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ESG – What is it and what is it all about?

Have you heard the new phrase ESG and wondered what it is all about? Have your tenders included the phrase and asked what you are doing about it? Don’t be left behind, let us explain what this means for you and your business.

“ESG” is short for Environmental, Social and Governance. It is a set of standards measuring a business’ impact on society, the environment, and how transparent and accountable it is.

According to the Confederation of British Industry, (CBI), two-thirds of investors take ESG factors into account when investing in a company, meaning ESG has the potential to grow your business while benefiting the environment and community.

Even if your business isn’t looking for investment, adopting an ESG framework has benefits; from reducing risk and lowering costs to improving reputation and attracting new customers and employees.

How can an ESG strategy help with recruitment and retention?

The COVID-19 pandemic, and #Me Too and Black Lives Matter movements have particularly brought the ‘social’ pillar of ESG under public scrutiny. Evidence suggests that Millennial and Gen Z employees are heavily influenced by employers’ ethical values in choosing where they work (Deloitte Global 2022 Gen Z and Millennial Survey (May 2022)).

ESG performance will become increasingly more important to attracting and retaining talent in the future, as Millennials and Gen Z employees occupy the largest part of the workforce. In the wake of the “great resignation” and the “war on talent”, employers who don’t have a strong ESG agenda run the risk of increasing retention and recruitment problems as well as reputational damage.

So let’s get into ESG; what does it cover?

“The E” – Environmental

The environmental aspect of ESG is a measure of a company’s impact on the natural environment and the natural environment’s impact on the company, for instance through physical climate risks. It takes into account factors including a company’s carbon footprint, its impact on biodiversity and its production of wastes and pollution.

In an employment context, environmental factors might focus on improving sustainable commuting options for staff, or adopting a volunteering program for climate change organisations.

“The S” – Social

The social aspect has the biggest impact on businesses as an employer. It measures how employers treat their workforce, customers, suppliers and the wider community.

An employer’s social impact encompasses its approach to gender, diversity, pay, equality and human rights, including modern slavery both within the business and the supply chain. It covers how the employer engages with its workforce and, importantly, how it includes them in decisions that it makes.

“The G” – Governance

The governance aspect measures how a company operates in terms of leadership, executive pay, audits, internal controls and shareholder rights. These factors help investors and other stakeholders to measure the performance and ensure business accountability.

What should businesses be doing?

As already detailed, by adopting a robust ESG strategy, businesses can demonstrate that they are reducing risks and securing their future by adopting the right processes and actions to allow for longer-term prosperity and growth.

Part of the strategic activities will include a full evaluation of their internal policies to ensure that they are fit for purpose and crucially comply with legislative and regulatory requirements.

Again, focussing more so on the ‘social’ pillar of ESG, employers should explore how they can positively contribute to fairness in society, investing in fair and equal opportunities and conditions for employees, people working in the supply chain, and local communities. Equality and fairness are at the heart of this and examples of social and ethical business practices include:

  • ensuring employee and customer data is secure (data protection considerations);
  • preventing abuses within the supply chain, such as labour rights, (including modern slavery and freedom of association);
  • providing robust training practices and supporting health and safety;
  • ensuring wellbeing (physical and mental health) support for the workforce as well as opportunity for flexible working;
  • promoting equality in the workforce with diversity and inclusivity policies, (including family-friendly practices);
  • improving employee engagement;
  • investing in local community projects, such as funding educational initiatives.

How we can help you

We have been kept busy helping our clients meet their ESG commitments, to assist in obtaining their B-Corp Certification or to meet industry standards, including tenders such as for the Financial Times.

If you would like our support as you develop your ESG strategy, then do get in touch. We can offer a one hour review session to help you review and develop your employment-related policies and procedures and, importantly, we are able to work with you as you involve your managers and staff and get them on board through learning and development activities. Remember your employees will make change happen.

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