What is the meaning of CSR (Corporate social responsibility) and how to adopt it?
CSR is an abbreviation for Corporate Social Responsibility. CSR strategies have become common in today’s corporate world as more and more companies realize that their business performance and its societal impacts are intricately connected.
That is why it is essential for companies to adopt CSR strategies and practices that enable them to optimize their performance and simultaneously benefit communities, society and environment where they operate.
There are many ways to initiate a CSR strategy, would it be through certifications, or reporting standards and frameworks, in addition to many tools available. Let’s deep dive into it.
What is corporate social responsibility?
According to the European Commission, CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”
The idea behind corporate social responsibility is that businesses have a responsibility to benefit the society that they exist within, rather than just seeking economic profit.
A company that has a strong CSR strategy will typically have three major focus areas:
- An organizational structure that supports the implementation of the CSR strategy, including clear reporting lines for departments and employees who are involved in implementing the strategy.
- A set of policies and procedures that support the implementation of the CSR strategy, such as policies on ethical behavior, environmental sustainability, human rights, employee engagement, and communication with stakeholders.
- A systematic approach to reporting on progress towards implementing its CSR strategy through monitoring and evaluation processes (M&E).
How to conduct and implement a CSR strategy?
Conducting a CSR strategy is not a one-size-fits-all process. Understanding the impact of your organization on environmental and social criteria is crucial, therefore identifying the company’s goals accordingly, finding ways to measure them and then implementing strategies that will help achieve those goals.
It starts with a clear understanding of what CSR means to your organization. What are its core values? What does it stand for? How does it want to be perceived by the public at large?
Once you know this, you can begin to develop a strategy for communicating those values and ideas to the public in a way that will resonate with them, with reportings and initiatives.
Guidelines for tailoring an CSR Strategy for companies
1. Identify purpose and business model
Determine the overarching goal and vision for the strategy, as this purpose will serve as the guiding force for the rest of the CSR strategy.
Ask questions such as:
- What are the possible benefits and challenges of this CSR strategy?
- Which values, strengths and weaknesses should the strategy address?
- What will the CSR report be used for?
2. Identify stakeholders and open dialogue
Understand which groups will be most influential and/or impacted by potential CSR activities and reach out to them to begin a dialogue about their expectations.
3. Conduct a materiality analysis
Identify the company’s major CSR priorities:
- Which environmental, social, and/or economic topics is the organization focusing on?
- Which topics are important to stakeholders, internal and external ones?
- Where can the company make the biggest positive impact?
4. Conduct a CSR assessment
Each company has unique needs and levels of pre-existing CSR activity. Conducting a CSR assessment will help identify the company’s starting point and gauge factors such as:
- Stakeholder concerns and values
- The drivers for CSR implementation (is there a weakness that the new CSR strategy needs to address or fix?)
- The strengths and weaknesses of the company’s decision-making structure, as these will determine priorities and which areas to focus the CSR strategy on.
- Already existing CSR initiatives (should current projects be integrated or connected with the new strategy to form a more cohesive whole?)
- Timeline and resources to implement new projects
Ensure that by the close of the assessment, everyone who will be working on or impacted by the CSR strategy is on the same page in terms of current status and the needs that are going to be addressed.
Be proactive in gathering feedback from employees and other stakeholders—try to gather as many diverse perspectives as possible.
At this stage, it may also be helpful to put together a CSR leadership team.
5. Define priority areas and specific goals/commitments
Once the purpose of the CSR strategy is established:
- Set a project scope and clearly identify which key areas to focus on.
- Set a project timeline, building in time for check-ins.
- Ensure that the goals do not overreach, as failing to deliver on a stated goal may compromise credibility.
- Try to make the goals Specific, Measurable, Achievable, Relevant, and Time-based.
- Making a list of proposed actions may be helpful in conceptualizing tasks.
Once focus areas and goals have been decided, start building support among senior management and employees to secure buy-in.
6. Choose tools and/or framework(s)
Conduct research into what peers are doing. Other sources of information and reference are industry associations and organizations specializing in CSR.
Running analyses of similar case studies can provide helpful information and aid in future projections.
- What types of tracking tools might be useful?
- Which performance indicators will this strategy rely on?
- What are the benefits and drawbacks of the selected framework or tool?
7. Launch CSR initiatives
Maintain engagement with stakeholders, follow projects/programs timeline, and seek to deliver on project benchmarks.
Maintain CSR-relevant governance practices, and introduce trainings that help support CSR projects.
8. Report and verify progress
Compile data from the CSR projects into a transparent and easily understood report for communication with stakeholders.
Complete verification by employing internal audits, peer/stakeholder reviews, or third-party audits.
9. Evaluate achievements and room for improvement
Take some time to reflect on the experience of implementing and tracking a CSR project.
- What went well? What was difficult? What lessons were learned from the experience?
- What advice would you offer to a company undertaking a similar initiative?
- Is there any follow-up work to be done?
Common CSR tools and frameworks for reporting
CSR shares some frameworks and approaches with ESG, as both concepts involve sustainability reporting. Currently, one of the biggest challenges with developing a CSR approach or report is the lack of standardization.
Given that there is no mandated structure for CSR reports, corporations can select the format that best suits their message and highlight the information that they deem important to their CSR program.
In fact, an article by Harvard Business School observes that companies will create specific branding strategies for their CSR reports, leveraging the report for marketing and PR, as much as for communications. However, the lack of standards does present difficulties in comparing data and identifying areas for improvement.
Listed below are some examples of reporting frameworks and other resources that a company might consider.
CSR Guidance
CSR guidance lays out the underlying principles and baselines for corporate social responsibility.
They include:
- ISO 26000
- The United Nations’ Sustainable Development Goals (SDGs)
CSR Reporting Frameworks
CSR frameworks provide comparatively standardized approaches for reporting out on CSR activities.
