The It Factor: Why Investors & Companies are Attracted to Enviro-Social Sustainability
ESG, which stands for Environmental, Social, and Governance, also referred to as Corporate Social Responsibility, Social Responsibility, or simply Sustainability can provide a set of criteria used to assess the ethical impact of a company or investment. Sustainability is defined as the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs - not only from an ecological standpoint but from an economic perspective as well.
Sustainable business practices are becoming increasingly important to investors as they seek to put their money where their values are, and understand the potential enviro-social risks of their investments. Savvy leaders are incorporating sustainability into their overall business strategy, and then quantifying and publishing their ESG performance, which is attracting conscientious investors. (A business strategy that is driven by established results and relevant initiatives such as the circular economy and employment equity.)
The Three ESG Factors
E: Refers to a company's impact on the environment. This includes a company's carbon footprint, water usage, energy usage, waste management, and pollution. Companies with a strong commitment to the environment may invest in renewable energy sources, use sustainable materials, and have green policies in their operations.
S: Assesses a company's social impact. This includes factors such as labour standards, human rights, diversity and inclusion policies, and community relations. Companies that prioritize social responsibility may have fair labour practices, engage in charitable giving, and prioritize employee wellness. Climate change is clearly an environmental matter, but it is also a social issue, as certain marginalized communities are more affected than others.
G: Examines a company's corporate governance structure, such as board diversity, executive compensation, and shareholder rights. Companies with strong governance structures may prioritize transparency and accountability, and have risk management programs in place.
Sustainability Should be Driven by Top Management
Everyone has a role to play to achieve sustainability in an organization. Starting from the top, a company’s leadership team defines the sustainability policy that will be the guiding vision for the organization, and demonstrate a calculable commitment to that vision. CEOs and those in leadership positions must visibly promote sustainability to stakeholders and all staff. Next, it is up to middle managers to implement the vision and effectively communicate that vision to all employees and contractors. Human Resources, Legal, and HSE managers will play a particularly key role in driving the sustainability policy, as they bare the weight of developing the environmental, governance, and social responsibility programs.
Applying ISO Continual Improvement to Implement an ESG Strategy
An ESG strategy can be implemented in the same way successful health, safety, environmental, quality, and security management programs are implemented — through education campaigns, management systems, and auditing. Since we have seen firsthand how ISO management systems can be applied to improve workplace health and safety, business strategy, and work culture in general, we will take the key ISO concept of continual improvement to illustrate how sustainability can materialize in the same way.
An ESG strategy can be actualized by following this roadmap.
- Identify and state key ESG issues: The first step is to identify the ESG issues that are material to your organization. This involves assessing the impact of your business operations on the environment, society, and governance practices.
- Develop a strategy: Once you have identified the key ESG issues, you need to develop a strategy that addresses them. This involves setting goals and targets, defining actions to be taken, and allocating resources to complete them.
- Communicate the strategy: It's important to educate stakeholders, investors, customers, employees, and suppliers about sustainable practices. This helps to attract support for your sustainability program.
- Integrate ESG into decision-making: ESG considerations should be integrated into all decision-making processes across the organization, including investment decisions, procurement, and risk management.
- Audit and report on ESG performance: To track progress and ensure accountability, it's important to measure and report on ESG performance regularly. This involves collecting data, analyzing performance, and reporting on progress toward goals and targets.
- Follow-up: ESG is a continual improvement process, and organizations should continuously review and improve their ESG strategy and performance over time.
By following these steps, organizations can effectively implement an ESG strategy and improve their environmental, social, and governance performance.
If you are familiar with the ISO standards, then the concept of continual improvement is not new to you. With ISO certification, a company will develop a management system to ensure compliance with legislation and best management practices. The next step will be to implement the safety, quality, or environmental program through training and awareness. To maintain certification to the international standard, internal and external auditing of the system is required. Corrective and preventive actions are identified, ensuring CONTINUAL IMPROVEMENT of the system. Follow-up is conducted to ensure actions have been completed, and the cycle continues with implementation of the ISO 45001 occupational health and safety, ISO 9001 quality, or ISO 14001 environmental management system.
ESG as a Reputation Enhancer
ESG factors are often used by investors to evaluate potential investments and assess the long-term viability of a company. Many investors perceive that companies prioritizing ESG are more likely to be profitable in the long run. As a result, ESG investing has become increasingly popular, and many investment firms and funds now focus specifically on companies that meet ESG standards.
When a business goes green, not only are they reducing their ecological footprint, but they will also reduce costs through waste reduction.
Social and governance metrics can help companies avoid costly legal issues, reputation damage, and other negative consequences.
“The world is changing as per investor interest in financial sectors all over the world. ESG can attract investors with new criteria which are best for company portfolios, as well as investors' stock exchanges in a company. The top position decision makers can manage risks to attain ESG either directly, by utilizing strategies linked to ESG scores; or indirectly, by targeting ESG indicators. If specific ESG scores are linked to rewards, those ESG components are more likely to be associated with excess returns.” - Saravanesh Ajayakumar
Through ESG, companies can operate more efficiently, manage risks more effectively, and enhance their reputation and value proposition. Companies that prioritize ESG factors can improve their reputation with customers, employees, and other stakeholders. This can lead to increased loyalty, improved brand perception, and a stronger social license to operate. ESG programs and policies can help companies contribute to the common good and be viewed as responsible corporate citizens.
