechanism of OKRs in the form of key results ensures that these big goals are grounded in an accountable plan of action. OKRs solve the problem of thinking and dreaming big while simultaneously having a tangible plan of action.
2. OKRs align your team toward ESG execution
To achieve difficult goals, you need to mobilize all your resources in an effective way. Arguably the hardest resource to make use of is the talent and focus of your team. Even in status quo environments, your different departments and the individuals within will have different motivations and focus, depending on their role and incentive structure.
When you introduce change into the organization such as prioritizing ESG, these diverse interests may become even more pronounced. Some may quickly adopt the initiative, whereas others may sit back and let somebody else pick up the slack. Conflict may also occur if ESG priorities create a clash of interest between groups and individuals. For instance, tighter ESG compliance enforced by the legal team may run up against the desire to cut costs by the finance team.
To solve this, OKRs can build alignment toward ESG goals by creating a clear line of sight across all directions:
- Vertical line of sight: OKRs allow your team to see how their department and function contribute directly to company goals. When it comes to ESG, they will be able to see how their actions contribute to key ESG metrics.
- Horizontal line of sight: Instead of seeing other teams as distinct and perhaps competing departments, OKRs connect each group together and provide transparency into how they all work towards the company’s goals.
When done right, the transparent nature of OKR deployment also creates greater accountability and collaboration across the organization. Challenges and roadblocks can quickly be identified by anyone, which unlocks opportunities for problem solving, as opposed to an individual or department having to deal with problems in silos.
3. OKRs bridge the strategy execution gap
One of the biggest challenges organizations face is managing competing priorities. Growth, cutting costs, improving efficiency, and innovation are just a few things a company can prioritize. When ESG commitments are added to the mix, many companies choose to put it at the bottom of the list.
This problem is made worse by the fact that there are many ESG goals and initiatives you may have to contend with. In fact, there may be as many as 20+ different factors you need to consider, which we explain in more detail in our ESG metrics article. Without a strong way to bridge the strategy execution gap, it’s easy to become overwhelmed with competing priorities. In the end, you achieve less than what you could have if you had an effective way to communicate and execute your different strategies.
This is where OKRs come in. At the highest level, OKRs solve one of the biggest problems companies deal with: strategy execution. With OKRs, you have a mechanism that is often described as a “GPS” for the organization. In addition to helping define your destination and focus, OKRs help ensure your team stays on track through real-time adjustments.
See our guide to OKRs for a more detailed breakdown of how the approach works
How to use OKRs to achieve ESG goals
To achieve ESG goals with the OKR method, you will need to first undergo the full adoption process. This includes understanding the method, getting buy-in at all levels of the organization, and running a test-pilot with OKRs to identify and solve any challenges with implementation.
Once you have some fluency with the OKR method, there are three broad steps you should take to use OKRs to achieve ESG goals.
Step 1: Define ESG challenges
Before you decide on your ESG goals, you need to understand what your ESG challenges are. This is because ESG fundamentally represents a set of problems that need to be addressed, so your ESG goals will be built around them. A simple way to find out what ESG challenges are relevant to you is to analyze the ESG reports of competitors or similar businesses.
Step 2: Determine your ESG capabilities
Once you know what your challenges are, you will then need to look at the capabilities of your organization. Understanding your capabilities is key because you need to determine what your team can accomplish and in which timeframe. Capabilities include:
- Team bandwidth
- Business ecosystem
- Intellectual property
When analyzing your ESG capabilities, you must also weigh them in relation to other priorities such as hitting growth targets.
Step 3: Define OKRs for each ESG goal
After analyzing your challenges and capabilities, you can then define what your ESG goals should be and their corresponding OKRs. Your ESG goals and objectives will typically be linked to an ESG framework, which provides insight into how you should manage your ESG commitments. The corresponding key results will be linked to ESG metrics which are the KPIs of ESG execution.
Step 4: Use software to achieve ESG goals faster
It’s likely that you will have many ESG goals that you need to achieve — potentially upward of 20 or more. You will need to ensure that your organization is aligned, your capabilities are being efficiently leveraged, and you're adjusting as you collect key performance data. Doing this manually at scale can be tricky, which is why it’s useful to consider an OKR software which can streamline the process of executing toward your ESG goals.
Example OKRs for ESG goals
The quickest way to understand how OKRs can work with ESG goals is to see it in action with a few examples.
Example 1: Diversity, equity, and inclusion
Example 2: Waste reduction
Example 3: Community investment
Learn more about OKRs for ESG Goals
Having ESG goals adds another layer of complexity to the many priorities you must contend with as a business leader. But with increasing pressure from the wider world, achieving ESG goals should be considered a core component of business activity. To manage and successfully achieve these multiple objectives, OKRs as a strategy execution framework represents a powerful solution.
Quantive is your bridge between strategy and execution. Founded on the objectives and key results (OKR) methodology, our Strategy Execution Platform is where businesses plan successful strategy, focus and align teams to it, and stay on the leading edge of progress.
As your company looks to achieve the best possible results, you need a modern approach to run your business and change your business. The Modern Operating Model brings strategy, teams, and data together to help make decisions faster, optimize operations, and drive better business outcomes.
Whether you’re a large enterprise facing competitive disruption or a small business leading the innovative charge, Quantive helps get you where you want to go.
Ready to achieve the best possible? Start using Quantive for free.