Examples of frameworks include:
- The Climate Disclosure Standards Board (CDSB)
- The Task Force on Climate-related Financial Disclosures (TCFD)
- Accountability
CSR Reporting Standards
Reporting standards provide a blueprint for companies to understand and report out on their impact in a comparable and credible manner.
Some well known CSR standards include:
- The Global Reporting Initiative (GRI)
- The Sustainability Accounting Standards Board (SASB)
Certifications
CSR certifications provide proof of impact; third-party organizations can be contracted to verify a company’s commitment to CSR and outcome of activities (performance, accountability, and transparency).
Trusted certifications include:
- BCorp
- Responsibility Europe
Extra Financial Questionnaires
Questionnaires such as the CDP and Dow Jones Sustainability Index (DJSI) provide scoring methodologies and benchmarks for building financial indices.
CSR Working Groups
Working groups such as the World Business Council for Sustainable Development (WBCSD) and CSR Europe bring together sustainability and subject matter experts to help scale and otherwise support sustainability efforts.
Other Tools
There is also a wealth of other tools to aid in CSR risk assessment or impact quantification. Most of these tools tend to be topic-specific, focusing on issues such as reducing/measuring carbon footprint, or on life cycle assessment (LCA).
At apiday, we use our technology to help companies track their CSR actions and make sure they’re building a company that puts people first.
With our algorithms, you’ll be able to collect and analyze data from your documentation, your team reports, and any other sources you choose, to give you a complete picture of your company’s CSR performance.
With this information, you’ll be able to quickly identify areas that need improvement, then implement those improvements right away.
Frequently Asked Questions
Why is CSR important?
The more a company cares about society, the environment, and its employees, the more successful it will be in the long run. Customers and stakeholders turn to companies they can trust and believe in, companies that value and respect their employees keep them longer. And unsustainable practices might lead to negative PR.
What are the benefits of CSR?
A number of benefits come from CSR, including: increased brand loyalty and trust, better employee engagement and retention, improved recruiting efforts, increased sales, and better preparation for laws and regulations as there is a recent push for governments to formally require and more closely regulate such activities.
What does CSR encompass?
CSR usually includes topics that fall under the following three categories: social (e.g. DEI, career development, health & safety, etc.), environment (e.g. climate change, biodiversity, resource use, etc.), and economic (transparent supply chain, philanthropy, etc.).
ESG - What is Environmental, Social and Governance
What is the definition of ESG?
ESG is an acronym for Environmental, Social and (Corporate) Governance. It refers to the non-financial factors of a corporation’s impact.
ESG can be considered a sub-topic of sustainability, whose definition by the UN World Commission on Environment and Development can be paraphrased as ‘meeting the needs of the present without compromising the ability to meet needs of future generations’.
Sustainable practices support ecological, human, and economic health, and operate under long-term priorities with an assumption that resources are limited.
ESG encompasses three pillars of responsibility :
- Environmental: refers to a firm’s impact on the environment, such as the company’s energy usage, pollution/waste, use of natural resources, and/or positive improvements like switching to renewable energy.
- Social: correlates to a firm’s impact on society and company stakeholders—this can include factors such as product safety, employee treatment and diversity, charitable initiatives, supply chain relationships, impact on local communities, etc.
- Governance: refers to the company’s internal governance structure. Metrics for governance might include board diversity, accounting policies, executive pay and compensation, ownership structure, and ethical behavior within the higher management chain.
ESG Key Concepts and Terms
Where does the ESG concept come from?
The specific term ‘ESG’ was coined in a 2004 report by the Global Compact, entitled “Who Cares Wins,” in a recommendation urging analysts to “better incorporate environmental, social and governance (ESG) factors in their research”.
However, the practice of considering non-financial factors in company evaluations has been in use since even earlier; some might point to the 2001 launch of the FTSE4Good Index Series, a series of ethical investment stock market indices, as the beginning of mainstream ESG.
Despite the rapid growth of ESG influence in recent years, the idea of sustainable investing, or investing with specific values, is far from new.
‘Impact investing’—investments aimed at generating not only financial return, but positive social and environmental impact as well—has its origins in religious groups, who placed ethical parameters on their portfolios (refusing, for example, tobacco, alcohol, and gambling businesses).
The concept of ESG itself is fairly broad. It includes three separate topics within its scope and can also be expanded depending on the inclination of the company or investor in question.
It is important to note that investors and companies interact with ESG criteria somewhat differently; investors usually seek to integrate ESG criteria into their investment decisions, and companies have an added responsibility of not only integrating ESG criteria, but also of disclosing ESG data to stakeholders (notably investors).
Listed below are some of the most relevant ESG (and ESG-adjacent) terms.
Many of these terms have similar meanings and are sometimes used interchangeably—however, understanding the differences in connotation will help place ESG within the spectrum of corporate sustainability.
ESG vocabulary
- ESG integration: the practice of incorporating ESG information into investment decisions to help enhance risk-adjusted returns.
- ESG disclosure: the disclosure of data relating to an organization's environmental, social and governance performance.
Investor vocabulary
- Impact investing: investing in businesses/organizations that have a positive and/or less negative impact on social and environmental criteria.
- Socially Responsible Investing (SRI): Investing in companies that have positive social impact. In other words, actively removing or choosing investments based on specific ethical guidelines.
Vocabulary for companies
- Corporate Social Responsibility (CSR): The European Commission has defined Corporate Social Responsibility (CSR) as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” In short, CSR refers to companies’ practical implementation of sustainability.
- Materiality (in the context of sustainability information): The effectiveness and financial significance of a specific measure as part of a company's overall ESG analysis. The Global Reporting Initiative’s (GRI) Materiality Principle states that a sustainability report should include information that “reflect[s] the organization’s significant economic, environmental, and social impacts” or “substantively influence[s] the assessments and decisions of stakeholders.”
