Why ESG Matters
The importance of Environment, Social and Governance (ESG) reporting has been increasing at a surprising rate over the past year or two, influenced by new regulations, increasing stakeholder pressure, and more recently by a move by investment companies and others who loan to businesses to require ESG information to be submitted for those seeking loans.
The effort to develop this information can vary depending on the type of product offered or service provided. Fundamentally, the initial action is to assess the current practices and how those align with ESG expectations. Those tend to be either the identification of measurements made, programs developed or business processes in place.
By far the highest level of effort is assessing the current state of the carbon impacts associated with all of the company’s business activities. These can be based on the energy required to produce and deliver raw materials for the use of the company, the energy expended by the company to manufacture items or perform a service, the energy used by those that purchase the product, and the impacts at the end of product life (e.g., recycling energy or emissions resulting from landfilling). Each product or service and produce a wide range of impacts.
Once the current state of carbon impacts is determined, stakeholders will expect an assessment of what changes the company proposes to reduce these impacts. As expected, the level of commitment and impact can vary widely as well, underscoring the need for benchmarking to be part of this process so that actions taken are cost effective, and in keeping with the potential competitive implications for the company.