For an organization wanting to better understand its impact and make real changes to its environment, we’d suggest that it is.
With such hype around ESG these days, there can at times seem to be no end to the media coverage about it.
Nowadays the topic comprises a multitude of different aspects and approaches, advantages and drawbacks, inclusion and exclusion criteria, and opportunities and opinions contributed by vast numbers of people via their writing, speaking or consultancy platforms.
As you may imagine, for an outsider looking in, the entire ESG concept can rapidly become an unfathomably complex myriad of standards, measures, frameworks, targets, loud voices, and conflicting opinions on everything from ethical water treatment processes to board-level gender diversity percentages, and everything in-between.
When one considers the noise and complexity surrounding the topic, it must be highly daunting for a business to realize that they need to start taking ESG management and reporting seriously, yet have little idea how to start, or where to begin.
The fact that ESG covers such a vast scope has not been lost on various industry players. It explains why global companies have partnered to align on a standardized set of ESG metrics via initiatives such as the ESG Data Convergence Initiative (EDCI) for example.
The EDCI seeks to greatly reduce the amount of ESG KPIs gathered to streamline the private investment industry’s previously fragmented approach to collecting and reporting ESG data.
The Initiative aligned on six categories for the 2021/2022 cycle, including GHG emissions, renewable energy, diversity of board members, work-related injuries, net new hires, and employee engagement.
Reducing the complexity of ESG data collection to six categories is an achievement and certainly simplifies the ESG data collection and reporting task for businesses.
Yet even this may seem onerous to certain companies. We’d suggest that a suitable jumping in point, and an activity which is arguably central to ESG, is that of managing an organization’s emissions and carbon footprint.
Arguably the biggest crisis of our time is global warming, and science unequivocally points to carbon emissions being a direct cause. It surely makes sense then, from a social impact and humanitarian point of view, that carbon footprint and emissions reduction makes for a good place to jump into the (seemingly) murky ESG waters.
The World Wide Fund for Nature (or as it’s known in North America, the World Wildlife Fund) mentions on its UK website that “Emission reporting is a key action for any businesses who want to better understand their impact, and to make real changes for the environment.” 1
What better way for a business to begin its ESG journey than by understanding its impact and making real changes for the environment. Given the apparent size and complexity of ESG these days, the authenticity and simplicity of such an objective must surely be an attractive one for any business looking to get started.
Not only is managing and reducing carbon emissions a worthy cause, but it’s also an increasingly relevant one. Of course it’s highly relevant from a scientific viewpoint, but it needs to be taken increasingly seriously from a legal and regulatory compliance perspective too.
Earlier this year for example, the US Securities and Exchange Commission proposed that public companies need to disclose their Scope 3 emissions if they are material, or if the organization has set a target in this regard. 2
(Scope 3 emissions include all indirect emissions that occur in an organization’s value chain. Or in other words, those emissions that it’s indirectly responsible for.)
As a growing number of companies begin to track their Scope 3 emissions, for their own reporting purposes they will increasingly require their value and supply chain partners to track their own emissions too.
Companies who do not track, and in some cases reduce, their emissions will find themselves under increasing pressure to do so, or face being excluded from a rising number of business and supplier relationships.
Not only is emissions and carbon footprint tracking therefore necessary from an environmental sustainability perspective, it makes a rational business case for itself as well.
This blog post admittedly contains generalizations, and where each company needs to begin its own ESG journey is no doubt a nuanced and individual affair.
Nevertheless, we’d suggest at least investigating emissions management and reduction as a sensible starting point for those organizations just setting out, and taking their first steps into the exciting and dynamic world of ESG management.
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