If you have a company, business or manage a corporate entity, one of the most important and emerging attributes is ESG sustainability. Although the whole concept of sustainability has been around for about three decades, it is considered emerging because it is only now that it is receiving greater emphasis. Almost every stakeholder, from investors to governments, insists on responsible and sustainable operations. In 2021 the leaders of the Group of Seven (G7) called for the adoption of policies to enforce climate-related reporting or disclosures.
As a corporate organisation, you have to appreciate that ESG (environmental, social and governance) reporting is becoming a mandatory requirement. So, what is ESG sustainability? How do you get it right in your company? Here is an expert guide to all that you need to know about ESG corporate sustainability.
Before laying out a plan for your company's sustainability, it is important to go back to the beginning and understand how it works. ESG, shortening for environmental, social, and governance, refers to the three main factors used to measure the ethical and sustainability impacts of a company or business. Customers, investors, and business partners, among other stakeholders, believe that they can help address the challenges facing the planet by working with ESG companies. Here is a deeper look at the three core components of ESG:
This criterion includes all aspects of a company that touches on matters of the environment. It looks at the impacts that your company or business has on air, water, land, habitats, and living organisms. You also need to factor in how a company is impacted by the related risks. Some of the main components in the environmental consideration include greenhouse gases (GHG) emissions, wastes from the company, and compliance with environmental regulations.
ESG sustainability must also factor in the people or how the company relates with stakeholders. So, how well does your company interact with its employees? Is the workplace safe and promoting better health of the employees?
When it comes to the community, your company should be part of it to make customers and those interested in investing identify with it. For example, if the company is located in a mining region, running projects that support better health, education, or economic empowerment would come in handy. Let the people feel part of the project by outsourcing staff locally and allowing more benefits to trickle down.
A company can only succeed when it has good management. Corporate governance is an important part of sustainability because it defines how all the other components of a company, from cutting down carbon footprint to supporting social justice, are implemented. The main ESG standards for governance include transparency in accounting methods, diversity in management board, and integrity. Investors are mainly interested in identifying a company that has good performance but does not have a conflict of interest when selecting board members or being involved in illegal conduct.
Now that you know what ESG sustainability is for your company, the next step is planning and ingraining it in the main operations. Because almost every stakeholder is demanding ESG sustainability and ethical operations, you have to plan and report every detail accurately. Here is a demonstration of how companies should go about it.
If you are new to ESG sustainability, it can sound like a pretty complex undertaking. Sure, it can be, but the application will become more straightforward with time. Therefore, it is important to start rethinking the company in the new era of sustainability (focus on both positive ESG and negative issues). Remember that implementing ESG sustainability does not mean doing everything at once but setting a clear plan to reach specific goals.
So, how would you want to see the company in the next three, five, or ten years? If it is cutting down the carbon footprint as a sustainability measure, this can be gradual, perhaps by changing the lighting system, buying new machinery, and ultimately shifting to renewable energy. This path needs to be demonstrated in a clear and accurate manner, including the corporate financial aspect, for investors and other stakeholders.
One of the reasons why ESG sustainability for most companies fails is that it originates from low-level managers. Instead, it should come from the top level of governance to be part of the company’s main agenda. This means that operations, efforts, and resource allocation will also be directed towards driving sustainability. It is because of this reality that more entities, such as the Hong Kong Stock Exchange (HKEX) guidelines for ESG reporting, put the duty on the boards of the listed companies.
For your ESG sustainability efforts to bear results, you need a clear strategy. So, what actions do you take? The first step in your sustainable journey in crafting a good strategy is analysing the current state of the company. For example, does your company release a lot of emissions which are harmful to the climate? Are the wastes released directly into the landfill or waterways?
By reviewing these operations, you can identify gaps that should be filled. Then, carry out a materiality assessment and involve stakeholders to identify specific reporting topics. Then, select a good ESG framework, such as The Task-force on Climate-related Financial Disclosures (TCFD) or the Global Reporting Initiative (GRI).
The framework should help you navigate through the reporting path and give the report greater credibility. Remember to stick to the principles of ESG reporting, such as accuracy, continuity, and materiality, when using the reporting framework.
As you can see, the whole idea of sustainability has a lot of focus on the accuracy and verification of data. After making the decision on sustainability topics, the selected strategy has to be reported to the stakeholders. To demonstrate the company's commitment to sustainability and avoid getting labelled "greenwashed” it is paramount to have the right ESG reporting software.
A good app, such as diginexESG and diginexLUMEN, can help you understand and adopt sustainability more effectively. This will make it easier for your company to craft top-notch reports and convince stakeholders that your company is a good investment option. At Diginex.com, we are always looking for newer solutions to help companies integrate sustainability into their operations. We also have experts to hold your hands in the journey to the targeted sustainability levels.
When it comes to matters of ESG sustainability, it is a good idea to work with the best experts and applications. Contact us today for all the assistance you want on ESG.
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