In this blog, we explore the significance of ESG, looking at why it is important given the current climate and the benefits that ESG reporting software can bring to your business.
ESG stands for Environmental, Social and Corporate Governance (ESG). These three different areas are the cornerstones of sustainability – and the standards a business sets in these areas are the key criteria that sustainability credentials are evaluated against.
Increasingly, potential customers are also using ESG credentials to evaluate companies. In addition, governments around the world are increasingly asking companies to publish ESG information and report on their ESG policies and goals.
They are useful when factored into the investment process, as it allows potential investors to see whether the business they are interested in are committed to a greener, fairer future and on track to meet ambitious targets such as Net Zero.
This criterion looks at how the company is responding to environmental issues. It includes examining what their carbon footprint across their organisation and whole supply chain is. Environmental also investigates what goals they have in place to improve sustainability, reduce greenhouse gases and plans for securing net zero by the required deadline.
It may also include an organisation’s energy management, their levels of waste and pollution, natural resource conservation and treatment towards animals. By exploring these types of issues, this criterion gives a clear view of how well-equipped a company is to manage any potential environmental risks specific to their operations as well as universal threats like climate change.
Whilst the environmental criteria deals with a business’s affiliation with the planet, the social side looks at more human-orientated issues by exploring the company’s business relationships.
This includes seeing whether they are conducting their day to day activities in a fair and ethical manner – and checking their policies on modern day slavery, health and safety and discrimination. It may also scrutinise their corporate culture, checking to see if employees are happy and if their working conditions are fine. It might additionally look at issues outside the company, exploring if they are working with suppliers that hold the same values, or seeing if they are doing anything to support the local community or charities.
In terms of reporting, this could make visible a gender pay gap through data such as remuneration ratios.
This criterion makes helps make sure that a business has all the right and necessary governance policies in place. Ensuring that your business is compliant with all the latest legislation and having the data available to prove that if audited – helps mitigate risk and encourages your business’s ongoing success and viability.
This also ties into the investment process, as potential investors may want to make sure an organisation uses transparent accounting methods and whether stockholders can vote on particular issues. By having clear data readily available that relates to a business’s operations, they can easily check to make sure the company they’re about to invest a substantial amount of money in doesn’t engage in illegal or morally dubious practices.
Climate change is a global issue, and one which requires a collective effort from both organisations and individuals to consider the ways they can reduce their carbon footprint.
ESG wields big potential in the fight against climate change, and provides a great opportunity for businesses to show their commitment to a more sustainable future. It forces them to be more accountable, and encourages business owners to examine their current operational procedures – prompting them to consider what they can be doing to reduce their environmental impact.
In a time where companies are being scrutinised for how they conduct themselves and treat their staff, it’s never been more important to be accountable and demonstrate how your business is compliant and showcasing its ethical credential through clear data. ESG is incredibly useful in this respect, as the social and governance criteria can effectively do this.
Broadly speaking, setting strong ESG policies can inspire positive and long-lasting change. By encouraging businesses to make more ethical and conscientious decisions across their operations, a sustainable future becomes possible which benefits the planet, people and wildlife.
In addition to helping fight climate change, measuring and participating in ESG can also bring a multitude of other benefits to your business pertaining to its efficiency, image and profits.
Implementing sustainable supply chains can prompt a better use of resources, which in turn cuts waste and reduces costs. The switch to sustainability can also drive innovation as it forces business owners to consider whether there are new, or more efficient ways to run internal operations.
Although the majority of ESG reporting is not currently mandatory for many businesses in the UK, it seems inevitable that companies will be expected by customers, stakeholders and governments to provide up to date, accurate information in the near future.
In addition, taking action now on ESG reporting can have a hugely positive impact on your organisation’s public relations and image.
Accumulating and reporting on data voluntarily shows a willingness to be transparent, which makes you seem more trustworthy and socially aware. In a time where sustainability and climate change is so important, this presentation of your business can only be a good thing. It can attract ethical investment, and go on to foster relations and expand your customer base.
Measuring and reporting on ESG can be a complicated process. The operations of a business are inherently complex – encompassing a range of people, procedures, supply chains and resources.
Knowing where to start with ESG can feel like a real challenge and is near-impossible in businesses of any scale without the help of specialist software and technology.
Using the right ESG reporting software that automates data collection and allows you to measure, analyse and report on your performance makes the whole process much easier.
Monitor, analyse and improve sustainability performance with AXIOM – a powerful cloud-based ESG reporting platform.
Using specialist technology, we equip businesses with a tool which enables them to track their environmental and social performance, whilst also improving governance – identifying and mitigating risks associated with business operations and relationships.
From tracking SECR and carbon emissions through to community engagement and beyond – AXIOM can help. To find out more – book your free demo today.