ESG 101: What is ESG?

  • ESG Consulting Services
Ali Payne

By now you’ve probably heard the terminology ESG. ESG stands for Environmental, Social, and Governance, and investors are increasingly applying these non-financial factors as part of their analysis process to identify material risk and growth opportunities. If this hasn’t impacted your company quite yet, it’s about to, and it’s so much more than climate conditions and the ole “reduce, recycle, reuse” mantra.

What Is Environmental, Social, Governance?

ESG is a vital way to measure a company’s health, performance, long-term competitive success, corporate responsibility, and community-level commitments and accountability, and has nothing to do with its profitability or financial value. It’s emerging as a strategic imperative for companies of all sizes — public and private.

For ethOs (and maybe even your company), we like to look at ESG as a way to

  • Always do what’s right
  • Make an impact
  • Care for and help others
  • Fulfill our purpose
  • Advance the causes that are most important to our employees, clients, communities, and the industry

What Does ESG Cover?

As we talk about ESG, you may be wondering how each of the areas are defined.

  • Environmental (E) — This criteria considers how a company performs as a steward of nature. Read more about environmental criteria here!
  • Social (S) —  This area examines how a company manages relationships with employees, suppliers, customers, and the communities where it operates.
  • Governance (G) — This deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

We’ll be taking a more in-depth look into each of the categories of ESG — Environmental, Social, and Governance — and what falls within the categories in upcoming blogs. I encourage you to tune in for those, as you may be surprised at what ESG covers. The mental health and wellbeing of your employees, along with your organization’s community giving, are just two areas that may not be top of mind when discussing ESG.

How Does ESG Impact Your Organization?

Ready or not, the ESG era is already upon us and growing in emphasis, and companies need to be prepared. In fact, 2020 and 2021 were historic years for their level of global regulation related to sustainability disclosure.

In the U.S., the Securities and Exchange Commission (SEC) is placing a large emphasis on climate change, human capital, board diversity, cybersecurity risk, and ESG funds as key issues for policies and rulemaking. And, as we all know, the global pandemic has brought to light the importance of the WHOLE employee, their experience with a company, and their overall wellbeing.

Due to all of this, the organizations, stakeholders, and investors you work with will begin inquiring (if they haven’t already) more and more frequently about what your organization is doing in regard to responsible business practices, how you treat your employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella.

We’ve already heard from several clients who have been impacted and even lost business because they didn’t have an ESG plan in place. That’s unfortunate, as we don’t want to see any of our clients go through that stress. It’s essential to understand how to measure and disclose your ESG findings, as well as be able to talk with clients about ESG and share your progress and those results.

You May Be Making an Impact Already in ESG Areas

Here’s the good news. Your company is likely already excelling in many areas of ESG, and you may just not know it. We have experts on our ethOs team with more than 30 years of experience that can help you identify and highlight those, help you expand upon them, and identify any new opportunities for you.

At ethOs, we embrace ESG as a guiding framework to always do what’s right, and our ethOs business is built on the foundation of helping you in all areas of your organizational and engagement journey. Reach out to us today for a consultation! We’re ready to help you with your ESG journey.

May 11, 2022