Awareness about environmental, social and governance among middle market companies is greater than ever, RSM US Middle Market Business Index data shows. But translating awareness into action is more difficult, says Anthony DeCandido, an RSM partner and senior financial services analyst whose specialties include helping midsize organizations develop ESG strategies.
“In the middle market, it’s rare that someone is defined as an ESG or sustainability officer,” he says. “Somebody is doing this in between their day job.”
More often than not, a company’s chief financial officer, marketing leader or human resources representative is assigned to carry the ball. DeCandido and his team can work with that individual to develop an ESG baseline by aggregating existing data from the company’s cloud-based enterprise resource planning (ERP) tools, HR data, supply chain records and the like, as well as from interviews with business unit leaders, suppliers and customers. Along with comparative information from other businesses in the space—the bulk of which is gleaned from public company disclosures—this creates a wellrounded picture of where the business stands on issues ranging from diversity to fair trade and carbon emissions.
“We gather that information through an exercise called stakeholder mapping,” he says. “It lets us determine who cares and why.”
This so-called “rapid assessment” can be completed in a matter of weeks, DeCandido says. It offers transparency for the C-suite and the board and allows the business to build a foundational plan toward achievable ESG goals, which typically begins with the issuance of an ESG report for stakeholders.
Says DeCandido: “They get an outline, a road map of the immediate actionable items, as well as the things they should do in the short, medium and long term.”
This article was originally published in our 2021 Environmental, Social and Governance special report.