In recent years, customers and investors have started giving sustainability more focus with the aim of helping the planet to address its challenges. Sustainability is a way of doing things to ensure that your organisation or company is focused on identifying and mitigating negative environmental, social, and governance impacts (ESG). This is what most licensing bodies, investing firms, international standards organisations, and governments, among other stakeholders, are giving more focus in the corporate world today.
To achieve sustainability, you will need to identify, follow and report on different ESG metrics for your company. This post digs deeper into sustainability reporting to answer one major question, “what are the main ESG metrics that your company should follow?” We will also tell you why you should have the best sustainability reporting app for accurate ESG reports.
Reducing Carbon Footprint
All over the world, carbon footprint reduction has become a standard metric for sustainability, especially for people searching for investment opportunities. It is emphasised as a crucial environmental, social, and governance (ESG) factor by independent standards organisations, governments, and capital markets. This focus is driven by the urgent need to address the problem of global warming and climate change that are caused by GHG emissions.
The Paris Agreement and experts have warned us of dire consequences if we fail to reduce global temperatures to below two degrees celsius the pre-industrial levels. The best goal for your business or company is to reach zero-carbon status within a specific timeframe.
This metric can be tracked by a company for its stakeholders, such as customers and investment enthusiasts, through a clear plan or following international standards that targets data on the following sustainability items:
- Reducing energy use in the company or organisation. The lower the energy use, the less the carbon footprint and positive impact on the climate for your business.
- Improved machine maintenance to reduce energy use and emissions that results in climate change. High quality machines in your management can help to improve your sustainability impacts.
- Selecting an energy provider that supplies renewable energy. This will help you to reduce Scope Two and Scope Three greenhouse gas (GHG) emissions, improve ESG performance, cut down carbon footprint, and make your organisation attractive for investing.
- Reducing business-related travel. If you can cut down the board or staff travel, emissions that could have been made by the vehicles or aeroplanes will be reduced. The good thing about this metric is that you can easily shift to alternative methods of communication, such as instant messengers and video conferencing.
- Shifting to local supplies and electric vehicles. This metric works like cutting executive travel. By sourcing raw materials locally, you improve the ESG performance of the company by cutting down on emissions that could have been made moving the supplies across the globe.
Cutting Wastage in Your Company
In every company, there must be some form of waste generated by daily operations. Take the example of a company or organisation that deals with food processing. In such a case, wastewater, water leakages and raw material damages would all be counted as waste and can cause environmental damage at the local and global level if not handled well. Therefore, waste reduction as an ESG metric would be an important part of the larger strategy to improve the company’s operating efficiency and reduce its environmental, social and governance (ESG) impacts..
Shifting to new categories of materials will help to improve the quality of products, reduce waste, cut down on water use, strengthen the brand, grow the customer base, and attract people interested in investing. As you focus on cutting wastage, whether it is in the production line or office, it is prudent to ensure the ESG metrics, risk and impact are captured by the management or sustainability team accurately.
This is crucial to make the information in the ultimate ESG report verifiable and make your company attractive as the most preferred global investment.
Employee Health and Safety
“Social” is one of the central pillars of ESG. It requires your company to focus on the people and ensure it is impacting them positively. This focus should start with the employees at all levels, both executive and juniors, in your company. Therefore, employee health and safety should be a crucial ESG metric in companies’ operations. Remember that you can break down health and safety metrics into finer details for greater specificity in their risk management.
Because every employee is part of your organisation, providing him/her with good health can be a good indicator of your company’s commitment to their welfare. It is also a signal that the strategies, goals, and targets of the company’s board would be achieved more effectively because of support by staff. To demonstrate the commitment to better health and safety of staff, companies should focus on:
- Providing a safe and healthy working environment.
- A well-defined medical cover for staff.
- Identifying and following global business standards on labour practices, such as their compensation.
- Extending the medical cover for staff to their immediate family members.
Make sure that the data on the health and safety related information, such as financial, compensation, and preventive efforts is captured well on the stakeholder’s report. You might also want to compare the data on these metrics with that of other firms in the industry to provide investors emphasis about the performance and commitment of your executive to ESG.
Clearly Defined Business Ethics
The idea of sustainability cannot be complete without factoring in ethics as one of the ESG metrics. For most companies, ethics simply means they are doing the right thing, but it is more than that from the viewpoint of ESG and responsible investors. Adopting ethics in your business will help to ensure that every structure of the company is doing the right thing. From the top leadership to junior employees, the focus on ethics means trying to make the company better by improving its processes, performance and products.
One way of improving business ethics is by implementing a new code of conduct. This should include strategies and structures for addressing corruption.
For example, does the company have a mechanism to detect corruption in the board or other management levels? What penalties are used to punish perpetrators?
What You Need to Implement an Effective ESG Plan
These are only a few environmental, social, and governance (ESG) metrics that you should consider. Others that you might want to include in the company’s ESG reporting system are the diversity of board members and product safety. Remember that to be able to follow these metrics; you should have a clear ESG plan. The strategy should demonstrate the areas of focus and the targeted goals.
To craft a good plan, you should start by reviewing your company's opportunities and risks. Then, identify the reporting topics that the ESG metrics should focus on. For example, a company in the hospitality industry might consider support for conservations as the main ESG metric.
Next, you should define the way you will support conservation. You can work with conservation authorities and other organisations that focus on protecting biodiversity. So, tailor your plan based on the type of your company, its operations, and the metric of interest.
Once you have created a plan, it is prudent to select an appropriate reporting framework to serve as a guide. Good examples include the Global Reporting Initiatives (GRI) and Task-force for Climate-related Financial Disclosures (TCFD). You should also work with an ESG consultant if your employees find it challenging to implement the sustainability plan. The experts can help you to understand more about the ESG metrics, develop the right strategy, and finally publish reports that will impress customers and investors among other stakeholders.
This post has demonstrated the main ESG metrics that you should consider when running a company or organisation. Others that you might want to consider include financial management, buying carbon credit as a compensation for high emissions that can accelerate climate change, and product redesign of the company.
If you opt to buy carbon credits, it is important to appreciate that it can be pretty expensive compared to other strategies, such as shifting to renewable energy or reducing water use and waste released from your company.
Remember that the metrics can differ depending on the nature of your company or organisation and risk involved. So, make sure to have the right ESG reporting software to make data collection and preparing final reports easy to prepare and information therein verifiable.
Contact our experts at Diginex.com for the best sustainability management apps, such as diginexESG, and expert assistance.