A comprehensive resource center to help you gain a better understanding of Environmental, Social and Governance (ESG) and to improve the way your company manages it, no matter where you are on your ESG journey.
If you’re like many EHS professionals, you’ve been hearing more ESG the last couple of years, and perhaps your role has even expanded to include managing some ESG initiatives. ESG has quickly become the new standard of excellence for business and EHS management, but you may find it challenging to connect all the dots with your previous responsibilities. ESG Central is designed to help you easily understand how ESG connects to and builds upon traditional EHS management. Check back often for the latest news.
When it comes to ESG, there’s a lot to learn, but this five minute primer will get you started on the road to ESG mastery.
The good news about ESG is that you’re not alone. Here are some of the questions many people have as they begin their journey.
ESG brings together so many disciplines, it can be confusing keeping all of the terms straight. Our ESG glossary is here to help.
ESG experts committed to your success developed these resources to take your ESG knowledge to the next level.
ESG Regulations & Standards
Depending on your jurisdiction, ESG is not just a good idea, it is a requirement. Stay up to date on your ESG obligations.
ESG Program Development
Getting started on ESG does not have to be difficult. Here are some simple steps to get your ESG program up and running.
Here’s a quick two-minute overview of ESG, why it’s on the rise and a few smart ways VelocityEHS can help you navigate the challenges and opportunities.
What Is ESG?
You’ve probably heard terms like “sustainability” and “corporate responsibility” before. The first pertains to an organization’s efficient use of natural resources and its active reduction of harm to the natural environment and to communities. The second term generally encompasses an organization “doing the right thing” – a concept that includes sustainability but also community involvement, ethical business practice and commitment to the greater good, rather than an exclusive focus on profit.
ESG includes and expands upon these topics, bringing in other stakeholder concerns, many of which have become recognized goals in global frameworks such as the United Nations (UN) sustainable development goals.
Why Is ESG Important?
More and more, business leaders are expected to develop a strategic, systematic approach to ESG and integrate ESG risk management into their financial business model. ESG has quickly evolved from an optional public relations reporting initiative into an increasingly mandatory, investor-driven reporting requirement. A company’s ESG performance is now closely correlated to its share price or its ability to raise capital. Beyond investors, consumers are also making many purchasing decisions based on ESG standards, such as how a company treats its workers and the environment. To put it simply: people, the planet, and profits are now truly linked, and ESG is the way to show you’re running your business responsibly. No matter the size of your business, a sharper focus on ESG provides many advantages you can’t afford to ignore.
What Is Materiality?
The easiest way to think of materiality is as a relevancy filter for the issues that matter most to an organization. Something is considered “material” – or relevant – if it could influence the decision-making of stakeholders regarding the company. Materiality can help an organization choose solid ESG management objectives to structure a program around. It is considered best practice to conduct a materiality assessment as a first step to determine which goals or objectives make the most sense for a business, based on stakeholder priorities.
How Do I Get Started in ESG?
Successful ESG revolves around a strategy, not just starting out blindly. ESG strategy is about being proactive versus responsive, and it should be based on the organization’s internal journey, aligning with the organization’s values. To make the pivot from traditional EHS management to an ESG focus, first take stock of where your company is today on its sustainability journey. Then identify the key stakeholders that will move the program forward. Those stakeholders should be surveyed through a materiality assessment to determine which ESG goals and targets the company should work toward. With that groundwork laid, you can take the right steps toward developing an ESG strategy that works to bring your organization into the future.
The ABCs of ESG
The power of ESG comes from the unification of its three main branches: environmental, social and governance. Here’s a closer look at what’s represented by each component.
The E of ESG speaks to a company’s impact on the natural world. It covers a wide-range of activities and sustainability concerns, including:
- Greenhouse Gas Emissions (GHS)
- Air Emissions & Carbon Monitoring
- Energy & Utility Usage Tracking
- Waste Management
- Water Quality
- Environmental Reporting (e.g., TRI/Form R)
The S of ESG focuses on how an organization treats people and operates as a member of communities and supply chains. It includes:
- Health, Safety & Social Sustainability
- Employee Engagement
- Diversity, Equity & Inclusion
- Privacy, Data Protection & Cyber Security
- Product Safety & Stewardship
- Labor Standards & Human Rights
The G of ESG covers how well a company is managed and how well it abides by ethical practices at all levels, including items such as:
- Business Ethics
- Risk Mitigation & Risk Governance
- Regulatory Compliance
- Tax Transparency
- Shareholder Rights
- Board Composition & Executive Compensation
What are the main drivers of ESG’s importance today? Why am I hearing about it so much?
This is one of the most frequent questions we get, because many EHS professionals and business leaders are understandably trying to make sense of all the additional attention ESG has been receiving over the past few years.
We can consider the two main drivers of interest in ESG to be investment and management. Let’s talk a little about each.
Investment. Arguably, investment decisions have been the major driver behind the mainstreaming of ESG over the last several years, because a growing volume of research and data demonstrates a relationship between higher ESG maturity and better financial performance. For example, a 2020 Harvard study found ESG performance to correlate with Economic Value Added (EVA) Margin, which is the incremental difference in the rate of return (RoR) over a company’s cost of capital. What that means in plain English is that companies with higher levels of ESG performance see a better return on their investments than companies with lower ESG maturity. The same 2020 Harvard study found that companies with the highest level of ESG performance had the lowest amount of volatility in business performance, defined as events that disrupted business continuity or caused a loss of a majority of shareholder value. According to the study, the reduced volatility is a function of avoiding the kind of significant events (e.g., fires, chemical spills, explosions) that can threaten employee health and well-being, disrupt business and undermine share price.