Additional Key Institutions and Decisions
- 1984 - US Sustainable Investing Forum founded
- 2000 - Global Compact Initiative founded, Global Reporting Initiative (GRI) launched
- 2004 - Global Compact produces “Who Cares Wins”
- 2006 - United Nations Principles for Responsible Investment (PRI) launched
- 2007 - Climate Disclosure Standards Board (CDSB) was born at the WEF meeting in Davos to create a generally accepted framework for climate risk reporting by corporations
- 2009 - Global Impact Investing Network launched
- 2010 - International Integrated Reporting Council (IIRC) formed to develop an overarching integrated reporting framework for both material financial and non-financial information
- 2011 - Sustainability Accounting Standards (SASB) formed to set standards for corporate reporting on ESG metrics
- 2015 - Task Force on Climate-Related Financial Disclosures (TCFD) which aims at developing a set of voluntary climate-related financial risk disclosures
- June 2021 - SASB and IIRC officially merged into the Value Reporting Foundation (VRF)
- Nov 2021 - IFRS Foundation announces the creation of International Sustainability Standards Board (ISSB), which is a consolidation with CDSB and VRF
Recent ESG developments
As of 2021, ESG is set to grow rapidly and shape the corporate sustainability agenda. Here are some of the most crucial developments.
An analysis of the ESG industry
New types of rating agencies that focused on non-financial criteria began to develop in the early 2000s.
Rating processes were developed to help investors conduct in-depth analyses of the companies within their portfolios and how well those companies adhered to ESG criteria, and such agencies incorporated a review of a company’s environmental, social and governance (ESG) performance in addition to their economic performance.
These agencies are commonly called social and environmental rating agencies, or, extra-financial rating agencies.
Each extra-financial rating agency has its own evaluation grids and criteria, its own methodology.
Just as there is a multiplicity of ESG standards and frameworks (GRI, IIRC, SASB, etc.), there are a number of different extra-financial rating agencies, each with their own process and ESG questionnaires.
Nevertheless, ESG rating processes are trending towards homogenization.
An initial consolidation movement (mergers, acquisitions or alliances) in the 1990s led to the appearance of the currently well-known extra-financial rating agencies operating on an international scope – Vigeo (France), MSCI ESG Research (United States), EIRIS (United Kingdom), oekom research (Germany), Inrate (Switzerland), Solaron (India) and Sustainalytics (Netherlands) – and the 2010s have seen continued consolidation, in a market increasingly dominated by American corporations.
Some of the most significant recent developments in the extra-financial rating ecosystem include:
- 2015 - Vigeo merges with Eiris
- 2018 - Oekom Research is acquired by ISS
- 2019 - Vigeo-Eiris is acquired by Moody’s Corporation and becomes V.E.
- 2020 - Sustainalytics is acquired by Morningstar
ESG funds
ESG funds are growing rapidly, indicating huge market demand for application of ESG strategy.
CNBC puts ESG fund inflow at over $21 billion during the first quarter of 2021, an increase from the $51 billion for the entire year of 2020 and $21.4 billion in 2019.
A BlackRock representative attributes this increase in interest for ESG to more visibly impactful methods of incorporating sustainable investments. Financial experts now view ESG as a “core-type strategy”- and this trend looks like it will only continue in the coming decades.
Data and Tech in ESG evaluations
ESG leaders are still struggling to get a hold on the unwieldy world of ESG data, but the standardization of ESG reporting and disclosure is of high priority.
ESG analysts from Forrester suggest that industry regulations will become increasingly specific, detailed, and relevant in coming years.
Companies are also reacting to dynamic materiality and the unpredictability of factors like new knowledge, regulations, and global events by adopting and developing new procedures to measure risk.
Shareholder Activism and ESG Proxy Voting Policies
Shareholder activists are people who use their influence, through ownership of company shares, to enact change within a company and/or in that company’s external impact.
As partial owners of the company whose shares they own, shareholder activists can initiate important conversations with the board of directors and enact change.
Tactics for enacting change vary, especially because there are different classes of shares that allow for a range of voting privileges. Examples of tactics include: a dialogue with managers, formal proposals, social pressure through social media, and lawsuits.
Market reactions to the climate crisis
According to the most recent IPCC climate report, the world has reached an increase of 1.1°C compared with the average in 1850–1900, resulting in extreme weather such as the 2020 Australia wildfires.
In order to achieve the Paris Agreement limit of a 2°C increase by the end of the 21st century, MSCI’s Warming Potential estimates that every company in the MSCI ACWI IMI would have to reduce total carbon intensity (Scopes 1, 2 and 3) by an average of 8%-10% per year from 2021 until 2050.
The need for steep reductions in emissions in portfolios means that companies would have to find means of decarbonizing rapidly, and investors/investment firms are faced with the choices of convincing companies to undergo massive overhaul of procedure, change their portfolio concentration, and/or shift assets.
The urgency of the climate crisis indicates a dire need for a change of status quo in corporate environmental impact.
As society faces unprecedented challenges—climate change, protests and social upheaval, increasing technological capabilities, and the ongoing COVID-19 pandemic—the need for frameworks that quantify and mitigate unpredictable risks becomes clear.
Environmental, social, and governance (ESG) strategies can help meet those needs: they are here to stay.
4 reasons companies should adopt CSR, Corporate social responsibility
While the challenges facing society are complex and multifaceted, companies have their own part to play in that. It is therefore crucial that companies adopt CSR strategies.
By adopting a strong Corporate social responsibility (CSR) strategy and reporting externally on their CSR performance, companies are able to ensure that all stakeholders are satisfied (consumers, employees, suppliers, shareholders) so the business can thrive for years to come.
CSR is becoming a more embraced practice across all industries, as companies are shifting their focus from being just profit-oriented to becoming socially- and environmentally-conscious ones.
Consumer Opinion
Consumer demand presents one compelling reason for integrating CSR into company practice.