As Finance Minister Heng Swee Keat puts it: “Corporate giving these days is not just a business practice, but an integral part of how companies engage stakeholders and inspire their employees.” You'll undoubtedly concur that the younger generation is striving for a higher, more meaningful purpose at work in addition to customers giving sustainability a higher priority in their decision-making process.
The E in ESG: A Closer Look
Firms must ensure that the environment is included as a top priority in the overall business strategy, and support those commitments with data related to environmental impact.
Some Areas of Environmental Impact to Consider in an ESG Strategy:
How energy is consumed by the organization's core building systems, vehicles, equipment, and employees.
Electricity and fuel consumption are the two largest sources of GHGs for organizations, so developing programs to reduce consumption will in turn reduce emissions and expenditures.
Water conservation measures include actions, behavioural changes, devices, technologies, or improved designs or processes that are applied to decrease water loss, waste, or usage.
Wastewater effluent is Canada's most significant source of contamination to surface water by volume. Several contaminants of concern can be found in wastewater effluent, comprising suspended solids, disease-causing bacteria, nitrates, and hundreds of toxins.
Procurement of Goods
How the organization makes purchases and manages materials. Is the company making purchases with the circular economy in mind?
The linear economy supporting our throwaway culture is outdated and is the root cause of the most challenging economic, social, and environmental problems. In “Why our Throwaway Culture has to end,” Dame Ellen MacArthur writes for National Geographic how “products are designed with planned obsolescence; they are purposefully designed to go out of style and/or to break so that the consumer simply buys more stuff.” The plastic waste crisis is a symptom of our single-use approach to products and to solve it we need the circular economy. A circular economy keeps resources in use for as long as possible, extracts the maximum value from them while they are in use, then recovers and regenerates products and materials at the end of their service life instead of disposing of them. In a circular economy, reduction of waste is a top solution, with recycling or discard being a last resort. Public policy on sustainability would have a ripple effect on supply chain management as we force companies to produce and sell sustainable products.
Indoor Air & Lighting Quality
How the facility can improve employee comfort while reducing energy consumption.
How the organization collects, reduces, recycles, and disposes of its waste streams.
The pandemic forced organizations to allow for remote work. Conducting work remotely can reduce transportation costs, fuel consumption, and vehicle emissions.
Some points to ponder for sustainable workplace initiatives may include:
How can companies encourage and support working virtually?
How does the facility reduce its contribution to GHGs?
How does the facility encourage sustainable transportation options such as carpooling, public transport, and bike lanes?
How does the organization manage documents? (paper reduction and green procurement policies, online document management systems)
How does the facility maintain its exteriors, landscape, site features, and amenities? (i.e. low VOC paints, environmentally-friendly pest control)
Social Responsibility - in our own Words
When we hear the word sustainability, environmental responsibility is what usually comes to mind. But, what does it mean to be socially responsible?
The social pillar of ESG is wide-ranging: it spans everything from diversity and inclusion to health and safety, ethics, and Indigenous Reconciliation.
Some areas of Social Responsibility to Consider in an ESG Strategy:
Programs for hiring and retaining minorities
Gender equality and awareness campaigns such as The Tallest Poppy
Programs which respect the Employment Equity Act
“Women and minorities are not asking to replace your seat at the head table, they just want to be invited - since top management are unwilling to make a place at the table, it is necessary to have policies in place that ensure us a seat.” - Dawn Gough
Employees, independent contractors, clients, suppliers, the communities in which they operate, and the final consumers of their services and goods can all be impacted by business, either directly or indirectly. Every human right can be affected by a business.
“To help ensure all workers feel represented, the inclusion of diversity seats for each minority, such as women, indigenous, LGBTQIA2+ and racialised workers, must be provided a seat at the boardroom table. These seats would allow all workers to feel included and their voices heard as we move towards a more inclusive workplace.
If these workers lived experiences are not included in strategic planning, how can employee improvements within the company be truly made?
Employee engagement leads to workplace improvement and employee retention.
This will empower workers to help make a more inclusive workplace.
This is the only way to reduce systematic racism in the workplace and move toward a safer and more inclusive future for all workers.
Only through inclusion and a seat at the table can true changes be made.” - Scott Quilty
Paid time off and sick leave
Workplace Health and Safety
Mental health and wellness programs
Equitable maternity leave policies which encourage fathers to also take leave
Mentoring future generations of workers
Giving back to the community
Ensuring profits are balanced with other priorities
Supporting education through grants and scholarships
Diversity on board of directors
What we are doing to Contribute to Sustainability
We develop management plans to incorporate ESG into business strategies.
We work with organizations to create tailored ESG strategies.
All 13 of our services support ESG in one way or another, from waste management plans, to GHG reporting, ISO Management System development, or overseeing spill cleanups.
Not only do we help others attain environmental, social, and corporate governance, but we are also mindful of our own social responsibility. We have our own sustainability, environmental, and social responsibility policies. All of our business is conducted with waste reduction in mind. At least 5% of our revenues are donated back to the community to non-profits that are most in need of help, such as food banks and shelters. We are assisting the forestry, agriculture, aquaculture and fisheries industries to derive value from their waste, advancing environmental awareness through Epic Engage, providing free well water testing and analysis to residents affected by arsenic contamination, and mentoring budding entrepreneurs through CBDC’s Consultant Advisory Services program.
Email Dawn to get started with ESG.
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