Environmental, social and governance (ESG) criteria are becoming central to the way organisations operate, deal with customers and clients, invest for the future and communicate with employees. Yet too many companies and corporations see ESG as an optional extra, rather than a fundamental series of policies which are woven into business strategy. Marianne Curphey investigates.


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SG is important for organisations with global teams. What steps can avoid reputational risk and


allegations of “greenwashing”?


Environmental: Environmental factors refer to the environmental impact that an organisation has. Understand how your business operations contribute to greenhouse gas emissions, use of natural resources and what exposure you have to climate risks like extreme weather, floods, fire and drought. Implement risk-management practices to mitigate the dangers. Consider what effect business practices are having on the environment, for example in terms of water use, air travel, pollution and the local population.


Social: When an organisation operates in different countries the social aspect of ESG can be particularly complex and challenging. Social refers to the relationships you have with stakeholders, including employees, customers and the community in which you operate. It covers human capital considerations such as working conditions, pay, employee engagement, DE&I and inclusivity, as well as the relationship with suppliers and local employees. Issues often arise for managers who are employing people in developing economies where there are fewer workplace standards or protections.


Governance: Leadership and standards are


at the heart of


corporate governance frameworks. Governance covers how an organisation is led, whether there are strategies and internal controls in place to ensure that operations and finances are accounted for fairly and managed with transparency and integrity. It also covers stakeholder and shareholder interests, the collection of data, including ESG data, and reporting standards.


WHY IS ESG SO SIGNIFICANT NOW? ESG initiatives are now widely adopted in businesses worldwide, with increasing demands from both employees and consumers for tangible evidence and reporting. Some companies have been accused of “greenwashing” where they exaggerate their ESG credentials or use data to make their business practices look more ESG-friendly or inclusive than they really are.


What to do: Organisations need to be more transparent and put in place strategies and systems to monitor and measure ESG goals and quantify progress towards them. They also need to acknowledge both successes and shortcomings in their stated ESG agenda. It is crucial to hire individuals who align with the organisation’s stated values, integrate sustainable practices, implement inclusive policies and continue to have open communication throughout the organisation.


Reputational risk: This is a


significant concern, particularly regarding “greenwashing” among companies who may be seen as concerned only with ESG box- ticking and not implementing policies effectively. On the positive side, having real and tangible ESG policies can make you a more attractive organisation to work for, especially for Gen Z and Millennial employees and with customers who put a high value on transparency and authenticity.


ESG litigation is coming: Climate disclosure requirements are anticipated to become a regular feature in company reporting calendars. Companies unprepared for these changes may struggle to keep pace.


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GLOBAL LEADERSHIP


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