ESG and Sustainability – How Can You Improve Your ESG Score
ESG (Environmental, Social and Governance) stands for Environmental, Social and Governance factors that act as an indicator of how companies are doing regarding the environment, society and governance practices. A common misconception is that this term refers to Corporate Social Responsibility (CSR), although ESG refers to much more than CSR practices alone. One important distinction between the two terms relates to the concept of the triple bottom line or understanding how it affects the financial aspects of business and the social and environmental aspects.
What Is An ESG Rating
Every year, about 150 companies are issued an ESG rating. The rating has three sub-grades: Overall, governance, and strategy. The Overall grade considers how environmentally friendly a company is (its carbon footprint) and how socially conscious it is (think of that time that company gave 1 percent of its profits to charity). Governance refers to whether or not board members are independent.
How Sustainability Practices Benefit Businesses
So, how do sustainability practices benefit businesses? According to GetSmarter, “56% of individuals say they’re more likely to remain with employers that contribute towards action in sustainability”. It is critical to assess both environmental, social, and governance (ESG) criteria alongside traditional financial measures when making an investment decision. Certain sectors perform better than others, so investors will want to focus on companies in industries with high ESG scores.
The Impact of Negative ESG Ratings
One significant downside of negative sustainability ratings is their impact on your company’s reputation. Negative ESG rankings, especially when published by credible sources, tarnish a company’s image, resulting in drops in consumer trust and investor confidence. If you want to avoid hurting your company’s image or profits because of poor ESG scores, it pays to read up on industry best practices for effectively improving them.
What Is An ESG Score?
An ESG Score is an assessment of how well a company integrates environmental stewardship, corporate responsibility, social well-being into their day-to-day operations. An ESG Score goes beyond simply measuring financials.
Steps on How Can You Improve Your ESG Score
- Don’t be tempted to create fake carbon credits just because they are cheaper
- Make sure you have a good relationship with all of your suppliers
- Consider switching to renewable energy
- Use recycled products where possible
- Make an effort to use less water
- Recycle whenever possible
- Switch energy providers so that you get greener energy
- Buy eco-friendly goods
Going green allows for a positive impact on our planet and strengthens relationships with consumers and potential business partners to create long-lasting brand loyalty.
How Is ESG Linked To Sustainability?
In a world of business data, systems, and complexity, calculating an ESG (Environmental, Social & Governance) score is a useful way to keep things simple. Assigning companies a single number that reflects their overall sustainability is an easy way to see how green a company is in one glance. The most commonly used metric for determining a company’s overall sustainability performance is The FTSE4Good Index Series created by independent financial index provider FTSE International Limited.
It’s clear that most industries, both large and small, are aware of what sustainable processes are. It is an integral part of creating an environmentally friendly product or service.