Organisations across the globe are embracing Environmental, Social and Governance (ESG) sustainability into their strategic planning and operations, as the economic benefits of the ‘green economy’ become even more apparent.
In this article, we take a closer look at ESG sustainability and see how transparency is the key to boosting a company’s bottom line.
Simply put, ESG is the criteria used to evaluate a company’s sustainability performance. A set of standards, if you like, that socially conscious investors, mutual funds and brokerage firms use when deciding to fund an organisation’s operations.
Environmental sustainability considers an organisation’s contribution to climate change through greenhouse gas emissions. It includes a company’s energy use, waste/recycling, natural resource conservation, compliance and more. It evaluates the risk posed by a company’s operations and reviews management’s mitigation strategy. For example, the Commonwealth Bank is managing its ‘climate-related risk’ by committing to become Australia’s first ‘big bank’ to exit thermal coal by 2030.
Social sustainability examines the impacts of a company’s operations – the diversity of the workforce, human rights, the Modern Slavery Act and consumer protections offered by the group. It considers how relationships are managed with employees, suppliers, customers, and the communities where it operates.
And Governance sustainability deals with a company’s leadership and stakeholder activities. It considers how the business is managed, including the treatment of workers, correct payment of wages, accurate and transparent accounting, payment of company taxation, executive pay, shareholder rights, conflicts of interest and whether the company operates legally.
Companies increasingly recognise that sustainability is an issue which directly impacts their business bottom line – be its material risk, regulatory and investor requirements or increased demand for sustainable goods and services.
The development of a well-designed and meaningful ESG sustainability strategy is vital for companies wishing to capture the significant value offered by having ‘green’ credentials. Through embedding ESG into the supply chain, design, operations, sales and marketing, organisations are achieving economic, environmental and social success.
If you have nothing to hide and openly report your ESG results, then you achieve ‘transparent sustainability’. This doesn’t mean, however, that you can hide your results in a PDF document, buried on your website. Instead, showcase your results on a purpose-built sustainability platform. This sends a clear message about a company’s positive commitment to sustainability.
If you ‘own’ your sustainability results – good or bad, you are demonstrating that you can be trusted. This is extremely important given that the Edelman Trust Barometer found Australia’s leading institutions are among the least trusted in the world. Transparency builds trust!
When a company is trusted, then its brand and reputation are strengthened. The Reputation Institute says companies that build a strong reputation enjoy enhanced financial performance. It estimates that a 1-point increase in reputation yields a 2.6% increase in market cap.
A company’s ESG performance is vital in attracting institutional investors and capital market investment. Social responsibility across all areas of a company’s operations is integrated into the investment process for consideration. In 2018, the multinational food products giant Danone Group secured a $2 billion credit facility, with lower borrowing costs linked directly to the company’s positive ESG performance.
Such is the importance of ESG Sustainability that the Taskforce on Climate-Related Financial Disclosure (TCFD), the Australian Securities and Investments Commission (ASIC) and the Australian Stock Exchange (ASX) all call for transparency in the reporting of a company’s risk and exposure to climate change. This means companies can develop strategies to mitigate climate risk, and ultimately limit company directors’ liability, through management and disclosure.
It should be simple to use, capture and demonstrate your ESG data and provide meaningful engagement with stakeholders.
Key Features include –
Monitor – Analyse and track data relative to Key Performance Indicators
Engage – Present the data on a sophisticated, user-based dashboard styled to engage stakeholders
Report – Collect data (via a data lake, CSV file upload or manual entry)
Available on any device
Send and receive alerts, notifications and actions
Full audit trail
Report and benchmark data
Pre-qualify supply chain
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