ESG refers to business leader’s focus on Environmental, Social and Corporate Governance in relation to their long-term plans. What can a focus on ESG mean to your business or profitability, and how can companies use employee engagement tactics to further the cause?
In 2017, over 140 CEOs from the World Economic Forum International Business Council (IBC) issued a “Compact for Responsive and Responsible Leadership”. The CEOs developed a framework that companies can use to track and demonstrate long-term sustainability. This compact aligns corporate goals to the long-term goals of society and identified “Sustainable Development Goals” (SDGs) as the roadmap for that alignment.
In our February and March blog posts, you’ll find an overview of the 4 pillars of ESG, and what they can mean for your business.
The 4 pillars of ESG that will be covered in this series of 4 blog posts are:
Part 2: PLANET
This pillar addresses the plan to protect the planet from both degradation and consumption and production. The consensus is that urgent action is needed on climate change to support the needs of both the present and future generations.
Business both depends on, and impacts, our natural environment. Today, there is a business risk associated with failing to understand and respond to environmental considerations. The 6 SDGs that are relevant to corporate disclosures include:
- Clean water
- Affordable energy
- Responsible consumption
- Climate action
- Loss of resources: under water
- Loss of resources: on land
Across these reporting frameworks, there are 7 environmental impact areas:
- Climate change: Greenhouse gas emissions and reporting on governance and risk management. Setting strategy and metric targets as well as ensuring that companies are committing to science-driven targets (net zero by 2050)
- Nature loss: Estimate and report on land usage affected by the business, annual change that is expected and any endangered species that are in the areas and affected.
- Fresh Water: Availability and amount of fresh water that is consumed, reporting of water-stressed areas. Fresh water is required for food production, generating energy and manufacturing. Access to water for drinking and sanitation is critical, yet there are still many areas of the world where there is no access to clean water.
- Air pollution: Emissions and other particulates that pollute the air and are the leading cause of diseases and premature death in the world.
- Water pollution: Harmful pollutants that are released into the water, especially excess nutrients that are used in agriculture.
- Solid waste: Plastic waste is now considered to be the most harmful. Lightweight and single-use plastics that are difficult to recycle often end up in the oceans and can take centuries to degrade.
- Resource availability: When genuine sustainability is achieved, we will be re-using non-renewable resources and reducing consumption of renewable resources which will strengthen our economies.
Metrics and Disclosures
The International Business Council firms set guidelines to track and report key dimensions consistently. Companies are encouraged to begin reporting on these core metrics as soon as they are finalized. ESG metrics should appear in the management discussion and analysis of a company’s annual report, ensuring that ESG factors will be on the Board of Director’s agenda.
Corporate social and environmental responsibility is increasingly important to employees who are deciding where to work, and to consumers deciding where to spend their money. Companies can communicate these priorities to employees through effectively designed employee incentive, reward and recognition programs. People pay attention to what is measured; setting goals aligned with corporate initiatives such as recycling and energy conservation, etc., will focus employee attention on company goals.
Companies must understand the impact of environmental concerns on long-term value creation and use best practices to engage and motivate all stakeholders to maximize success. These new guidelines and reporting mechanisms will provide a consistent platform for companies to use.
For more information on ESG and its impact on your business, register below for the “The Connection Between EE & ESGEmployee Engagement & Environmental, Social, Governance” webinar event.
And stay tuned for Part 3 in this series where we will cover the 3rd pillar of ESG: People.