OGSM makes ESG strategy more concrete, easier and more enjoyable

Introduction

More and more organisations are engaging with sustainability reporting. For some companies this is driven by the introduction of mandatory sustainability reporting, the Corporate Sustainability Reporting Directive (CSRD); others had already started doing so voluntarily and shape their sustainability reporting based on, for example, the Global Reporting Initiative (GRI). Sustainability reporting should form the closing piece of the cycle of strategy formation, implementation, internal evaluation and adjustment. In practice, however, we see that many organisations find it difficult to make a clear connection between their ESG strategy, internal steering and external reporting.

Standards for sustainability reporting, such as the European Sustainability Reporting Standards (ESRS) and the Global Reporting Initiative (GRI), require organisations to report on the way in which material topics (or impacts, risks and opportunities) are managed. This includes, among other things, the policy the organisation has adopted, the actions taken and progress against them, as well as the objectives and indicators used to determine whether the organisation is on the right course. Although these standards offer guidelines, they do not prescribe anything about the content of policy and actions, nor do they set specific objectives. Certain indicators are prescribed, such as reporting on scope 1, 2 and 3 emissions. Even so, it remains up to the organisation itself to determine which indicators are relevant for its internal steering and external reporting.

In this article we show how OGSM can help to make organisations' ESG strategy concrete and to secure the coherence with implementation, internal steering and external reporting.

About OGSM

OGSM stands for Objective, Goals, Strategies and Measures. The core of OGSM is translating the long-term objective into concrete sub-goals and short-term actions within an organisation. This ensures that an organisation not only knows what it is steering on, but also which daily actions different departments, teams or programmes are taking to realise the objective. The objective describes where the organisation wants to be in a number of years. The goals make this objective measurable and concrete, so it becomes clear when success has been achieved and how high the bar is set. The strategies form the roadmap to realising the objective. They determine where the organisation deploys its people and resources, and where it does not. The measures consist of indicators and actions. The indicators monitor the progress of the strategies, while the actions make clear on a quarterly basis what departments, teams or programmes are concretely doing to progress against the strategies. OGSM offers organisations a structured and purposeful approach to making their ESG strategy concrete, executable and measurable. The OGSM model is shown in Figure 1.

Figure 1: The OGSM model

The lack of concrete guidance in sustainability reporting requirements

After organisations have carried out a double materiality assessment and identified their material ESG topics, they face the challenge of drawing up an ESG strategy with concrete actions and monitoring progress through indicators. Reporting standards offer only limited guidance for this. For example, the CSRD prescribes that organisations should report on the male-female ratio and the age categories of their employees on the topic of diversity, but leaves the choice of indicators relating to other diversity perspectives or inclusion to the organisation itself. The same applies to the GRI standards. Organisations therefore have to formulate their own policy, actions, objectives and indicators to define their progress on ESG topics and report transparently on it. OGSM offers a structured approach to organise these elements. It helps organisations to make their ESG strategy concrete, bring focus and create coherence between strategy, policy, objectives, indicators and actions.

The ESG strategy with OGSM in practice

Take as an example an organisation that wants to be a frontrunner in its industry within three years in the area of sustainable and social entrepreneurship through a circular and inclusive business operation with a focus on technological innovation. The goals determine how high the bar of this objective is set. Think of the percentage reduction of scope 1 and 2 emissions, the share of reused materials in products, the degree of inclusion within the business operation, encouraging the personal development of employees, the number of technological innovations contributing to reducing the ecological footprint and the return on ESG investments. Which specific goals the organisation chooses depends on the core aspects of its objective, the areas it wants to steer on and the criteria against which its success is measured.

The strategies indicate which choices the organisation makes to realise its objective. They determine, for example, which choices are made to achieve CO2 reduction, how circularity and inclusion within the business operation are increased, the way in which technological innovation is invested in, how the personal development of employees is encouraged and how transparency and business ethics are promoted. The indicators measure the interim progress on these strategies and provide insight into the results the organisation is pursuing. The actions show concretely which steps are being taken to make progress on the strategies. With an OGSM, the ESG strategy becomes concrete and a clear roadmap to achieving the objective emerges. The indicators and actions make visible which interim results the organisation wants to achieve and which specific actions employees are taking. In this way the organisation creates a clear link between the ESG strategy, internal steering and external reporting.

Cascading the ESG strategy via OGSM within the organisation

Once the OGSM for the ESG strategy has been drawn up, the challenge for organisations lies in actual implementation. OGSM makes it possible to translate the organisation-wide OGSM down to departments, teams or programmes, so that they can contribute concretely to realising the overarching strategy.

The strategies from the example can be cascaded to underlying OGSMs of departments, teams or programmes. For example, the strategy of CO2 reduction can be linked to Finance & Control, technological innovation to R&D, inclusion to HR, and transparency and business ethics to Compliance. Some strategies, such as circular business operation, can touch several departments. In that case it can be useful to set up a separate programme for this and link the strategy to it.

By linking the organisation-wide OGSM to underlying OGSMs, the ESG strategy becomes firmly anchored within the organisation and departments, teams or programmes are given a clear role in realising the objective. This system makes it possible for different departments, teams or programmes within the organisation to contribute coherently and with concrete actions to realising the ESG strategy. At the same time, there is always the possibility at organisational level to actively steer on execution and report on it. Figure 2 shows how an ESG strategy can be cascaded within the organisation.

Figure 2: Cascading the ESG strategy within the organisation

A clear course

In practice we see that OGSM helps organisations to make their ESG strategy concrete. OGSM offers structure and steering in managing material topics and monitoring progress, making integration into the planning and control cycle easier. By going through the process of drawing up the OGSM(s), it becomes clear for employees what they can do every day to contribute to making the organisation more sustainable. OGSM makes clear where the organisation wants to go, when success has been achieved, which roadmap is being followed and which actions are expected from departments, teams or programmes. This creates a strong connection between the ESG strategy, internal steering and external reporting. It makes the ESG strategy concrete, easier to determine the deployment of people and resources, and more enjoyable for employees to see how their daily actions contribute to the long-term ESG goals of the organisation.

Want to know more about OGSM? Read the book OGSM in practice.