It is imperative that organisations observe Environmental and Social Governance as a way of attracting investors to their businesses. Nowadays investors are shunning organisations that lack integrity, hence companies should ensure sustainability for business growth. This should be built on a solid foundation of corporate values and culture. ESG is the future. African governments and policy makers must work towards adopting ESG and join the world in ensuring best practise.
What is ESG Investing ?
ESG investing is sustainable investing that evaluates the financial returns considering the environmental, social and governance factors and their overall impact. The ESG scores of investments measure the sustainability of investments in three areas: Environmental and Social Governance (ESG). The concept of ESG investing is driven by the ideology that large investors can pressure the corporate world to behave in an environmentally friendly, socially responsible and governance perspective. Let me illustrate factors to be considered when being reported by organisation under ESG.
Environmental
Environmental factors address the impact of the company on nature through:
- Waste and pollution management
- Resources depletion
- Greenhouse gas emission
- Deforestation
- Climate change policies
- Water usage and conservation
- Green energy initiatives
- Recycling practices
Social
Social components that affect employees, consumers, customers, suppliers and the community as a whole, such as:
- Employee’s relations and diversity
- Working conditions
- Local communities
- Health and safety
- Conflict
- Fair labour practices
- Customer satisfaction
Governance
The governance factors are related to the management of the company by the top executives towards the interest of stakeholders of the company. These include:
- Tax strategy
- Executive remuneration
- Donations and political lobbying
- Corruption and bribery
- Board diversity and structure
- Ethical business practices.
- The voting process of the board directors
- Shareholder’s power to nominate board members
Environmental and Social Governance (ESG) programs will assist the organisation to increase employee engagement, customer retention and reduce reputational risk while decreasing impacts through operational efficiencies. The good news here for organisation is that they do not have to reinvert the wheel because the information is at their disposal. On the other hand, the organisation should consider lifecycle of products from raw material extraction, production, use and disposal. In the process the organisation should evaluate their potential environmental impacts and opportunities within the value chain.
During implementation of Environmental and Social Governance (ESG), there are systems that must be put in place. These include ISO 45001:2018 on Occupational Health and Safety Management Systems, ISO 14001:2015 on Environmental Management Systems and other sustainability and compliance systems. Business leader of today must be ready to demonstrate that they are meeting Environmental Social Governance ( ESG) requirements through their actions and results. Lastly, it is important to note that ESG design and system of thinking should be applicable to how the economy will be shaped in the future.