People are inundated every day with news on heavy topics such as climate change, social justice, and the state of the economy, and many have deep-seated values on these topics. Consumers increasingly want their purchases to reflect these values.
The survey participants also valued elements like environmentally-friendly business practices, social responsibility, and support of the local community above product price. Thus, the ‘conscious customer’ is increasingly well-informed (due in part to social media as organizing platforms and the availability of information through the internet) and assertive about their desire for evidence of corporate impact.
Not only do consumers choose to support companies that reflect their values, they also increasingly fact-check corporations’ claims of sustainable practices. They look not just at the product, but dig into a holistic evaluation of the brand and its commitment to positive societal and environmental impact.
The term ‘greenwashing’ refers to companies intentionally misleading consumers into thinking that a product or service is sustainable when it is not; the use of this term helps to describe and raise consumer awareness of fraudulent environmental claims.
Conscious consumers will actively vet companies to determine whether the company’s practices align with their goals. The benefit of this increased scrutiny is a different sort of brand loyalty.
Whereas before, brand loyalty was an outcome of marketing psychology, modern consumers are invested in the success of sustainable companies because they believe that those companies create positive impact.
Employee Engagement
The implementation of CSR reports and activities can also create value from within the company, by motivating employees and cultivating a sense of purpose.
CSR programs have the potential to encourage cooperative behavior and closer relationships among employees, as well as increase employee engagement and identification with the corporation.
Other data suggests that sustainable practices that come from top down have the potential to attract talent, enhance job satisfaction, and improve employee retention, among other benefits. People want to feel like their work aligns with their values, and that their labor is meaningful.
Employee opinion can also swing in the opposite direction.
Employee activism is a rising movement, as employees, like consumers, maintain that companies have a responsibility to proactively address CSR issues.
Investor Opinion
Every company, no matter its size or the industry it is in, has a responsibility to its investors. One of those responsibilities is making sure that the company is doing everything it can to be responsible and ethical in its operations.
By implementing a CSR policy, companies can show investors that they are doing their best to operate ethically and responsibly. Investors will be more likely to invest in companies who demonstrate good corporate social responsibility.
A good CSR report proves to investors that the company has considered all aspects of its business and has thought through how each contributes to its overall impact on society and the environment.
A commitment to CSR denotes accountability and transparency in company processes, which in turn helps prevent costly missteps (such as fraud) and therefore reduce investment risk.
Regulation and Standards
Finally, regulations pertaining to CSR and sustainability efforts are continually evolving.
Standards such as the UN Global Compact, UN Sustainable Development Goals, and even the creation of the ISSB to align extra-financial concerns with financial reporting provide data on best practices for voluntary CSR activities.
However, there is a recent push for governments to formally require and more closely regulate such activities.
In conclusion...
No company can prosper nowadays if it is not involved in the community and the people around.
Companies need to take an active role in the community, beyond just making a profit. The positive benefits of this attempt include the company’s expansion and durability of its success.
So, what are you waiting for? Start implementing your CSR strategy today!
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Frequently Asked Questions
What is meant by corporate social responsibility (CSR)?
Corporate social responsibility (CSR) refers to the degree to which a company is socially responsible. It is usually measured by how well a company manages its environmental, social and governance responsibilities. The most common way of assessing how well a company is performing in terms of corporate social responsibility, is by looking at its policies, practices and reporting in these areas.
What are examples of CSR initiatives?
The following are some examples of CSR initiatives: providing training to employees, promoting local recruitment and local procurement, ensuring social dialogue and employee engagement, developing a healthy work environment, reducing waste through recycling programs or donating time and money to charities.
Carbon disclosure project reporting: what is it and how does it work?
The carbon disclosure project is a global disclosure framework that assesses companies on their greenhouse gas emissions, as well as their plans for reducing those emissions.
Companies have to answer an annual questionnaire about their emissions and actions taken to reduce them. The CDP questionnaire is mainly used by investors and corporate clients to evaluate the risk of climate change-related issues for a company.
What is the Carbon Disclosure Project?
Definition
The Carbon Disclosure Project (CDP) is an extra-financial questionnaire that collects data on companies’ environmental practices and performance, which serves as a reporting standard on environmental topics.
CDP gives a score that confers a total ESG rating for the subjected enterprises to assess their environmental impact.
In order to shed some clarity on CDP’s particularities, it is worth exploring the following definitions of the aforementioned key concepts:
- Questionnaires = Collect information on a company's ESG policies, processes, metrics, and performance.
- Standard = Standards are a set of specific, replicable, and detailed guidance for what should be disclosed.
- ESG Rating = Rates companies based on their ESG policies, systems and measures, and it can be performance-based or risk-based rating.
What does CDP stand for?
Climate change, water management, and deforestation all became persistent issues for businesses worldwide.
In order to tackle these challenges, Environment, Social & Governance (ESG) reporting represents a viable option for various stakeholders to ascertain their impact on their surroundings and to be held accountable.
CDP emerged as a pioneer in the area of ESG reporting at the beginning of the 21st century.
CDP is a not-for-profit organization that administers the worldwide disclosure system used by investors, businesses, cities, governments, and regions to manage their environmental effects.
CDP surveys assist the business sector in successfully communicating their strategy for quantifying emissions and managing the risks and opportunities connected with climate change’s consequences.
In other words, CDP is a tool that businesses may use to develop their climate plan and benchmark themselves against other businesses in their industry, even on an international level.
CDP was established in 2000, building on The Global Reporting Initiative’s (GRI) idea of environmental disclosure, focused on individual corporations rather than states. GRI-compliant reporting is geared at stakeholders and provides a framework for evaluating an organization’s economic, environmental, and social performance.
In comparison, CDP reporting is more investor-focused, supporting the aggregation of information on climate change risks and possibilities, as well as statistics on emissions reduction, business measures to mitigate climate change and minimize environmental impact, and so on.
