This may sound like an unpopular opinion but read on to discover why ESG matters and the benefits of mastering ESG integration into your business.
In recent years, there has been a growing recognition among organisations of the importance of Environmental, Social and Governance (ESG) factors in their operations and their ability to thrive in the next decade. Many other businesses are now catching up as they understand the long-term benefits.
Companies that incorporate ESG considerations into their strategies and operations are better positioned to manage risk, build resilience, and create long-term value for stakeholders.
This theme was unanimously supported at our recent ESG event and is summed up in the words of Andrew Morrison, Director, AM Bid:
What’s driving ESG integration?
The importance of ESG integration has been driven forward with the introduction of stricter regulations requiring companies to report on their ESG impact. For instance, European Union Regulation (SECR, CSRD, NFRD, TCFD, SEC, ISSB). Similar regulations are being introduced in other parts of the world, including the United States and Asia. This is having a knock-on effect along the global supply chain as businesses select who to work with based on ESG criteria not just pricing.
How can companies assess ESG performance?
To help companies assess their ESG performance and identify areas for improvement, ESG Maturity Assessments have emerged as a useful tool. A self-assessment process, the ESG Maturity Assessment helps companies estimate their ESG impact, identify areas of strength and weakness, and develop a plan to improve their sustainability performance.
The process involves evaluating the company's carbon emissions, waste, pollution, and human rights performance, among other factors.
For larger companies, external ESG Maturity Assessments and Scoring have become normal business practice. ESG Ratings agencies and consultants can help with assessments, scoring, and the creation of a plan to improve a company's ESG impact. Every company’s ESG Control Framework should include:
An ESG Maturity Assessment covers each of these elements of the Control Framework to measure its effectiveness, robustness, and goals. The assessment evaluates the sustainability targets within the overall business strategy, the quality of the internal control framework, the effectiveness of ESG Risk Register management, the quality of ESG management reporting, and the quality and transparency of ESG communications and internal reporting.
How to gain a competitive advantage with ESG?
Companies that adopt an ESG strategy early will gain a competitive advantage. Carrying out honest self-assessments of their ESG strengths and weaknesses is important to put an effective plan into action. While some ESG impacts may be complex and difficult to measure, acting early and starting the journey sooner rather than later will put companies on the path to a successful, sustainable future.
In conclusion, ESG is an important aspect of modern business practice. Companies that incorporate ESG considerations into their strategies and operations are better positioned to manage risk, build resilience, and create long-term value for stakeholders.
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