ESG (Environmental, Social, and Governance) describes the various non-financial aspects of a company that can depict its long-term performance. Some examples are pollution, waste, resource preservation, liveable wages, diversity, etc. Many of these considerations are involved in creating ESG strategies for companies to effectively manage these three components by setting and meeting ESG goals, collecting and analysing their ESG data, and thus increasing their value.

ESG data refers to the metrics and criteria used to gather quantitative data on an organisation's sustainability efforts, and to evaluate their operations across all three components. Various indicators such as greenhouse gas emissions, working conditions, deforestation, and board diversity are used to provide an overall score or rating.[1] Measuring and publicly reporting their ESG data can allow a company to greatly increase accountability for meeting their sustainability goals, which can grow the organisation's appeal to their employees, consumers, and investors. Establishing trust can elevate productivity, increase customer loyalty, help acquire business opportunities, assist in obtaining funding, and much more![2]

The Climate Crisis and ESG are extremely interconnected. The following are some implications of this relationship.

1. Investor-driven Impacts

Now, more than ever, investors are aware of the negative impacts that business can have on the climate crisis. Having high expectations of transparency, companies are expected to state their climate-related risks and related actions to mitigate these as much as possible. Monitoring their waste management, carbon emissions, and resource depletion provides real-time analytics to accurately report a company's risks. Reporting ESG data can allow investors to make a judgement on the company's missions and if it aligns with their own, increasing their confidence in their asset allocation.2 Along with establishing transparency, it can prove beneficial in creating ESG strategies, meeting sustainability goals, and promoting corporate sustainability.

2. ESG Investing A Leading Form of Sustainable Finance

ESG investing is the process of considering various non-financial factors when making investing decisions. It involves opportunities for growth, long-term value, and an assessment of future financial risks based on the environmental, social, and governance efforts being implemented by companies.3 Environmental scores are also being used to represent low-carbon transition. For example, renewable energy is a net zero commitment and ESG investment that can be implemented within a company's decarbonisation plan, which could not only effectively address the climate crisis, but directly reduce pollution and increase workplace health and safety.4 Additionally, it can lead to the introduction of more clean energy facilities, overall improvement of public health, and more job opportunities - the benefits are endless! The reason why this kind of investing has become so relevant and important in recent years is because it increases return on investments while bettering the community and environment. These investments also tend to have lower risks in terms of reputation, policies, and regulation, proving to be profitable in the long run.

3. Climate Change and Company Performance are not Mutually-Exclusive

Companies that possess a high ESG awareness and commitment to climate issues are more likely to succeed. It is a common belief that investing in sustainable business practices is unnecessarily expensive. While initial expenses can be higher, sustainable production methods have proven to be more efficient and result in a reduction of costs in the long-term. For example, many ESG frameworks and policies call for companies to commit to transitioning into renewable energy as part of their net zero goals. This transition could save the company non-compliance costs where regulations are becoming more stringent while benefiting the environment.5

So how can companies track their progress?

Gathering ESG data for your company can help identify your current positioning and allow space to create a strategy. Your ESG strategy, in line with your mission, will cover net zero commitments and regulations/policies to set actionable sustainability goals within your organisation. The next step is to seamlessly implement ESG values within your business. For example, rather than completely changing your business approach, find creative and innovative ways to reduce your carbon emissions by transforming current products or services. Reporting on your ESG data can hold your company publicly accountable to fulfil promises made to stakeholders. You can utilise standardised frameworks such as Business Responsibility and Sustainability Reporting (BRSR), Sustainability Accounting Standards Board (SASB), or the Global Reporting Initiative (GRI) to measure your company against the standard and assess your progress. Lastly, key performance indicator (KPI) monitoring will allow you to quantify your activity and assess performance in ESG initiatives.

At Oren, we offer ESG solutions to accurately gather and analyse your company's ESG data. We lift the weight off your shoulders so you can effectively implement initiatives to meet your sustainability goals and tackle the ongoing climate crisis.

[1] https://www.reformis.com/esg-data-what-you-need-to-know/#:~:text=ESG%20data%20is%20an%20abbreviation,%2C%20corruption%2C%20and%20executive%20pay.

[2] https://www.greenly.earth/blog-en/what-is-esg-data-and-how-to-use-it 

3 https://www.oecd.org/finance/ESG-investing-and-climate-transition-market-practices-issues-and-policy-considerations.pdf

4 https://www.adecesg.com/resources/blog/esg-investing-and-climate-change/#:~:text=ESG%20investing%20is%20an%20effective,main%20causes%20of%20climate%20change.

5 https://regask.com/why-is-esg-more-important-now-than-ever-for-your-business/#:~:text=Leads%20to%20reduction%20in%20the%20costs&text=This%20will%20not%20only%20help,the%20use%20of%20plastic%20packaging.