ESG Strategies and Your Business
Companies have recently begun acknowledging the importance of environmental, social, and governance (ESG) matters. These include climate change, social justice movements, and investor pressure. As the popularity of ESG causes and activities increases, more and more companies are making ESG practices part of company policy.
Over the past few decades, it’s become evident that the environment is changing, and not for the better – changes that could make life in some parts of the world impossible. The COVID-19 pandemic has spurred investors and businesses to address the issue of ESG proactively. Today, ESG is an essential consideration for companies across all industries.
What Are ESG Strategies?
An ESG strategy prioritizes sustainable and responsible business practices in three areas: environmental, social, and governance. In short, it ensures that a company is doing the right thing for its customers, employees, and stakeholders by implementing ethical standards that promote transparency.
The CFA Institute has developed a framework that it uses to measure ESG. The framework has three categories:
- Environmental – Examines conservation of the natural world (e.g., carbon emissions, water usage, etc.)
- Social – Considers people and relationships (i.e., how you treat your workers, customers and communities)
- Governance – Looks at standards for running a company (e.g., equitable board representation, anti-corruption policies, political contributions)
Why Is This Important for my Business?
A growing number of private and public sector companies have begun integrating ESG considerations into their core strategies, and others are beginning to follow suit. Diving head-first into an ESG curriculum could help your organization improve its reputation and boost profits. For some companies, adopting an ESG framework can be a daunting task.
Implementing an ESG strategy is a way to help mitigate the threats posed by climate change, resource scarcity, and other environmental problems. By assessing risks ahead of time and planning for scenarios before they occur, ESG can help make businesses resilient in the face of these challenges.
Likely Government Mandates
By 2022, we will have created a framework of carbon reporting standards that can be used worldwide. The federal government will update government standards, making ESG data reporting vital to managing a company properly.
By 2022, the SEC will have published a set of ESG reporting frameworks, including climate change disclosures. In addition, some of the world’s most extensive ESG reporting frameworks announced in November 2021 at the COP26 United Nations Climate Change Conference that they will unite to create an International Sustainability Standards Board.
Don’t Be Left Behind!
ESG is an essential factor to consider for your business, and you should develop a strategy for dealing with it now. This will help safeguard your bottom line while positioning your company for long-term success. Measuring ESG performance and setting targets can help you achieve favorable results.
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