What is ESG?
ESG stands for Environmental, Social and corporate Governance, and it’s a system of (at-present) optional corporate reporting that’s associated with sustainability, and has more recently been used as a selling point in the markets, equated with a good indicator of which companies may be good to invest in.
Beyond stocks and trading, ESG helps companies create goals to impact the environment and community around them positively—it also shows how the company is doing everything it’s promising to do. What originally started as a United Nations initiative (a response to social concerns, climate change, and questionable corporate governance structures) is now a widely accepted method for businesses to become more mission-focused rather than just financially-focused.
Each letter in ESG has a few categories that are useful to identify:
E is for Environmental: This portion of the ESG focuses on addressing the climate crisis and environmental sustainability through corporate actions. This can include steps to prevent, mitigate, or eliminate carbon emissions, runoff, or pollution of any kind. This portion of the plan for corporations also pulls in ideas for encouraging resource efficiency, biodiversity, proper disposal procedures, and it outlines previous history with environmental regulatory bodies (the EPA, for example.)
S is for Social: The second section of ESG is invested in social concerns, human rights, and consumer protection. The Social part of ESG Plans can address these concerns through outlining policies around the treatment, benefits, pay, and diversity of its employees; sourcing practices; and the service and protection of its customers.
G is for Governance: The “G” part of ESG reporting deals in management structure, executive compensation, and employee relations and compensation. This portion of the plan can lay out steps or policies that have to do with stakeholder incentives, bonuses, metrics of success, conflicts of interest or matters of corruption, levels of corporate transparency, and the hierarchy of governance.
At PEC, we can help you with the “E” (environmental) aspect of your ESG, by helping you replace your legacy lighting with energy-efficient LED retrofit replacement upgrades, underperforming LED to high-performance LED upgrades, or EV Charging system installations.
What is ESG Reporting?
When creating an ESG, you will want to create an ESG plan, and disclose the accompanying and applicable data (showing improvement and follow-through) through data disclosure companies like CDP, and then you’ll be able to reap the benefits through helping your company optimize and grow. Through ESG reporting, companies are held accountable and kept ethical, because of the tracking of various goals and/or KPIs the company has identified in their ESG plan (e.g. lowered greenhouse gas emissions or improved waste management).
There is not currently an industry-wide set of standards for ESG reporting or measurement. Organizations sometimes use market research companies to help compare their efforts against competitors. Companies should show data from both financial and non-financial sources to indicate that they’re meeting standards set by particular agencies. According to Deloitte, one or more frameworks are usually used for reporting, with Global Reporting Initiative (GRI) and the Sustainable Accounting Standards Board (SASB) being the most commonly used standards. Companies should plan to publish a sustainability report, and disclose data through their website showing the ESG performance, beyond a typical standard financial report or mission report.
What are the Benefits of ESG?
ESG shows that your company takes care of its resources: financial, yes, but also the community within and the world outside your company. With an ESG plan set in place, you may garner a few resulting benefits, like:
Cost reduction: Become more energy efficient, use renewable energy, and your electric bill will go down. Minimize employee downtime through employee safety programs (proper lighting can help with this). Be sure to track the most important metrics in your ESG: shipping costs and the energy/water consumption, for example.
Attract lenders and/or investors: Lenders and investors are interested in being linked to organizations and companies that are working against climate change, and leading that movement. Smaller companies that focus on your ESG may secure a loan, even when competing with much larger companies. If you can get a solid ESG plan in place, you may out-perform your rivals.
Improve supply chain pool: A good ESG plan and performance can equate with a better partner for your shipping or supply chain company.
Beat out the competition: People care today more than ever, about societal change, the
earth, and holding corporations accountable. If your ESG is proactive and data reporting shows you’re meeting sustainability concerns, you become more desirable
Bring in/keep the best (employees): Today’s workforce wants to be part of a company that cares—workplaces that prioritize ESG are assumed to also care about their employees, especially through their corporate governance goals. In fact, 86% of employees prefer to support or work for companies that care about the same issues they do.
How Do I Implement ESG Measures?
Now that you know what ESG means, what the reporting is, and what benefits may be involved, it’s time to learn how to implement ESG measures and what items to focus on:
1. Gather your group and assess which topics you should prioritize.
2. Create your baseline through data (reports, policies, surveys, interviews).
3. Set up your ESG goals—what can you continue, adjust or improve?
4. Determine how ESG goal data will be collected and assessed, along with any tasks required for each.
5. Identify your gaps/threats/weaknesses in data or in reaching your goals.
6. Link your company’s mission/vision/values to your ESG goals.
7. Write up the plan and create KPIs (key progress indicators), with software in place to collect data.
8. Report your progress via PDF online or in annual reports to stakeholders. Include: alignment of ESG and business goals, accomplishments, and goals/metrics.
9. Assess regularly as you grow, and adjust your ESG as needed.
ESG Implementation Challenges and How to Overcome Them
As with anything good, it takes plenty of time and energy. Make difficult data collection streamlined with the right collection method. Find a method built for accuracy and good cross-company communication. Remember your goals—it’s a marathon, not a sprint. Most of all: stay on course, reassessing regularly. If you still need extra guidance, check out this easy guide to ESG and developing your company’s strategy.
Environmental, social, and corporate governance is a valuable piece to your company’s future, and is worth the effort and time. At PEC, we can help you easily create lasting impact in the “E” of ESG, with LED retrofit and EV charging installations.