A Global ESG Outlook

The March 2022 SEC proposal on climate disclosure has increased the focus on corporate sustainability and disclosure levels for publicly traded companies. This proposal, if passed into law, would require companies to disclose information regarding their climate-related risks and activities. Its goal is to give investors greater transparency into how companies are preparing for, responding to, and mitigating the potential risks associated with climate change. Our Montrose environmental industry experts weigh in with their regulatory and ESG expertise, offering three recommendations on how to remain competitive in this ever-evolving space.

Choosing an ESG Framework 

When it comes to sustainability frameworks for your organization, there is no one-size-fits-all solution. Rather, it requires a process of discovery through conversations with your stakeholders to determine what is material to the business. It is also beneficial to research and ask your colleagues what they are doing and which frameworks they are using. The Task Force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI) are two popular frameworks. Adopting and conforming to the TCFD regulations puts your organization 80% of the way there for many laws. GRI, on the other hand, provides a comprehensive approach, spelling out what sustainability means at both a high strategic level and an individual topic level.

Meeting Your Stakeholder Expectations

ESG Scores & Rating Agencies measure a company’s ESG efforts, and these scores help communicate a company’s sustainable business practices to both stakeholders and investors. Organizations like MSCI publish ESG ratings on over 8,500 companies. Given the variability of the ESG rating organizations, it can be challenging to control the assessment and perception of the effectiveness of ESG programs. To address this issue, companies should think about the metrics they want to use to rate their organization. This will help ensure that all stakeholders have a shared understanding of the effectiveness of the organization’s sustainability efforts. 

The Triple Bottom Line (TBL) approach is becoming increasingly popular among companies, as it provides a reliable way to measure the success of a sustainability strategy that can be presented to stakeholders and investors. TBL helps companies evaluate economic, social, and environmental impacts when making decisions. The three Ps of TBL – profit, people, and planet – provide an analytical perspective to evaluate the effectiveness of sustainability efforts. This can be seen in activities such as planting trees or becoming carbon positive, which are aimed at generating wealth while delivering a net positive value to the community. By taking into account economic, social, and environmental impacts, companies can build business models that are beneficial to the community in which they operate.

Reporting in a Transparent and Accurate Manner

Utilizing data and conducting regular audits are important steps to ensure the success of your organization. Auditing is a key quality assurance program for your ESG and EHS initiatives. Organizations need to have effective controls in place to monitor and store data, as well as stay up to date with the latest regulations and thought leadership in the ESG space. A successful ESG program is transparent and accurate. By taking an ESG-forward approach, your company can create value that goes beyond being a cost center. 

If you are an EHS professional in your organization, you are in a prime position to be a leader in ESG initiatives in your company. In addition to data such as air emissions, safety, chemical, and supply chain data, you have the opportunity to be the voice of ESG at your company. With EHS software technology becoming more consolidated and the industry becoming more fragmented, shadow ESG initiatives can arise from different departments such as finance and supply chain. To ensure alignment of all departments and stakeholders, you must establish a clear framework for your organization with goals, action plans, and risk analysis. Additionally, you should consider if physical inspections or software reporting measures are needed. 

Organizations are increasingly recognizing the importance of ESG initiatives. As demand for ESG continues to grow, companies are seeing more alignment and consolidation in this space, along with an increase in accountability. Organizations and their stakeholders are also recognizing that ESG is more than just managing GHG emissions and pledging to aspirational climate goals. By staying on top of the latest developments in the ESG space, organizations can develop a defensible and transparent ESG program that satisfies the expectations of their stakeholders and the public, while also safeguarding the planet for future generations.

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Webinar: Global ESG Outlook: What to Expect in 2023 and Beyond