Environment, Social, Governance, that is the literal definition of ESG. What it means to a business is far more than just the words.
Fundamentally, the definition was created by the financial community, to provide them with business metrics that would indicate what the business is doing to ensure they are minimising their impact on the environment, people and the community.
However, ESG has, to date, had no structure or performance guidance, so to all intents and purposes, it has been a little like “sticking your finger in the air”.
ESG is the tip of the CSR (Corporate Social Responsibility) framework. It is the reporting that is needed to illustrate what the business is doing and there is now legislation being introduced to ensure all businesses are meeting the required level.
From January 2023, the EU introduced the CSRD (Corporate Sustainability Reporting Directive) which requires large and listed companies to disclose information on risks and opportunities related to ESG issues, with a particular focus on the impact of their activities on people and the environment. It is easy to say, at this point, that won’t affect my business, but it is important to note that if you are providing products or services to any large business in the EU, you will be required to provide them with the information to meet their “Scope 3” requirement. This fundamentally ensures that every business in the supply chain is meeting the same standards.
With CSRD set to be introduced in the UK in 2024, the impact will hopefully be more significant, but what it does mean is that all businesses need to be ready.
To ensure your business is set up to meet the requirements you will need to implement a CSR framework in your business that allows you to produce the necessary reports on an annual basis. But most importantly this will deliver numerous additional benefits, such as;
- Raising the profile of your business
- Attracting new customers and winning business
- Improving the efficiency of your business
- Improving the health and wellbeing of your team
- Retaining staff
- Helping recruit new staff
These are just for starters, but to develop your strategy takes time and involves engaging your whole team to ensure it delivers the best results. To find out what your business needs to implement your CSR strategy and ensure you meet the ESG reporting requirements, get in touch.