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Environmental, Social and Governance (ESG) is a tool used by businesses to report on their environmental, social and governance policies and impacts. Often done by public companies to be more transparent about investment risks and opportunities, a growing number of small businesses are developing and disseminating their own commitments to these issues to gain a competitive advantage over companies that are unaware of the importance of reporting.
ESG is “changing the landscape in labor and employment law.”
Companies applying for tax abatements, grants or other public funds must respond to planning and zoning boards, industrial development agencies, local development corporations and the public. Broadcasting a company’s commitment to the public good is not only good PR, but ESG reporting can help attract better employees, partners, investors, etc., or mitigate opposition to pending projects. Millennial job hunters, consumers, vendors and investors value ESG and are likely to pass up a company that doesn’t.
In fact, some banks are partnering with real estate developers and offering loan portfolios to developers who adhere to measurable ESG principles.
What is ESG? | Understanding each element of ESG
(E) Environment. What is the company doing about its relationship with the environment? Is it working to reduce its carbon footprint? What measures are used to make it green? Where does he get his building supplies? Are the projects LEED certified? What percentage of the waste is recycled? How does it control power usage?
(S) Social. How does the company interact with people…employees, customers, suppliers? Does it provide educational grants to employees? Complete benefits? What is the company doing for society? Are the plans in accordance with municipal master plans? Do the employees participate in charity work?
(g) Administration. Is there proper leadership for the company? Are there any future plans to improve the defects? Are there controls (eg audits) to ensure that things are handled correctly? What does the board of directors look like? What about the next level of management? Is it diverse and inclusive? Does it support equal pay for equal work?
These are just a few examples. There are many, many more depending on the type of industry you’re in, your location, and your mission.
Why is ESG important?
ESG is reportedly “changing the landscape of labor and employment law.” These changes will affect small employers who are not subject to ESG reporting but may need to consider ESG factors in their operations. Some examples are:
Area. Allowing employees to work from home is a plus for the environment. Using best practices for waste disposal and pollution control is an important green practice. How to choose the power supply is important.
Social. Diversity, equity and inclusion in the workplace as well as conducive working conditions lead to a happier workforce. They are also important for employee training and education. Consider consumer protection and fair trade for customers.
Management. Self-monitoring of company actions and reporting this to stakeholders (e.g. employees) can help with employee recruitment and retention. Charitable donations and community involvement demonstrate a company’s involvement beyond the wall.
A final thought
While you don’t have to generate a fancy ESG report, you can review the company’s policies to see if they’re in line with what’s comfortable in the marketplace and are only good things. Every company and business can benefit from ESG reporting. Failure to report may put you at a competitive disadvantage.
For more information or to discuss getting started with your ESG platform, give us a call or fill out the form below and we’ll get back to you.
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