Monday, September 25, 2023

ESG is more important than ever – here’s why

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Jag is the founder and CEO of securea third-party lifecycle management platform for procurement, compliance and ESG.

Every year, the call for greater sustainability – from operations to products to the people we do business with – grows louder. Stakeholders want transparency in what companies do to increase their sustainability. Customers want it from their brands because they look for shared values ​​when making purchasing decisions. Partners and suppliers are also looking for demonstrable actions with regard to ESG initiatives (ie environmental, social and governance initiatives). And investors, who know that customer and partner assessments of a company’s sustainability really matter, want that transparency, too.

In addition to the most obvious reasons for organizations to pursue true sustainability, recent years have shown that prioritizing ESG can be a competitive differentiator. Those who ignore it do so at their own risk.

If you feel that companies are paying more attention than ever to ESG, or at least talking about it more, there’s a good reason for that. They have to… a little. The United States Securities and Exchange Commission (SEC) is Prepare to Adopt Key ESG Disclosure Requirementsand similar regulations adopted by the European Union of recent years are starting to have an increasing effect. As the founder and CEO of a procurement, compliance and ESG management platform, I think more are likely to follow, whether in specific industries or regional jurisdictions. Companies, especially those operating globally, are feeling the heat and are taking steps to get their tracking and reporting systems in order.

ESG Disclosures and Assessments

Despite all the focus on ESG and companies’ ESG scores, many overlook a very important fact: ESG information and ratings are not same. First, in many cases, disclosures are (or will be, as governing bodies like the SEC are introducing new rules) by law. Reviews are not.

Disclosures are intended to provide that coveted transparency and detail in a company’s sustainability efforts to interested parties. Ratings, on the other hand, are intended to provide investors and stakeholders with an accessible comparison of the ESG efforts of different companies. These are both incredibly important as we move towards greater sustainability, but a tricky aspect of ratings is that there are multiple rating bodies and no standardized rating system to meaningfully relate the findings of one rating provider to another. Many of these providers do an excellent job of analyzing companies’ ESG efforts and providing ratings, but how do you compare an ‘AA’ rating from one provider to a 55 out of 70 score from another – and a ‘Laggard’? ‘ score of a third? There may also be situations where an organization scores high on one vendor’s rating but low on another’s analysis, as methodologies also change from vendor to provider.

Despite this awkwardness, I think both reviews and disclosures are clear steps in the right direction. These systems can have flaws, but such systems don’t have to be perfect right away. They can still be useful even as we work to improve them. Most importantly, reviews and disclosures have helped bring ESG initiatives into the common language: people are talking about them, thinking about them, and planning their implementation.

It pays to be proactive

As companies rush to race with the upcoming ESG regulations, many will have to make an important choice: how reactive or proactive will they be with their implementations in the coming months and years? I think organizations that don’t want to be guided by public perception in the near future should consider thinking proactively.

Those monitoring ESG commitments will likely be looking for: continuous impact—something real, lasting and evolving. In my opinion, a reactive plastering approach is a short-sighted way of approaching sustainability, and companies trying to cut corners will fall behind – both in the ratings and in the marketplace.

Doing good is good for business – it just takes a little extra work to do it right. The alternatives are also bleak: a spiral of negative associations and consequences. A company that doesn’t prioritize ESG to begin with is likely to experience lagging ratings and a negative sustainability profile in the public eye, which in turn can lead to reduced access to capital and difficulties hiring top talent. Limited resources, both financial and human resources, can make it difficult for that company to catch up with the ESG leaders in their industry, potentially leaving their rating even further behind. The cycle continues.

From today

So what can companies do? now to ensure that their ESG efforts are leading rather than falling into a reactionary pattern? Many actions that are a good fit for a sustainability-focused organization are industry-specific, but there are a number of industry-independent things companies can get started with.

One of the most important things is to get started collecting master data on your company’s emissions. Transparency in your carbon footprint is crucial and collecting all data on a company’s emissions takes time. It is especially more time consuming and labor intensive when it comes to determining a company’s supply chain emissions – which they are still assessed on, as they are considered ‘scope 3’ emissions.

Two-thirds of a company’s ESG responsibilities within their supply chain, but it is still the duty of their leaders to gather that data and determine where changes can be made, then do what they can through incentives and fines to encourage their supply chain to move in the right direction. Or, if that doesn’t work, they can demonstrate that the company is taking steps to address the issue by replacing underperforming (emissions) suppliers with other suppliers.

And finally, don’t come here haphazardly. Take the immediate step to build a useful structure to determine what actions to take to improve their ESG efforts, how to get those actions in motion, and what to do to evaluate the success or failure of the initiative . Building a sustainable business that becomes an ESG leader is not a one-time project. It is an ongoing process that must be woven into the fabric of a company, and by building a structure that can be optimized and repeated in the future, a company can stand out from the rest. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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