How to Create an ESG Policy for Your Australian Business
An ESG policy provides the foundation for your sustainability efforts. It articulates your commitments, principles, and governance structure. Without clear policy, ESG efforts are ad hoc. With policy, you set direction, establish accountability, and signal commitment to employees, customers, and investors.
This guide helps you develop an ESG policy for your Australian business. For context on building overall ESG strategy, see our ESG strategy guide.
What Is an ESG Policy?
An ESG policy is a formal document outlining your organisation’s commitment to environmental, social, and governance principles. It establishes the framework for ESG management, governance, accountability, and stakeholder engagement.
A good ESG policy:
- Reflects your material ESG issues and strategy
- Articulates clear principles and commitments
- Specifies governance and accountability
- Defines stakeholder engagement approach
- Sets expectations for employees and suppliers
- Is publicly available (demonstrates transparency)
Components of an ESG Policy
1. Purpose and Scope
Purpose statement: Why does your organisation have an ESG policy? Example:
“We are committed to operating responsibly and sustainably. This policy establishes our approach to identifying and managing material environmental, social, and governance issues that affect our business and stakeholders.”
Scope: What does the policy cover? All employees and operations? Does it extend to supply chains and contractors? Be clear.
2. Principles and Values
Articulate the core principles guiding your ESG approach. Examples:
- Respect for human rights and labour standards
- Environmental stewardship and climate action
- Health, safety, and wellbeing of employees and communities
- Ethical business conduct and integrity
- Transparency and accountability
- Stakeholder engagement and inclusion
- Continuous improvement
3. Material ESG Issues
List the material ESG issues you’ve identified in your materiality assessment. Briefly explain why each is material and your management approach. This grounds the policy in your specific business reality.
4. Governance and Accountability
Board oversight: How does the board oversee ESG? Which committee is responsible? Reporting frequency?
Executive accountability: Which executive is responsible for ESG? What are their responsibilities?
Functional accountability: Which functions (HR, operations, procurement, finance) have ESG responsibilities?
Performance management: How is ESG performance assessed? Are ESG KPIs in employee scorecards? Linked to remuneration?
5. Environmental Commitments
Outline your environmental commitments related to material issues. Examples:
- Energy efficiency and emissions reduction targets
- Water efficiency and responsible use
- Waste reduction and circular economy practices
- Climate adaptation and resilience
- Biodiversity and land stewardship
Be specific where possible (targets, timelines). Avoid vague commitments.
6. Social Commitments
Outline social commitments:
- Fair wages and working conditions (own operations and supply chain)
- Health, safety, and wellbeing
- Diversity, equity, and inclusion
- Human rights and modern slavery prevention
- Community engagement and contribution
- Accessibility and inclusion for people with disabilities
7. Governance Commitments
Outline governance commitments:
- Board governance and independence
- Ethical business conduct and anti-corruption
- Transparency and disclosure
- Risk management and internal controls
- Whistleblower protections and grievance mechanisms
- Supply chain governance and oversight
- Stakeholder engagement in decision-making
8. Stakeholder Engagement
Describe your approach to engagement with stakeholders:
- Employees (engagement channels, feedback mechanisms)
- Customers (transparency, responsiveness)
- Investors (communication, disclosure)
- Communities (consultation, grievance mechanism)
- Suppliers and contractors (standards, engagement)
- Industry and peers (collaboration, transparency)
9. Supply Chain Expectations
Articulate ESG expectations for suppliers and contractors:
- Labour standards (fair wages, safe conditions, no forced/child labour)
- Environmental standards (emissions, waste, water management)
- Compliance (legal compliance, no corruption)
- Transparency (willingness to be audited, data provision)
- Continuous improvement (willingness to improve ESG performance)
10. Reporting and Transparency
Describe how you’ll report on ESG performance:
- Annual sustainability reporting
- Public disclosure of material ESG issues and performance
- Regulatory disclosures (AASB, APRA if applicable)
- Transparency on governance, risk management, targets
- Third-party assurance of key claims
11. Review and Continuous Improvement
How will you keep the policy current? Annual review? Update triggers? Continuous improvement approach?
ESG Policy Template Structure
Sample outline:
- Purpose and Scope
- Our Principles
- Material ESG Issues
- Governance
- Environmental Strategy
- Social Strategy
- Governance Standards
- Supply Chain Responsibility
- Stakeholder Engagement
- Reporting and Assurance
- Review and Improvement
Length: 5-15 pages typically. Avoid excessive length (not many read long policies). Be clear, specific, authentic.
Important Principles for ESG Policies
Authenticity: Don’t overcommit. Better to commit to achievable goals and deliver than promise moon and fall short. Credibility matters.
Specificity: Vague commitments aren’t credible. Specific targets, timelines, and accountability create confidence.
Alignment: Policy should align with actual business practices. Disconnected policy creates cynicism. Don’t write policy in isolation—ground it in reality.
Accountability: Make clear who’s responsible for ESG. How will you measure progress? How will it be reported?
Transparency: Public policy signals transparency to stakeholders. Keep confidential information out; be honest about what you’re committing to.
Frequently Asked Questions
Should ESG policy be public?
Yes. Public policy signals transparency and builds stakeholder confidence. Keep it public. Employees, customers, investors, and community members should be able to read it.
How detailed should ESG policy be?
Detailed enough to be clear on commitments and accountability; concise enough to be readable (5-15 pages). Detailed operational procedures go in separate documents. Policy sets direction; procedures execute it.
Do we need separate environmental, social, governance policies?
Depends on complexity. Single integrated ESG policy is cleanest for most organisations. If you have pre-existing separate policies (labour, environmental), you can reference these in ESG policy while keeping consolidated ESG policy at strategic level.
Who should approve the ESG policy?
Board approval signals importance and commitment. Policy should be recommended by management and approved by board. Employee and stakeholder input valued before finalisation.
How often should we update ESG policy?
Annual review. Update if material business changes, new regulatory requirements, stakeholder feedback, or significant ESG performance changes warrant updates. Don’t change constantly; changes should be meaningful.
Moving Forward
A clear, authentic, specific ESG policy is foundational to credible ESG management. Take time to develop policy grounded in your material issues and business reality. Make it public. Hold yourselves accountable. Update as needed based on performance and changing context.
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