CDP Today
In 2021, a record number of firms of more than 13,000 submitted environmental data to CDP, marking a 37% increase in the number of organizations sharing information since 2020 across the three surveys. These corporations account for more than 64% of market capitalisation.
CDP’s A List of environmental leaders includes just 2% of the world’s Fortune 500 businesses, with a combined market capitalization of $12 trillion.
However, approximately 17,000 companies with a combined value of $21 trillion continue to withhold information.
Another prominent occurrence for CDP in 2021 was the publication of CDP’s five-year strategy. Overall, CDP aims to strengthen the involvement, monitoring, and analysis across a diverse collection of stakeholders, broaden their coverage to include additional environmental challenges, and emphasize concrete objectives, plans, and performance.
Moving forward, the guidance for CDP reporting in 2022 has been issued, and the response platform will be accessible in early April.
CDP has enacted many significant revisions to the questionnaires for 2022, such as extended governance questions to determine the competencies in managing climate, water, and forest risks as well as more emphasis on biodiversity.
Moreover, the questionnaire will elicit detailed information on transition strategies and the existing and forecast capital expenditures and operating expenses necessary to achieve net-zero emissions by 2050.
How does CDP work?
CDP implications for Businesses
Following the United Nations Climate Change Conference from November 2021, there is growing pressure on businesses, financial institutions, and investors to live up to their Glasgow obligations.
Environmental regulations are becoming more stringent, and governments require companies to align their operations with national and international sustainability goals.
In addition, consumers are becoming more conscious of their environmental impact. When it comes to the products and services consumers purchase, they expect transparency and rigor.
Hence, CDP represents the perfect opportunity for companies willing to meet contemporary sustainability standards and set carbon targets and action plans.
Moreover, the information encompassed by the CDP is essential for businesses since institutional investors utilize publicly available data to drive their decision-making, and large firms use it to analyze and interact with their supply chain.
Beyond innovation, companies must identify hidden opportunities within the risks posed by climate change. These risks may be transformed into opportunities for the company and incorporated into their fundamental strategy.
For instance, CDP includes a question on how respondents transformed challenges into feasible business opportunities as part of the questionnaire.
Therefore, businesses must understand whether particular hazards associated with climate change might have a meaningful impact on their operations, how big of an impact this would have on their bottom line, and what efforts must be made to avert these risks in the first place.
Advantages of CDP
CDP brings forward a plethora of advantages for the enterprises, such as the following:
- Promote more openness - Improved disclosure and reporting of the financial risks and possibilities associated with climate change would help businesses' relationships with investors, stakeholders, and the general public. They foster trust by being open and transparent, and in the process, they safeguard the company's long-term survival.
- Risk Management - Enterprises that respond to CDP, demonstrate unequivocally that their business is a forward-thinking, long-term sustainable enterprise. By implementing the guidelines, businesses may become more robust to the physical and transitional risks of climate change. Companies that invest in assessing and comprehending climate-related risks and possibilities will be able to make more informed business choices in the future, facilitating a fair and orderly market transition to a low-carbon economy.
- Indicator of commitment - By signing the CDP pledge, these firms demonstrate that they understand the economic potential created by a new low-carbon economy and that they have a business strategy that involves long-term climate risk management. Furthermore, it enables businesses to be proactive in their environmental disclosures while simultaneously improving their brand's reputation.
- Joining a Sustainable Ecosystem - Businesses that adhere to the CDP will join an innovative group of businesses that are implementing the guidelines for the first time. Associating with such a group enables them to share their experiences and learn from others around them.
- Mitigating Emerging Regulations - Providing disclosures allows businesses to stay ahead of regulatory and policy changes, detect and mitigate emerging risks, and discover and pursue new possibilities for action that their investors and consumers throughout the globe are requesting. CDP enables any company to prepare for the possibility of mandatory environmental reporting requirements. For instance, CDP's climate surveys are completely consistent with the guidelines of the Task Force on Climate-Related Financial Disclosures (TCFD). The Financial Stability Board (FSB) established the TCFD in 2015 to provide uniform climate-related financial risk disclosures for corporations, banks, and investors to use when communicating with stakeholders.
- Competitive Advantage - CDP constitutes the benchmark for corporate environmental reporting, and investors increasingly require it as a condition of doing business. Responding to demands for information from stakeholders may result in substantial advantages for the company. Businesses may get a competitive advantage, gain access to winning capital bids, and boost their stock market performance by using this service.
Who should disclose to CDP?
Each year, CDP assists thousands of stakeholders in assessing and managing their climate change, water security, and deforestation risks and opportunities. CDP is not limited to businesses; cities and governments may also respond to similar questions to contribute to a more sustainable future.
CDP Reporting Process
CDP reporting necessitates collecting data and using that data to complete questionnaires through the CDP’s Online Response System (ORS). CDPs questionnaires are assessed by qualified scoring partners who have been educated by CDP.
Each business has its own dashboard from which it may access the ORS.
Additionally, the dashboard displays which surveys a company is being asked to answer and which stakeholders are demanding information.
Investors and clients alike may demand environmental information from businesses through CDP, and the data is used to inform and motivate action.
The subsequent report, which may be made public or confidential, is used to educate investors and calculate CDP ratings.
Corporate Questionnaires
As its name indicates, CDP is mainly concerned with climate-related issues such as carbon emissions, water use, and deforestation.
Hence, companies wishing to report on social and governance concerns will be required to do so via the use of a secondary reporting structure.
Enterprises may submit information about their operations through CDP’s three corporate questionnaires:
- Climate change
- Water security
- Forests
In terms of CDP submissions, the climate change questionnaire accounts for the vast majority.
Each of the three areas of emphasis has its own scoring methodology, which is somewhat different for each of the three categories.
Not all respondents are evaluated on all three key areas; for example, a company may be required to answer on climate change but not on water or forest, depending on its size, location and investors or clients needs.
