ESG – where to start

Businesses today face mounting scrutiny that goes far beyond profitability. With social and environmental issues now taking centre stage worldwide, businesses must prioritise Environmental, Social, and Governance (ESG) principles to remain competitive and compliant.

While ESG was once optional, it’s now necessary for success, with three-quarters of CEOs recognising ESG as important as profit. Whether meeting stakeholder expectations or enhancing brand reputation, incorporating ESG practices can drive long-term business growth and resilience while positively contributing to both society and the planet.

What is ESG?

ESG encompasses criteria that evaluate a business’s environmental impact, treatment of employees and communities, and corporate governance. Rather than solely relying on financial metrics, ESG enables businesses to address broader societal and environmental issues. It provides a framework to quantify the overall impact of a business’s activities.

Why do businesses need to think about ESG?

By embracing ESG practices, companies enhance transparency, accountability, and risk management. This approach helps foster sustainable growth, resilience, and long-term profitability. At the same time, it actively contributes to positive social and environmental outcomes. ESG offers businesses:

• Financial benefits: It allows businesses to reduce their environmental impact, leading to cost savings on energy and resources.
• Attracting and retaining talent: Employees increasingly seek companies that align with their values helping businesses build a more motivated workforce.
• Risk mitigation: ESG practices help businesses proactively address environmental and governance issues, reducing the risks associated with climate change, regulatory changes, and potential reputational damage.
• Investor expectations: An increasing number of consumers and two-thirds of investors consider ESG when investing in or purchasing from a business.
• Future-proofing the business: Businesses embracing ESG are better positioned to adapt to changing markets and regulatory frameworks and ensure long-term success.

Demystifying ESG jargon

While ESG may seem complex, it simply outlines the standards for responsible business practices. Understanding the different terms related to ESG can empower businesses to embark on their ESG journey with confidence:

• Climate change: A long-term change in the Earth’s climate and weather patterns.
• Net zero: Reaching a balance between greenhouse gas emissions and removal of these gasses from the atmosphere.
• Carbon accounting: Measuring and monitoring a business’s greenhouse gas emissions.
• Carbon intensity: The ratio of greenhouse gas emissions emitted as a result of using one unit of energy.
• Scope 1, 2, and 3 emissions: Categorising a company’s direct, indirect, and value chain emissions.
• Carbon dioxide equivalent: A unit measuring the global warming potential of various greenhouse gases.

Navigating the world of ESG

Implementing ESG is a unique process for each business. However, you can get started by considering the following steps:

• Awareness: Ensure that all key decision-makers and employees understand what ESG is and its importance. Organise training sessions to encourage awareness, involve them in ESG-related initiatives and foster a culture of responsibility and sustainability.
• Understand ESG risks: Identify potential ESG risks, such as climate change impacts, regulatory changes, or reputational risks. You need to know where you’re starting from, undertaking materiality assessments to see what is important to your team and what your current impact is will help guide your future decisions.
• Set clear ESG goals: Define specific ESG objectives, such as reducing carbon emissions, enhancing employee relations, or strengthening governance practices.
• Implement ESG measures: Take targeted actions to achieve your ESG goals, such as investing in renewable energy, improving employee training, or enhancing internal controls.
• Transparent reporting: Regularly report on ESG performance to build trust with investors, consumers, and stakeholders, showcasing your commitment to sustainability and responsibility.

Summing up

For businesses navigating ESG, the key is to take the first step, as the rest will fall into place. By beginning the journey towards ESG integration, companies can unlock many opportunities, driving positive impact and ensuring a sustainable and responsible future for their business and the world.