Investors are betting more and more in companies that are socially responsible, sustainable and profitable. This is so because of the belief that these companies are better prepared to face social, environmental and economic risks, and still provide value for stockholders in the long-run.
Companies that follow ESG indicators, i.e., that generate positive impact in the environment and society, are preferred by consumers and, therefore, have better chances of becoming leaders in their respective markets.
But, what is ESG after all?
ESG is an acronym for the words Environmental, Social and Governance. In a nutshell, they are a group of good environmental, social and governance practices, that aim at defining if a company is socially aware, sustainable and properly managed.
The goal of ESG is to measure if the company actually is a viable option in terms of sustainable investment, apt and engaged so as to generate positive financial, social and environmental impact. In this way, the incorporation of ESG indicators to the strategy and business models of companies, strengthens the notion that purpose and profit and inseparable concepts.
How to measure ESG?
ESG indicators are divided in three basic themes, according to their name. Through them, it is possible to check the health and profitability of companies. They can even be classified according to the acronym itself.
- Environmental: demonstrates behavior connected to environmental problems such as treatment of waste and pollution, depletion of natural resources and climate change;
- Sociai: points to the relationship of the corporation with their employees, customers, partners and the community in which it operates.;
- Governance: this refers to the corporate and governance policies applied by the company, including pay, leadership, rights of partners and shareholders and other structural aspects of the operation.
ESG indicators are applied based on international standards. Therefore, it is not wrong to say that companies that take these indicators seriously tend to perform better in the stock market. In this aspect the most relevant indicators are:
- Carbon Efficient Index: this is formed by companies that develop policies connected to the control and reduction in the emission of greenhouse gases;
- Corporate Governance Index: this is the performance index that qualifies the assets of companies listed in the Novo Mercado (New Market) or on Levels 1 and 2 of the B3 Stock Exchange;
- Corporate Sustainability Index – ISE: evaluates the companies listed in the B3 Stock Exchange under the scope of social and environment responsibility, that is, if they foster sustainable practices, promoting societal growth and protecting the environment.
What is the importance of monitoring ESG indicators?
Companies that try to adopt such practices become more reliable, not only to investors, but also to suppliers and the society in general because, by adopting corporate governance goals, social and environmental indicators show a reduced risk and tend to prevale for longer.
How to use ESG indicators on my business?
It is paramount to employ the right metrics, stories and case studies in order to show the commitment of companies with the ESG agenda. Some of the most commonly used instruments for that are the annual sustainability reports, which typically contain:
- Broad data originated from the public information available about the company;
- Specific ESG topics that are relevant to the specific industry, moderated by the practices of such sector;
- Benchmarking in order to understand how the company´s ESG profile compares to others;
- Factors that show the perspective of stakeholders in relation to ESG topics;
- Information that reflects the speed in which the ESG topics are evolving in the company.
Eighteen ESG practices that swiftly bring an impact to your company
To wrap it up, we suggest some simple practices that can be adopted so as to ensure the advancement of ESC themes in your company.
In the environmental field (E):
- Development of recyclable packaging for products or a reduction in the use of plastic in the existing packaging;
- Using only recycled paper and a reduction in the amount of printed material in the packaging;
- Implementation of recycling systems (disposable cups and office paper) in conjunction with an incentive for the use of personal cups and bottles;
- Correct management of residue and waste;
- Adoption of practices aimed at protecting the living beings that circulate in the areas where the company is located;
- Using of reverse logistics, i.e. the collection and recycling of products and residues after their use by customers.
In the social field (S):
- Providing basic benefits such as meal ticket, health insurance, as well as flexible working hours, and the adoption of policies that are specific the some groups of employees (e.g. extended maternity leave);
- Creating an open channel for the dialog between employees and leaders, so there is reassurance to communicate all types of occurrences;
- Development of social projects with the community such as apprentice schemes;
- Fostering the participation in volunteering activities by the employees;
- Promotion of donation campaigns, such as food and clothes;
- Sponsorship and/or promotion of cultural and social events.
Finally, in the governance field (G):
- Creation of an administrative and/or consulting board that is committed to strategic planning, results and, most of all, the ESG agenda;
- Hiring independent consultancy companies, ensuring that your business is in line with ethical and legal matters;
- Development of corruption prevention programs;
- Creation of a formal code of conduct, one that establishes ethical values, patterns of behavior and transparency;
- Having a transparent behavior, giving publicity to all relevant information, including financial information;
- Evaluation and following up of the strategic projects for the company, projects that aim to ensure its permanence in the long term.
There has progressively been a take up of conscience from investors, suppliers, employees and consumers who look for corporations that act based on such principles.
The sustainability of corporations is not only a trend, but rather, a reality that is here to stay, and that will promote a positive, profound and lasting chance to the business environment.
What about chatting to one of our specialists to help you in the process of implementing ESG?