Primary Questionnaire & Sector-Specific Questionnaire
Companies in high-impact areas will be asked sector-specific questions along with generic inquiries.
CDP’s Activity Classification System (CDP-ACS) is used to assign sector-specific questions to enterprises. CDP has created the novel Activity Classification System to assign sector-specific questions to businesses.
This framework categorises businesses according to their most relevant industries, focusing on the varied activities that generate income for businesses connecting them to the commercial implications of climate change, water security, and deforestation.
CDP-ACS is a three-tiered system comprising Activity, Activity Group, and Industry.
The CDP questionnaire is structured around the following items:
- Governance
- Risks and opportunities
- Business strategy
- Targets and performance
- Metrics and methodology (breakdown of CO2 emissions, energy and water consumption, etc.)
- Engagement of stakeholders and the value chain
- Verification
Nonetheless, companies will be evaluated only on the basis of their primary questionnaire sector.
This implies that not all questions will be scored if the organization is subject to more than one set of sector items. Sector-specific questions will be labeled with the sector(s) they pertain to.
However, companies should answer any queries that pertain to their business sector.
The sector-based approach enables CDP to render more meaningful assessments of companies’ responses by taking into account each sector’s unique characteristics and intricacies, leading to a score that accurately represents the company’s environmental stewardship progress and enables more accurate benchmarking criteria against other businesses.
What is a CDP score?
Overall, a CDP score evaluates an organization’s environmental performance.
Companies and governments who reveal information to CDP are graded using letter grades ranging from A to D-, with distinct ratings offered for each focal area of the report (climate change, water, and forests).
Understanding the Scoring Process
Companies are graded on their environmental openness and activity by the CDP, based on the information they provide via its annual questionnaire process.
The internal scoring team at CDP coordinates and collates all scores, as well as conducts data quality checks and quality assurance procedures to guarantee that scoring standards are consistent across samples and scoring partners.
The scores are determined based on the replies to the questionnaire.
Scores are assigned to entities based on the level of detail and comprehensiveness of the information they provide in their questionnaire, their awareness of climate change, water scarcity and forest issues, and their understanding of management methods and progress toward actionable change.
Firms that do well on the CDP scoreboard enjoy a competitive edge over their competitors.
It is also possible to utilize scores inside an organization to benchmark progress and ensure that plans are consistent with current best practices.
CDP’s A-List
A-List comprises organizations that have received CDP ratings of A or A-, which indicate that they are at the “leadership level.”
Companies and governments that reach the A-List have proven excellent environmental knowledge and management to establish themselves as industry leaders in openness and action on environmental issues.
Only companies that make their response to the CDP public are eligible for an A rating (companies’ response can be found on CDP website).
There are more than 300 firms represented on the 2020 A-List, including well-known brands such as L’Oreal and Adobe, as well as eBay, Volkswagen, Levi Strauss, Hewlett-Packard and others.
It is sufficient for a corporation to achieve an “A” rating in one of the three key areas of CDP reporting to be featured on the A-List.
For example, a corporation that obtains an A in climate change but a C in water will still be included on the A-list of companies.
Nonetheless, CDP maintains that only 10 firms have earned A ratings in each of the three major categories.
CDP Levels of Environmental Stewardship
Respondents to the CDP are evaluated on four levels, corresponding to the stages that an entity goes through as it works toward environmental stewardship. These levels include:
- LEADERSHIP - Adheres to current best practices in environmental management or climate change action
- MANAGEMENT - Has undertaken environmental or climate change-related initiatives, policies, and strategies
- AWARENESS - Has handled environmental or climate change issues, risks, and consequences in connection with its business
- DISCLOSURE - Is transparent when it comes to environmental and climate change issues
How to Answer CDP Questionnaires
Overall, CDP operates on a calendar year-by-year basis.
To access the system, companies must first register for a CDP account.
If investors or consumers request information from the firm, CDP will alert the participants through email and provide them with access to a designated company dashboard and ORS.
Carbon Disclosure Project reporting timeline
Numerous businesses report on a calendar year basis, from 1st January to 31st December.
Annually, the CDP’s submission deadline for score is the end of July, they usually disclose the exact date at the beginning of the year.
As a result, companies will have about seven months from the end of the reporting year to compute their carbon emissions, complete the questionnaire, and evaluate and sign off on their submissions internally.
Carbon footprint data gathering takes around three months on average, but might vary significantly due to the nature of the organization and the availability of carbon activity data.
Therefore, each enterprise should begin the procedure immediately, determining their carbon footprint and completing all portions of the CDP questionnaire simultaneously.
One thing to keep in mind is that CDP’s internet interface, the Online Response System (ORS), does not open until April of each year, therefore companies will need to work offline until then based on the previous year’s questionnaire.
CDP updates its questionnaire every year, so changes (new questions or title changes) are to be expected.
Step-by-step instructions for reporting
Preparing for CDP
CDP offers a range of resources to assist firms with sharing information through their platform.
Their corporate advice website includes the following important materials that enterprises might reference as they prepare for their response:
- Their climate change, forest, and water security questionnaires are accessible online or as a Word document/PDF download.
- The Scoring Introduction gives an overview of CDP scoring, including data on thresholds and scoring eligibility should serve as a guide for submitting the organization's response(s) for scoring.
- Each questionnaire has its own scoring methodology, which details the points available for every question.
- Documentation illustrating the weighting of categories and questions for scoring at the Management and Leadership levels.
Furthermore, CDP provides detailed reporting guidelines for each questionnaire to understand questions, terminology, and standards.
The reporting guidelines section includes an overview of each module, rationales for each question, linkages to other frameworks, desired material, definitions of words, sample replies, and extra information.
The CDP questionnaire completion
Each mandatory question in the questionnaire is rated for Disclosure, which means that unanswered questions earn a score of 0 out of the maximum possible points for that question or combination of questions.
