COP29: Why ESG?

The emergence of ESG

Environmental, social and governance (ESG) considerations have existed in various guises for decades, but are becoming more important to a multitude of stakeholders, from investors, credit rating agencies and lenders to regulators and consumers.

Consumers, particularly the younger generations, are becoming more interested in socioeconomic factors, such as protecting the environment, addressing climate change and poverty, and diversity based on race, gender and sexual orientation. This ever-expanding base will continue to have a lot of influence and make purchasing and investment decisions based on ESG.

These stakeholders, alongside investors, employees and society in general, demand that companies go beyond mere compliance with legal requirements and, instead, have a positive impact that reflects a true commitment to sustainability leadership. This requires an active contribution to the UN Sustainable Development Goals (SDGs) and a journey toward value creation across the business model.

Increased investor focus and regulations

ESG criteria are an increasingly popular way for investors to evaluate companies in which they might invest. The criteria can help them avoid companies that pose a greater financial risk due to areas like poor environmental practices.

ESG regulation also continues to tighten worldwide, from the EU’s Sustainable Finance Disclosure Regulation (SFDR) to the US Securities and Exchange Commission (SEC) confirming a greater focus on climate-related risks.

Impact now

Sustainability and corporate social responsibility (CSR) are no longer things businesses can talk about but fail to act on. Greenwashing – putting an environmentally friendly spin on business practices – is no longer acceptable to the new primary drivers of change – the financial markets. Instead, senior management must find an effective way to quantify their company’s operations against set ESG criteria.

Active engagement by corporate boards stems from a profound change in the way financial markets are approaching sustainability and CSR. Investors are focusing on more than just financial statements. They are now taking an integrated approach to investment decision-making that involves financial information and ESG metrics. This is gaining support from government authorities.

Improving labor standards and human rights, and reducing resource use, carbon footprints and emissions, among other concepts, is vital. Companies must manage their performance and that of their supply/value chains. Multiple standards exist to help businesses drive positive outcomes in these areas, providing metrics that relevant managers have traditionally focused on when looking to improve sustainability and CSR.

How is ESG different?

ESG encompasses these factors and yet focuses on its material impact on the business. The aim of relevant managers, such as heads of sustainability, and board members may, ultimately, be the same – to work more efficiently while reducing the impact on the environment and society – but how they describe and achieve these goals can be quite different.

Relevant managers are concerned with improving sustainability to reduce risk while the board is interested in ESG because it is a vital part of what investors consider – it is part of its materiality.

Why improve the quality of ESG information?

Benefits include:

• Increased recognition, trust and credibility
• Risk resilience and increased chance of long-term success
• Improved Board and C-level engagement
• Strengthened reporting and management systems
• Improved stakeholder communications
• Financial benefits, such as improved share price/cheap funding

Easy, support and guidance

Whether you are starting your ESG journey and need help through materiality and picking an ESG framework, or a bit more seasoned and require later processes like ESG assurance, we have a service for you.

One facet of our suite of sustainability solutions, our ESG services are a unique set of competencies to help you mitigate risks while optimizing success, helping you to achieve your targets. Our services meet the needs of a variety of clients and organizations, whatever their maturity level, industry focus or demand.

We offer:

• CSRD and CSDDD solutions
• ESG Training – expertise and experience from ESG experts
• ESG Health Check – an efficient snapshot of your ESG status
• ESG Gap Analysis – full findings, recommendations and a road map
• ESG Disclosures and Sustainability Report Assurance (SRA) – accurately demonstrate your ESG accountability
• ESG KPI Verification and Assurance – validate your ESG metrics and targets, and get a third-party statement
• ESG Certification – a cornerstone for committing and demonstrating your ESG credentials
• Social and due diligence auditing

Our ESG services are constantly evolving to meet new ESG challenges. We can let you know about any new services. Contact us to start or enhance your ESG journey.