The rise of digital technologies has changed our lives – how we work, how we communicate, how we spend our time, and even how we think. While it didn’t happen overnight when we stop and reflect on the changes over the past 15 to 20 years, we see the holistic shift in the business world and our lives. There is another shift on the horizon that is currently picking up significant momentum – sustainability and ESG.
ESG refers to three non-financial factors (environmental, social, and governance) that help us understand the sustainability and ethical impact of a business or company. Increasingly, we are hearing ‘ESG’ come out of the mouths of the top CEOs and business leaders around the world. Gone are the days of getting through an investor roadshow without being questioned on how the changing environment and pressing social issues are not only going to affect your business but also how you’re managing your effect on them. With key ESG criteria increasingly being factored into investment and business decisions, business leaders need to show how they’re actively working to address the issues at hand.
In fact, fast disappearing are the days when your stakeholders are satisfied with a well-articulated narrative around everything you plan on doing or are busy doing towards ESG. Lip service is not enough; measurable progress is expected. But before this can be achieved, you need the following: (1) defined ESG priority areas chosen by your organisation; (2) a system or process to drive the actual execution of your ESG agenda; (3) the ability to measure the progress and show tangible outcomes.
We believe that OKRs (Objectives and Key Results) is a powerful tool to give you momentum on your ESG journey, due to the principles that underpin the OKR methodology. Here are five reasons why:
1. OKRs focus on the outcomes, not the long list of everything you’re busy with
Companies love listing all the great things they’re doing towards ESG in extensive detail in their integrated reports. So often, they get to reporting time and have to start pulling all information relating to ESG that took place over the last year and package this into a powerful story. In addition to this, there has often not been any tangible progress and so a company is forced to list what they’re starting or what they’re still busy with.
The expectation is, however, moving away from just listing all the great things you’re doing. More than ever before companies need to show how this is having an actual impact. The way this is done is by showing how these initiatives and actions are driving a pre-defined outcome.
OKRs is an outcomes-based goal management methodology. It’s built on the foundation that you need to first define the outcome you’re going after, define what metrics are used to show progress, and only then determine the initiatives and actions that will help you achieve this outcome. ESG goals should be set up by defining the outcomes first, and then we can decide how we want to achieve these outcomes. This will allow us to stay focused and show tangible improvements year after year.
2. OKRs break longer-term overwhelming goals into shorter-term achievable goals
A common goal for many organisations is to have a net zero carbon footprint by 2050. Many ESG strategies are underpinned by the SDGs (Sustainable Development Goals) which have 2030 targets. The amount of effort often required to reduce a company’s impact on the environment, especially when a change in business model is required, is significant. It is because of reasons such as these that ESG goals are longer-term in nature. These longer-term goals are often terrifying – they’re big, hairy, and audacious. And companies often don’t know how they’re going to get there.
Applying the OKR methodology helps break these long-term aspirational goals into shorter-term (either annual or quarterly) goals that are more consumable and achievable. These shorter-term goals are then able to galvanise action within an organisation, and not leave teams frozen in fright wondering how they’re ever going to get to net-zero by 2050, for example.
3. OKRs force a company to focus on the most important issues
With the many standards and frameworks currently in the market, one can easily put together a long list of everything the company needs to be collecting data on, measuring, and implementing initiatives to improve. While in theory, this would be great for the environmental and social issues around the globe, it’s not practical or effective to try do everything at once. While a company needs to be aware of the many key metrics in their business, there are a few key issues that usually require the most focus and attention.
Using OKRs helps identify the priority areas for a company based on various criteria, that require focus for the whole organisation to improve. To create focus we usually try to limit the number of OKRs at any one time to five. This reduces the risk of diluting our execution efforts by trying to focus on too much and not making any progress. Instead, OKRs help you pick the most important issues to focus on for your organisation, and what to focus on first by asking “why” and “why now”.
4. OKRs has a cadence that allows for agility in a fast-evolving environment
Every single day we receive newsletters, emails and notifications on LinkedIn of all the advancements around ESG. It is non-stop and not likely to slow down anytime soon. As the momentum around ESG picks up, more and more players are entering the market. New guidelines, frameworks, taxonomies, etc. are constantly being released. Furthermore, new and innovative solutions (often due to technological advancements) to ESG issues are also being developed and becoming available on an ongoing basis.
Because of this, it’s simply not possible to paint out your complete ESG roadmap for the next 10 or 15 years. Instead, companies need a process in place that allows them to get traction on their goals while at the same time stopping and assessing the effectiveness of their strategies regularly given the changing, and at times uncertain, environment.
The quarterly, bi-annual, and annual cadence of the OKR methodology, enables teams to achieve this. At the end of each OKR cycle, teams reflect on past performance and reset goals for the next quarter, incorporating any changes that are required. While OKRs is a critical thinking framework, it is also an ongoing discipline. It’s this ongoing discipline that will stop companies from setting a once-off strategy and finding out that it’s outdated in a year.
5. OKRs help communicate clear goals to galvanise stakeholders
The narrative around an organisation’s ESG journey is important for both external and internal stakeholders. Communication is key to securing the buy-in you need and to ensure that efforts are being steered in the same direction. It’s not one single person’s job in an organisation to drive the execution of the ESG strategy – it’s the whole team’s responsibility. But first, they need to understand what the organisation is trying to achieve.
OKRs help improve the communication around ESG goals through the clarity they create. This clarity stems from how the OKRs are articulated – for which there are guidelines.
The following was recently published in a Harvard Business Review article titled Developing ESG Strategy Is Hard, But Executing It Is Even Harder:
“Falling behind or kicking the can down the road poses a major risk. If organizations cannot deliver on their promises, the penalty of failure could have a direct result on their bottom line, especially when the perception of ESG intention doesn’t add up to the outcomes.”
As a business leader, it is overwhelming to try and understand the ESG expectations on an organisation. To navigate this rapidly developing world, we would always recommend first formulating an ESG strategy. Thereafter, equally critical, is ensuring that you have a process in place to get the results that you want. OKRs for your ESG strategy could be the answer you need to make the process more structured, less overwhelming and help drive the outcomes your organisation wants to achieve.
