Environmental, Social and Governance, also known as ESG, is a framework that measures a business’s environmental and social impact. Traditionally it was used by socially and environmentally conscious investors to screen investments, however today, with an increase in global issues such as climate risk, public health and economic inequality, ESG is being used more widely amongst investors as well as within businesses themselves to measure their non-financial performance indicators.
This article takes a closer look at ESG, unpacking its respective factors in more detail, highlights why it is important for businesses to monitor and suggests how they can incorporate it into their continuous improvement strategy in order to manage, improve and demonstrate their ESG performance.
Let’s start by unpacking the ESG factors:
- Environmental
The environmental pillar refers to criteria that measures a business’s impact on the natural environment. Examples may include measures such as its greenhouse gas emissions, waste and pollution, as well as its overall resilience against climate risks such as climate change, flooding and fires. - Social
Social criteria examines a business’s behavior specifically with regards to how it treats people (including its employees, suppliers and communities that it operates within). Examples of social measures may include working conditions, health and safety and the protection of human rights. - Governance
This refers to criteria that examines how a business is led and managed and focuses on elements such as board diversity and structure, accountability by leadership and transparency. In addition, governance also ensures alignment of the purpose, vision and mission with business strategy and operations.
For investors and businesses alike, ESG is important as it provides another level of due diligence. More specifically, by measuring and minimising ESG risks, it assists in building a business’s reputation to benefit, what is referred to as, their triple bottom line – namely profit, people and planet. In doing so, it not only increases a business’s performance and likelihood of success in the long-term but also promotes overall sustainability. Businesses that demonstrate leadership in ESG performance experience benefits such as greater customer loyalty, employee attraction and retention, and access to lower cost capital.
To assist businesses in managing, improving and demonstrating ESG performance, Cubility has included ESG into its tailored Integrated Management System Framework. It is designed to define and evaluate a business’s key elements, make adjustments where need be and foster continuous improvement.
Cubility’s Integrated Management System Framework
Cubility is a management and technology consultancy that specialises in solving business, operations and logistics challenges through tailored strategies and systems. We utilise in-house developed frameworks and models as well as industry standards to optimise clients’ governance structures, improve their risk management and achieve specific business objectives. For assistance with your business challenges, please get in touch with us. We would love to hear from you.
