Doing Environmental Social Governance Right - The First Time
Climate change and social responsibility are prominent issues for many people; and investors are favouring companies who can demonstrate their commitment to doing environmental social governance right – the first time.
Environmental Social Governance (ESG) refers to how much an organisation incorporates environmental and social goals into its business operations, outside of its primary goal to make profits for shareholders.
Environmental covers carbon emissions, energy use, recycling methods, pollution, and adhering to environmental regulations.
Social refers to charity work, safe workplace conditions, ethical codes of conduct, diverse hiring, and being active with the local community.
Governance concerns leadership practices within a corporation, ensuring accurate and transparent reports of accounting methods, decision-making, partnerships, anti-bribery, and compliance systems.
Though a lot of us recognise ESG as practices that should be done as a moral obligation; sadly, there are others who only think of ESG in terms of checking boxes to increase marketability. In extreme cases, this takes the form of greenwashing; i.e., fraudulently advertising goods to be environmentally friendly.
Not that it’s all bad news: the upside of greenwashing is that the broader public are becoming far more scrutinous when it comes to where they spend their money; which, in turn, means investors are following suit.
This can only be a positive for us in the long-run – after all, more scrutinous customers mean that companies are put under more pressure to implement effective sustainable change. But, if we wish to keep our reputations intact in today’s modern marketplace, we have to ensure that our ESG strategies are made with integrity.
According to this helpful infographic compiled by sustainable marketing agency Akepa, 72% of sampled customers want more sustainability information to be available when considering purchases – but unfortunately, 42% of sampled companies’ sustainability-related claims are exaggerated, false, or deliberately misleading. This isn’t just limited to obscure players – big names like Nespresso, Unilever, Keurig, Walmart, Coca-Cola, and Volkswagen have all been accused of greenwashing in the last decade, with those who have been found guilty having to pay out millions of dollars.
Not that it stops there – with so much information so readily available nowadays, we’re now under increased pressure to be transparent about our practices. Since environmental and social concerns are so central to the beliefs of younger generations, neglecting our ESG practices puts us in danger of long-term reputational damage – whereas showing ourselves as active, ethically responsible businesses will be a feather in our cap when it comes to attracting consumers and investment opportunities.
Tesla was dropped from the S&P 500 ESG Index earlier this year, with reasons cited being poor working conditions, allegations of racism, and a lack of low carbon strategy. While Tesla will be re-eligible after providing evidence that these issues have been rectified; until that point, exclusion results in diminished visibility from investors who use it to forecast safe investments.
Conversely, Apple, Microsoft, Amazon, and Google all regularly publish clear, transparent information about their ESG goals and progress toward them; and as such, enjoy a level of status as ethically responsible, sustainable businesses worth investing in.
So how can you focus your ESG efforts to ensure maximum effectiveness, the first time?
- Identify your priorities.
As much as you may want to try, addressing the increasing number of ESG areas to an equal extent is not realistic. The best way to ensure that your ESG goals are effective, long-lasting, and implemented organically, is to first decide which areas are most relevant to your business, sector, and audience – then use those areas as foundations to build your strategy upon. Set up measures to ensure that you can record and report progress easily, for maximum relevance to your audience.
- Assess your supply chain.
Regardless of ESG, it’s always been our responsibility to be informed about who exactly we’re doing business with. Companies can no longer plead ignorance of unethical operations occurring along their supply chains – especially with an increased scrutiny on modern slavery, worker’s rights, and responsible sourcing.
If you haven’t done so already, it’s imperative that you conduct your research proactively; and it may also be a good idea to hire a third-party risk management service to carry out audits on your behalf, to ensure that your operations are completely ethical from top to bottom.
- Set Net Zero goals.
ESG strategies will vary from company to company, but due to the prevalence of greenhouse gases, a Net Zero Strategy will always likely be present to some extent. If you’re unsure of where to start, good news – there are multiple ways to keep your carbon emissions balanced. Carbon offsetting programmes like landfill methane capture, wastewater treatment facilities, investments in energy-efficient technology, reforestation programmes such as PrintReleaf , and opting into Managed Print Services are all great places to start reducing your carbon footprint.
- Conduct an ESG Materiality Assessment.
With all this in mind, it makes sense that investors are more scrupulous than ever when it comes to who they give funding to. Nowadays, it’s crucial to have answers prepared about our treatment of employees and vendors; our supply chains, and our progress in attaining sustainability objectives, etc. Gathering all your information into a single materiality assessment allows you to easily report on the state of your business, as well as initiatives on the horizon.
To be as clear as we can: on their own, these steps don’t constitute an entire ESG strategy by themselves. Ultimately, it’s a broad subject, and any ESG goals should be properly assessed with your people and work processes in mind, before incorporating them into your business. To explore the role that proper IT management can play in achieving your ESG objectives, see more here.