The emergence of COVID-19 and several natural calamities have furthered the need for businesses and individuals to reassess the impact of climate change on human life and the economy. Environmental, Social, and Governance (ESG) has become the comprehensive solution towards that.
ESG has become a corporate mandate so we can reduce our GHG contribution to climate change and help the planet heal for future generations. Its holistic framework covers a variety of concerns to improve the quality of life for the Planet, People, and Profit. By incorporating ESG in business portfolios, a company can become a frontrunner in helping the planet, staying relevant, and boosting its market value.
ESG has now materialized into actionable social welfare & environmental policies, Net-Zero roadmaps, a boom of small sustainability-driven businesses, energy efficiency schemes, green financing, and ESG investing options. There are more than 3000 ESG Mutual Funds available with over 1 trillion in assets under management (AUM). And that’s just the beginning.
ESG reporting that was once limited to the assessment parameters of Business Responsibility Reporting (BRR) and CSR can now be evaluated and given an ESG score, a numerical measure of perceived performance based on its defined criteria. Several private and public undertakings, such as Dow Jones, S&P, Stakeholders Empowerment Services (SES), among others, offer ESG scores to businesses.
If you are looking to get your company appraised from an ESG standpoint, here is a quick guide per category.
(E)nvironmental is a company’s direct or indirect impact on the environment through GHG emissions, pollution & waste management, impact on wildlife & natural resources, renewable and non-renewable energy usage, and so on.
For example, a company with a branch of offices would need to disclose their carbon footprint based on their energy consumption. Moreover, they would also need to mention if they are implementing any energy management or carbon mitigating techniques and its financial implications when evaluated. Those who fail to do this might get a lower ESG score which can hurt their market valuation, lose the favor of investors, and eventually lead to a negative stock price.
(S)ocial, refers to a company’s workforce welfare (in terms of fair wages, gender & racial equality, health & safety), consideration of the residents near their operational vicinity, suppliers, and customers, social impact initiatives, and more.
Businesses are now closely judged through the ethical barometer of how they affect their immediate to distant social spheres. For instance, companies with issues in employee welfare, customer satisfaction and privacy breaches have found it difficult to recover or get a good ESG score because of a loss in public faith. This leads to lower market support, consumers, employees, a dent in their net worth and eventually falling behind their competition. A company that empowers its employees with upskilling opportunities and growth beyond just their rudimentary daily duties would benefit from having a more competent workforce, improved allocation of resources, and a qualitative contribution to society.
(G)overnance stands for a business’s ability to adhere to the legal requirements of the Environmental and Social categories from ethical management, cybersecurity to operational transparency in their business reports, to name a few.
Many businesses don’t realize that the fine print and complexity albeit an essential need are deciding factors for a favorable ESG score, especially from a regulatory angle. Risking a breach in this area of ESG criteria eliminates opportunities for growth, dilutes integrity, and comes at the cost of being punished by governing bodies.
Making a transition to be a standup ESG compliant business takes work, but not if you have the right sustainable partner to take you through that journey. Racanaa’s team of experts has cracked the algorithm to meet each of the ESG requirements in an inclusive yet self-reliant manner.
By breaking down the complexities of your energy assets into clear, straightforward insights, Racanaa facilitates companies to be self-starters in doing their part to help the environment, cost-effectively. ESG roots from the common knowledge that the overdependence on the planet’s non-renewable energy sources has reached its boiling point. In consideration, Racanaa’s tech creates a steppingstone for adopting renewable energy, starting with technology that can help automate SOPs and lower their carbon footprint.
This begins by taking an honest look at the areas affecting your ESG score and implementing realistic solutions to safeguard a sustainable financial future for your business.
