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WHAT IS E.S.G ? HOW DOES IT COMPARE TO C.S.R AND E.H.S? WHAT BENEFITS DOES COMPLIANCE BRING?

Updated: Jan 26


ESG can be defined as the examination of a company’s environmental, social, and governance practices, their impacts in the various fields they affect, and the company’s progress against regulatory or self-imposed benchmarks. In capital markets, interested parties rely on information about a company’s ESG efforts, including ESG ratings, for investment decision-making, so expect these reports and ratings to be reliable and verifiable. But what part does CSR play in this and is EHS overlapping with one or both? Or is it entirely an internal thing?  


ESG: ENVIRONMENT, SOCIAL AND GOVERNANCE

 

There may be legal and regulatory requirements related to ESG with respect to workers, human rights, products, corporate governance, data privacy and security, emissions, and many more areas but for most purposes, ESG refers to the measurement and reporting on these issues. There are several voluntary standards for reporting to guide companies, and regulations are advancing around the world.

 

A very quick listing of the areas of concern within each sector is as follows:


Environmental

Climate change, greenhouse gas emissions (GHG), deforestation, biodiversity, air, water and land pollution, water, waste, waste water, extended producer responsibility, etc.


Social

Customer relations, employee relations, labour, human rights, occupational health and safety, community relations, supply chains, inclusivity, regulatory compliance, corruption, fraud, data hygiene and security, etc.


Governance

Board management practices, succession planning, compensation, diversity, equality and inclusion, regulatory compliance, corruption, fraud, data hygiene and security, etc.



WHAT ARE THE BENEFITS OF ADOPTING ESG PRINCIPLES AND PRACTICES?

 

Here is a very simple overview of the sort of advantages a company or organisation can expect to achieve through genuine adherence to ESG standards:

 

Investor relations: Investors, especially institutions, now expect to see ESG policies and practices including good governance (e.g. succession planning, independence of auditors), compliance tracking, and industry leadership.

 

Effective risk management: Risk management becomes more effective with good ESG practice, e.g., less exposure to supply chain disruptions and controversies; reduced regulatory burden; improved brand value; and goodwill reflected on the balance sheet.

 

Cost reductions: ESG programs reduce HR costs, e.g., by attracting talent from a wider pool of potential employees and limiting expenses related to turnover.

 

Enhanced value: Research has shown that a portfolio of companies with the fewest ESG incidents outperformed global equity markets by 11%. There is a growing body of research showing that ESG practices can lead to better financial performance and increased shareholder value.

 

Access to new markets: Evidence suggests that companies with strong ESG track records gain access to new markets, e.g., Millennials or environmentally or socially conscious consumers.

 

It’s important for businesses to understand that ESG issues are regular business issues and ESG risk management is a part of standard risk management. With this knowledge, companies can confidently get started on their ESG journey. But they should be still actively looking at enhanced CSR programs and ensuring their EHS structure is in very good shape.  

 

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