Additionally, if a question does not earn Disclosure points, the enterprise will be unable to earn points at the Awareness, Management, or Leadership levels.
There are several strategies that an enterprise could utilize to increase their CDP score:
- Calculate Activity Data - Robust activity statistics (energy consumption, waste generated, quantity and types of procurement, etc.) are critical for calculating the company's carbon footprint accurately.
- Provide concrete examples/case studies illustrating methods specific to the business - Companies should provide concrete examples of carbon management practices that elucidate what was accomplished and what was learnt throughout the process. For example, practices that reduce fuel use, decreasing energy demand via the installation of energy-efficient equipment, or selecting suppliers that value sustainability performance and assessing supply chain possibilities to improve energy efficiency.
- Comprehend the CDP approach - CDP makes its scoring methodology public. Companies may provide comprehensive, transparent, and company-specific responses by following the process explained by CDP. Reading the methodological guide and respecting the instructions as much as possible is a first step to ensure the best scoring as possible.
- Begin the dialogue early - Businesses should gather their team members, set a timeline that works for them, and collect all particular data and verification papers required for the questionnaire.
- Complete all appropriate cells - Before officially submitting the questionnaire, enterprises should verify that they have completed all applicable cells, since this has an effect on their disclosure performance.
- Utilize time and resources prudently - By logging onto CDP's website, respondents may obtain an editable version of the climate change questionnaire. This document is beneficial for gathering and organizing input from various sources. While completing the questionnaire offline, it is advisable to keep CDP's ORS open, so the company is aware of the specific information requested for each question.
Challenges of CDP
Notwithstanding the benefits provided by CDP, several challenges might hinder the effectiveness and optimum prospects, such as the following:
- Organizational Silos - CDP reporting is complicated and challenging because of silos, as companies are organized in various ways throughout the world and under multiple commercial and operational structures. It may be difficult to break down segmented risk-management systems and get leadership support for a more comprehensive approach to climate risk management.
- Inadequacies in practical capabilities - Most businesses have little or no expertise with climate change scenario studies and greenhouse gas (GHG) emissions accounting across all three emission scopes and science-based goal setting. They cannot report their present sustainability performance because they lack the necessary knowledge, tools, and related competencies.
- Time-consuming Endeavor - For enterprises to comply with CDP, they must answer a comprehensive set of questions. In 2021, this took the shape of an 88-page paper including more than 200 questions and answers. Obtaining the necessary information and responding to a CDP questionnaire is a time-consuming and difficult task.
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Frequently Asked Questions
What is the Carbon Disclosure Project?
The Carbon Disclosure Project is a questionnaire that collects information on companies’ environmental practices and performance. This assessment serves as a reporting standard on environmental issues. The CDP score confers a global rating for the companies to evaluate their overall impact on the environment.
The most popular questionnaire focuses on Climate Change and was created by the CDP in 2006. Other CDP questionnaires exist such as the CDP Water or CDP Forests.
How does Carbon Disclosure Project work?
Companies that participate in CDP reporting must collect data and use that data to complete questionnaires through the CDP’s Online Response System (ORS). The ORS provides a secure online environment in which companies can access their own dashboards, which display all the surveys they are required to answer.
Investors and clients may demand environmental information from companies through CDP. This data is used to inform and motivate action, and the subsequent report may be made public or confidential. The report is used to educate investors and motivate companies to take action on environmental issues.
What are the differences between Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG)?
One way to differentiate Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG) is to think of CSR as qualitative and driven by considerations and commitments internal to a corporation, and ESG as quantitative and driven by external requirements (ie. international frameworks and standards).
At first glance they can seem synonymous, but they are not the same thing. They each have specific meanings and different aspects of a company to consider when using them.
Differentiating CSR and ESG
What is CSR
CSR stands for Corporate Social Responsibility.
- CSR is centered on the idea that businesses have a responsibility to benefit the society that they exist within—a broader view than the one that says businesses’ only responsibility is to produce economic profit.
- CSR is about accountability and self-regulation; these elements can be incorporated through internal processes such as communication between management and employees.
- CSR commitments serve as benchmarks for preventing and/or mitigating social or environmental harm, adding positive social value, and as indicators of company culture.
- CSR commitments tend to be goal-focused and highly variable, as each corporation will choose commitments that align with their values and overall mission.
What is ESG
- ESG uses environmental, social, and governance metrics to evaluate sustainability efforts, placing a strong emphasis on data-driven reporting.
- ESG policies are led by specific criteria, and utilize standardizing frameworks—often administered by external bodies—that allow for project comparison through ESG scores and ratings.
However, while CSR and ESG have some key differences (see table below), it is important to note that the two concepts are not in conflict: both seek to set goals for and report out on positive societal impact.
CSR vs ESG key differences
| Corporate Social Responsibility (CSR) | Environmental Social Governance (ESG) |
|---|---|
| Broader, more vague scope & reporting | Specific scope & reporting |
| Focus on accountability | Focus on tracking and measuring |
| Generally qualitative | Generally quantitative |
| Projects are relatively individualized | Trend towards a more unified approach (ex. standardized metrics) |
| Stakeholder-based approach | Risk- and/or performance-based approach |
A Brief History of CSR
The origins of CSR
CSR ideology and approaches have shifted dramatically over the past few decades.
The idea of CSR began in the mid-20th century, with the landmark book Social Responsibilities of the Businessman by Howard Bowen widely considered as the beginning of CSR ideology.
In the decades between 1950-70, attitudes towards CSR were shifting as the concept became more widely accepted–aided by the Committee for Economic Development’s introduction of a ‘social contract’ between businesses and society–and practical applications were developed.
The 1980s also saw an increase in CSR operationalization and its role as a decision-making process. However, during this time period, CSR was primarily focused on philanthropy and little else.
