What is ESG anyway?
Find out what the letters in ESG represent. Discover what ESG is all about – and how the strands of Environmental, Social and Governance fit together.
The 2022 United Nations Climate Change Conference, more commonly known as COP27, took place in November 2022. This high-profile event brought with it an increased focus on all things ESG (Environmental, Social and Governance). But at the same time, research shows concern about climate change is shrinking and many companies are putting ESG initiatives on hold due to fears of an impending global recession.
The say-do gap has never been bigger. We know there’s a serious problem, but action is urgently needed. As Greta Thunberg has explained, we are experiencing a communications crisis as much as we are a climate crisis. We must focus on a more holistic approach and part of this is helping people to understand the extent, urgency and interconnection of the challenges we face. As well as the steps we can take to address them.
Discussing what ESG actually is, and how the different strands of Environmental, Social and Governance fit together for organisations wanting to progress in this area, seems like a good place to start.
Give me an E
Let’s start with the simple bit. E stands for Environmental. This is the strand of ESG that focuses on sustainable environmental practices and is probably the most widely understood. Depending on your area of business, this can cover a whole range of factors such as air and water quality, biodiversity, energy use, carbon footprint, deforestation and pollution.
Give me an S
S stands for Social. These factors focus on the impact an organisation has on people and communities. For example, the community they serve, the local community in which they operate, and the people they employ. Social values cover a wide range of issues from community relations and employee engagement to data protection and privacy, diversity and inclusion, and human rights.
Give me a G
The Governance strand of ESG is perhaps the least understood. Put simply, it is how an organisation governs, oversees or administers itself. It involves the controls, systems and practices in place that ensure an organisation and the people working for it use best practice and are transparent. This covers leadership and Board composition, tax strategy, performance measures and effective reporting on issues such as executive compensation, political lobbying – and of course ESG.
What have you got? ESG…
ESG is complex, so it’s not surprising there’s some confusion about what it actually is and how to take action. But adopting a more joined up approach is crucial. Because the real power of ESG lies in the fact that the different strands add up to so much more than the sum of their parts. By aligning the ‘E’, ‘S’ and ‘G’ of ESG with concerted action across organisations, we can make a tangible difference.
Most importantly, an integrated approach to ESG has a more positive impact on the future of our planet. But what’s also important in bringing about meaningful change, is that focusing on the different parts of ESG has also been shown to have a positive impact on organisations. From attracting more customers, investors and staff, to improved financial performance and capacity to identify potential opportunities and challenges. Ensuring longevity for your organisation, communities, and the world at large.
What now for ESG?
Success in any field requires that you establish exactly where you are now and where you want to be. That’s the only way to measure progress. And that’s the journey we follow with every Transform ESG client:
- Assess – audit where you are now.
- Goals – set where you want to be and what you need to do to get there.
- Engage – bring everyone with you (employees, suppliers, customers, investors).
- Action – work collaboratively to do it.
- Lead – share what you’ve done to support, guide and help others change.
Using this approach, every organisation has the power to make a difference. We work with organisations of all sizes from multiple sectors, from international publishers and engineering firms to small community groups.
Think global, act local
Not all of us were able to attend COP27. Luckily there are important events taking place on a more local scale that have the potential to generate change.
We are co-hosting a series of events to debate the vital role the South West region has to play, as a leader in decarbonisation and the push towards net zero. The first was last year at the Insider South West: Net Zero Goals and Roadmap Breakfast on 30th November. With more events are planned for 2023, watch this space as we’d love to see you there. Or get in touch if you’d like to find out more about our holistic approach to ESG.