Environmental, social and governance - ESG - criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
ESG has been called the megatrend for the future of business. The need to demonstrate that ESG is front and centre of corporate strategy has become clear. Companies must recognise and understand the wider regulatory and societal context in which they operate. Sustainability and broader ESG issues need to sit at the heart of what they do, driving the narrative of how they engage with customers, suppliers and investors.
As the world emerges from the ravages of COVID-19, concern that climate change represents a much greater danger coupled with a determination to learn lessons from the pandemic are driving governments and regulators to take action. National net-zero targets have been set* and new regulations to accelerate the transition away from fossil fuels to cleaner forms of energy are being implemented.
How we can help:
Policy and ESG reporting and frameworks review
The ecosystem of ESG disclosure and reporting systems and methodologies has exploded, together with an increasingly complex and fast-moving regulatory environment. Our review will cut through the noise and highlight the essential information your business needs to understand, giving you a set of recommendations on how to plan a clear operational route forward.
A full review of your current approach across Environmental, Social and Governance issues. This can encompass the following factors:
Overview of emerging social and environmental megatrends, and potential effects on the company and its market
Comprehensive assessment of the business's material ESG risks, liabilities and opportunities
Benchmarking of the company's ESG policies, procedures and performance against peers and sector best practice
Assessment of compliance with national regulations and international treaties
Insight into how the company's ESG performance could affect intangible assets including reputation, brand value, trust and relationships
ESG strategy and policy
Essential for credibility with investors and other stakeholders, we will address current and forward-looking ESG positioning, enabling businesses to engage across the stakeholder spectrum with confidence, with clearly articulated messaging underpinned by ESG-focused strategies. A Net Zero roadmap will be developed out of this approach.
S172 review and assessment (UK headquartered companies)
An essential component of the Companies Act 2006, section 172 sets out the duty of directors to promote the success of the company and, in doing so, to take into account the interests of stakeholders in their decision-making processes. The reporting requirement introduced by the Companies (Miscellaneous Reporting) Regulations 2018 now requires all large companies to include a section 172 statement in their strategic report. ESG criteria are a critical component of s172.
“Companies which don’t prioritise ESG in 2021 will find themselves not just lagging but completely left behind. Despite global warming, it’s cold out there”
Jane Stevensen, Founding Director JS Global
“Investors are becoming increasingly disillusioned with surface level ESG disclosure. Throughout 2021 approaches to ESG will move from simplistic and superficial to something more focused and transparent”
Robert Jenkins, Global Head of Research Refinitiv Lipper
“There is no company whose business model will not be profoundly affected by the transition to a net zero economy”
Larry Fink, CEO Blackrock
*The UK became the first G7 country to make achieving net-zero a legal requirement with a target date of 2050, and has now set the world’s most ambitious climate change target into law to reduce emissions by 78% by 2035 compared to 1990 levels (announced April 2021). China, the world’s biggest emitter of greenhouse gases, has committed to achieving climate neutrality by 2060, while two of the world’s other leading economies, Japan and South Korea, recently set a target date of 2050. In the USA, one of the first announcements made by the Biden administration at the end of 2020 was to declare that tackling climate change will be one of its top priorities, and in the EU, the Commission and Parliament are developing and enacting ever more stringent climate-related legislative proposals, including ratcheting up the EU’s 2030 emissions reduction target from the current goal of 40% to at least 55% (from 1990 levels). From this point forwards, this will either cement our dependence on fossil fuels or help us to forge a path towards achieving the goals outlined in the Paris Agreement and the Sustainable Development Goals (SDGs).