How do social and governance fit into ESG?

13 October 2022 


When it comes to assessing and analysing sustainable performance, you may (like many others) automatically prioritise the ‘E’ in ESG (Environmental, Social, Governance). After all, ESG is all about your environmental impact, right? While that’s absolutely part of a successful ESG strategy, there are other factors to consider. So what are they? What do they all mean? How can you monitor the various strands of an ESG strategy to make sure you’re doing your part for both people and the planet?

ESG: more than your carbon footprint

As the world faces a climate crisis, a key priority for many businesses is mitigating environmental impact. One of the ways to do that as a business is to reduce and limit your carbon footprint. This is perhaps why so many people look to the ‘E’ in ESG, which considers everything from how a company can reduce greenhouse gas emissions to how they can manage waste policies and energy use.

ESG has become a critical part of business operations worldwide, with the UN-backed global campaign, Race to Zero, setting ambitious targets for businesses, cities, regions and investors to achieve Net Zero carbon emissions by 2050. Businesses across the globe are adopting their own strategies to monitor, track and improve their performance because there’s a clear, real need for it. Regulatory and societal changes are also driving many businesses into action and, as policies evolve, it becomes even more crucial for businesses to stay up to date with the changes.

So, as well as looking at your environmental impact, what are the things you need to consider in an ESG strategy?

The ‘S’ in ESG – what does it mean?

The ‘S’ in ESG stands for social, which centres around monitoring your impact on social issues. Essentially, it focuses on your relationship with people. Some of the key focus areas include: employee wellbeing and health and safety, training and development, equality and diversity, human rights and supply chain transparency.

Why is it important?

86% of people prefer to work for or support companies that care about the same issues as they do (PwC).

76% of consumers would discontinue relations with companies that treat employees, communities and the environment poorly (PwC).

There are a number of reasons why you need to consider the social strand of ESG. Not only are there regulatory requirements in place (which differ wherever you are in the world), there’s also mounting consumer pressure for greater transparency as well as a need for investors to understand where their money is going. Your company’s actions and policies have an impact on people’s everyday lives, so imagine being able to understand this in more detail. Not only could you make significant improvements to your operations, mitigate risk for investors and increase the value of your business, but you’d also have the power to make a positive change for the world and everyone in it.

While there isn’t (yet) a standardised global framework to work to, the UN’s sustainable development goals (SDGs) is a guide. It highlights 17 goals to be met by 2030, which include important matters such as climate action, reduced inequalities, no poverty and economic growth. The social aspect of ESG has often been seen as difficult to monitor (when compared to environmental impact) but there are a number of ways to track your social behaviour.

Our intelligent technology platform, Sustainion, is designed to give you complete transparency over your entire supply chain. You can automatically collect and centralise key data, map this out alongside regulatory requirements and identify key opportunities for improvements that could increase productivity across the business and drive long-term, sustainable change.

The ‘G’ in ESG – what does it mean?

The ‘G’ stands for governance, which refers to how a company operates, its corporate behaviours and decision making. From accounting standards and shareholder rights to gender equity and diversity, good governance is critical for an effective ESG strategy.

Why is it important?

80% of consumers would prefer to buy from a company that stands up for governance (PwC).

73% of consumers feel let down by slow progress on diversity and inclusion (PwC).

Not only is understanding governance data and reporting on it crucial to how investors and stakeholders might view your business, it’s also fundamental to how the world views it too as outlined by the Volkswagen Group scandal in 2015. Having a clear governance strategy in place can help you mitigate reputational risk and ensure your business practices are aligned with your values.

Our team works with companies around the world to help them monitor and track governance data. Using our platform we can help you not only streamline your data but make sense of it, helping you gain clear visibility on where you need to make improvements so you cannot only successfully manage your reputation but drive efficiencies and performance too.

Helping you create a better future

We know that understanding all elements of ESG can be overwhelming, which is why our expert team is on hand to answer any questions you have and guide you through the process.

Every ESG journey is different, so our advisors have a tailored approach to each strategy. Working with you, we’ll understand your key requirements, goals and objectives, and create an action plan that ensures you get the results you want.

Whether you’re just starting your ESG journey and looking for information on how you can comply with legislation or you’re now looking for ways to improve your overall strategy and boost business performance, we’re here to help.

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