ESG (Environmental, Social and Governance) has evolved from a buzz acronym to becoming a critical element in today’s business world. It is no longer just a feel-good initiative; rather, it has become a crucial factor that can impact companies’ bottom line in terms of retaining and attracting employees as well as affecting their financial performance.
In this ever-changing world we all live in; how a business develops and grows is more important now in so many areas. What worked in the past may not work now or in the future. We are evolving and becoming much more conscious about strengthening and protecting our people and our planet. The need for companies to step up and lead with purpose and social responsibility has never been more important, which is why a lot of organisations are now putting the Environment, Social and Governance (ESG) framework at the heart of everything they do.
ESG is a framework that helps key stakeholders and investors such as: employees, customers and shareholders understand how a company manages risks and opportunities around sustainability issues. The ESG framework has evolved from other historical movements that focused on health & safety issues and pollution reduction.
The three steps of the ESG framework are:
- Environmental Impact
When it comes to the environmental impact, key stakeholders are interested in understanding how a company’s operations may impact the environment. This can include things like, carbon emissions, air & water pollution, green energy initiatives and waste management. Companies that reduce their environmental impact are seen as more sustainable and are therefore more attractive to employees, customers, and stakeholders. Governments and regulatory bodies increasingly introducing new laws and regulations that require companies to operate in a sustainably and socially responsible manner.
- Social Responsibility
The social responsibility step of ESG assesses how a company treats its employees, customers, suppliers, community members and other stakeholders. This includes things like diversity & inclusion, human rights, and fair working practices. Socially responsible companies are always more attractive to employees, customers, investors and other key stakeholders.
The governance step of ESG assesses a company’s internal policies itself. This includes things like board diversity, company leadership & management, executive compensation and shareholder rights. Key stakeholders who are interested in ESG often look for companies that perform well across all three steps.
There are many frameworks that manage ESG reporting. These frameworks can provide best practice and guidance for companies to ensure that they are reporting on their ESG initiatives accurately and transparently, such as the Global Reporting Initiative (GRI) framework or the Sustainability Accounting Standards Board (SASB). From 2024, the reporting on ESG by large and other listed companies will become mandatory under the new EU Corporate Sustainability Reporting directive.
When a business performs well across all three steps it provides long-term value without producing any negative effects on the environment or society. Flogas Enterprise are delighted to sponsor the ESG Awards 2023 which takes place today at the Mansion House, Dublin. The ESG Awards recognise and celebrate individuals and groups who are actively striving to address environmental, social and governance issues. The awards showcase the successes of ESG initiatives and examples of best practice, as well as highlighting the importance of transparency.