Are there regulations related to ESG?
Yes, there are. While many people still think of ESG disclosure frameworks as being largely voluntary, there are in fact regulations addressing many aspects of ESG.
First, we shouldn’t forget that EHS is part of ESG, and there is a universe of EHS regulations that company leaders need to know about, many of which create significant work in terms of compliance obligations. For example, in the United States, OSHA issues regulations regarding workplace safety, some of which, such as the HazCom Standard and the Recordkeeping Standard, apply to most employers covered by the Occupational Safety and Health (OSH) Act of 1970. The HazCom Standard requires employers to maintain safety data sheets (SDSs) for all hazardous chemicals, a written Hazard Communication Plan, and a hazardous chemical inventory list, as well as to ensure that all containers containing hazardous chemicals are labeled and that all employees who work with these chemicals receive proper training. The Recordkeeping Standard requires many employers to document workplace injuries and illnesses that meet general or specific recording criteria on Forms 300 and 301, as well to complete, sign and post the Form 300A summary report from February 1 to April 30th of each year. A subset of those employers also needs to electronically submit 300A data to OSHA each year, and all employers covered by the OSH Act need to report certain serious workplace incidents directly to OSHA. There are analogous regulations in other jurisdictions, such as in Canada, which has the Workplace Hazardous Information System (WHMIS) Standard for chemical hazard communication and provincial worker’s compensation board requirements to report occupational injuries and illnesses.
How do I get started in ESG?
We’re getting that question quite a bit, because it seems that many EHS professionals are learning about ESG and are either being “voluntold” to manage their company’s ESG programs or realizing there are many professional development opportunities and career pathways open to the professional who makes the effort to learn about ESG. While there’s no universally applicable answer to this question, we can give a few tips based on our own subject matter expertise and awareness of common organizational pain points.
First, master the foundation of EHS. As you know, you already have plenty of EHS tasks to manage, like investigation of injuries, development and tracking of corrective actions, management of safety meetings and training, inspections, keeping up with your chemical management and hazard communication responsibilities, and completion of reports, some of which may stem from regulatory requirements. Many EHS professionals are struggling to manage these tasks without the tools or support they need, which makes it difficult if not impossible to start taking on additional ESG projects.
Can following or certifying to standards like ISO 14001 and ISO 45001 help build ESG maturity?
The International Organization for Standardization (ISO) develops some of the most widely used global standards outlining guidelines and general practices for many areas of business management. The standards they publish that end with a “1” are intended to be used by businesses for certification purposes – meaning that they go through a multistep process of improving their management practices to confirm they have the elements in place required by the standard, then undergoing certification audits by accredited third party organizations. Other ISO standards that don’t end in a “1” can be used for guidance purposes, often in conjunction with a major standard.
Two very relevant ISO standards in the EHS & ESG worlds are:
- ISO 14001: the international standard for Environmental Management Systems (EMSs).
- ISO 45001: the international standard for Occupational Health & Safety (OH &S) management systems.
Both standards have a few traits that make them very useful as roadmaps for navigating the pathway from EHS to ESG. For instance, they task an organization with looking at the full context of their operations to determine factors that can affect their environmental or OH & S performance, and ISO 45001 additionally stresses the importance of “consultation and participation” of all workers – not just managerial level employees.
ESG Glossary of Terms
The EHS & ESG Journey
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- A Look at the EFRAG Proposed ESG Disclosure Rules
- How Well Do You Understand the GHG Protocol Standards?
- What Are “Materiality” & “Double Materiality?”
- ISSB’s Consolidation of ESG Reporting Frameworks
- Understanding the SEC’s Proposed ESG Disclosure Rule
- Five Amazing Benefits of ESG for Companies of Any Size
- Have You Mastered the ESG Pyramid?
- VelocityEHS & Urjanet Integration Automates Utility Data Analysis for More Efficient ESG Reporting
- Using Ergonomics to Attain the S of ESG
- ESG Conference Summary – “EHS to ESG: Making the Pivot”
- Intro to Materiality: Why Your ESG Journey Should Start Here
- EHS to ESG: Making the Pivot
- The Value of ESG to the Financial Community
- Practical Steps to Implement an ESG Program
- ESG Horizon Planning: What’s Happening?
- Embracing ESG into A Company’s DNA: CF Industries Case Study
- CEO Checklist for ESG
Regulations & Standards
A key factor in the increased focus on ESG is that it has been driven by investors. Sustainable companies are good investments; however, comparing one company to another can be difficult. That is why stakeholders at every level are demanding transparency and reporting that follow rigorous standards. Following are a few of the most trusted and relied upon standards you should be aware of. Some jurisdictions, like New Zealand, are even making certain reporting compulsory.
ESG Program Development
Step 1: Materiality Assessment
Prioritize Your Objectives
When you’re embarking on a journey, knowing where you want to go and why is a critical first step. This is especially true of your ESG journey. A materiality assessment helps you build the map, and ensure that you have the right people along for the ride.
The VelocityEHS ESG Solution is the best way to align your strategy and goals while ensuring transparency across your organization and supply chain. Rate, rank and prioritize your issues using a survey with built-in SASB, GRI & CDP standards, and automatically turn your results into a custom materiality matrix.
Step 2: Select Your Metrics
Know What Measurements Matter
Because ESG encompasses so many areas, it can be difficult to know what to start measuring first, especially when you are just starting out. The temptation is to try and do too much too soon, which can lead to frustration and burn out.
However, using your materiality assessment, you should be able to identify a mix of short term targets and long term goals that will make a substantive impact on your organization. Selecting metrics aligned to these goals can help you build momentum as you get your ESG program off the ground.
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