CSR ideology in the late 20th to early 21st century became more globalized, as multinational corporations began to face increased reputational risk and increased pressure for social responsibility from both their home and host countries. This environment and need for greater awareness of social impact helped institutionalize CSR and bring the discussion of CSR compliance into the mainstream.
Governmental organizations such as the European Commission (EC) also encouraged the implementation of CSR through actions like passing the European Business Declaration against Social Exclusion and launching the European Business Network for Social Cohesion one year later.
The rise of CSR
CSR grew in influence in the 2000-2010s, when it began being incorporated into policy.
In 2001, the European Commission (EC) introduced a Green Paper called Promoting a European framework for Corporate Social Responsibility that constituted the first step towards the 2002 European Strategy on CSR adopted.
The EC also sponsored a number of CSR conferences and launched a “European Roadmap for Business” discussing CSR objectives for the next few years. This time period also saw the development of standards and frameworks: the idea of the ISO 26000 was first proposed in 2002.
The 2010s introduced the concept of creating shared value (CSV), developed by Heslin & Ochoa and Porter & Kramer.
CSV–which Porter & Kramer explained as practices that simultaneously enhance a company’s competitiveness and advance economic and social conditions in its surrounding communities–has a lot of overlap with CSR and added to the case for increased attention on corporations’ impact.
Moreover, key events such as the Rana Plaza tragedy in 2013 led to more widespread awareness of issues like human rights and ethical manufacturing that fall under the purview of CSR.
The 2015 United Nations Climate Change Conference (COP21) was another key moment pushing the development of CSR, as COP21 produced a new commitment to the environment and net zero emissions.
More recently (since 2020), sustainability and the idea of regeneration of resources are becoming more prevalent in the field of CSR.
Moreover, one important distinction with modern CSR is the focus on accountability and creating positive impact for the whole value chain; CSR does not stop at simply limiting negative impacts–the goal is to create positive outcomes as well.
In conclusion...
As consumers align their investments with their values and become increasingly vocal in demanding that corporations adhere to a moral standard of social and environmental responsibility, the field of CSR and ESG will likely continue to grow and expand.
No company can prosper nowadays if it is not involved in the community and the people around.
Companies need to take an active role in the community, beyond just making a profit. The positive benefits of this attempt include the company’s expansion and durability of its success.
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Frequently Asked Questions
What are the differences between CSR and ESG?
CSR is thought of as a qualitative approach that is driven by internal values and commitments, while ESG is considered quantitative and driven by external requirements (i.e., international frameworks and standards). While the two concepts have some key differences (see table above), it is important to note that both seek to set goals for and report out on social and environmental impacts (mitigating negative ones and enhancing positive ones).
What is the difference between CSR and corporate governance?
The concept of corporate governance is actually a sub-topic of CSR. It refers to the system of rules, practices, and processes by which a company is directed and controlled.
What is the difference between CSR and social responsibility?
Corporate social responsibility is the idea that businesses have a responsibility to benefit the society that they exist within. It is viewed as a form of social responsibility but is used specifically in the corporate business world.
Why is ESG (Environmental, Social and Governance) important for a business
ESG stands for “Environmental, Social and Governance.” ESG can be described as a set of practices (policies, procedures, metrics, etc.) that organizations implement to limit negative impact or enhance positive impact on the environment, society, and governance bodies.
In recent years, investors have become more aware of the importance of ESG criteria in their investment decisions. As a result, many businesses have begun to integrate ESG into their operations and business strategies.
Uncovering the meaning of ESG
What is the definition of ESG?
The ESG acronym stands for Environmental, Social and Governance. It refers to a set of non-financial measures that reflect a corporation’s impact on the environment and society.
ESG can be considered a subset of sustainability, which is defined by the UN World Commission on Environment and Development as ‘meeting the needs of present generations without compromising the ability of future generations to meet their own needs’.
Where does ESG come from?
The term ESG, or environmental, social and governance factors, was coined by the Global Compact in 2004.
However, the notion of incorporating all non-financial factors in business has been around for much longer; some might point to 2001 as the beginning of mainstream ESG with the launch of FTSE4Good indices.
While ESG influence has grown rapidly in recent years, sustainable investing is not a new concept.
Impact investing—the practice of making investments that generate not only financial returns, but also positive social and environmental impact—has its origins in religious groups who placed ethical parameters on their portfolios (refusing, for example, tobacco, alcohol, and gambling businesses).
How does ESG work?
ESG functions as a valuation technique that takes into account environmental, social and governance issues. ESG in the private sector is a set of criteria used to evaluate a company’s risks and practices.
The concept of responsible impact in business is not a new one, but has been gaining more widespread acceptance in the past few decades.
| Environmental factors | Social factors | Governance factors |
|---|---|---|
| Natural resource use | Workforce | Board independence |
| Carbon emissions | Human rights | Board diversity |
| Energy efficiency | Diversity | Shareholder rights |
| Pollution/waste | Supply chain | Management compensation |
| Environmental opportunities | Corporate ethics |
Source: ESG Rating providers, OECD, selected themes for illustration.
The importance of ESG for businesses and investors
Why adopt an ESG approach?
Risk Management and Adaptation for Investors
ESG covers issues that are, for the most part, longer-term considerations.
ESG risks are similar to other business risks in that it is important to understand, identify, quantify, and manage them, but certain ESG risks carry an added complication of being unpredictable.
For instance, the world is in uncharted territory with regards to climate and there is little relevant historical data to draw upon, since we are experiencing unprecedented changes. Thus, there is a need for investors to consider ESG criteria in their investment decisions.
Another characteristic of ESG risks is that they can be very costly.
To continue with the example of climate change, costs from climate change-related extreme weather ranks in the billions for each individual disaster. Therefore, while the cost of adaptation and mitigation can be substantial, the costs of uninsured losses far outweigh the cost of proactive mitigation.
Some examples of ESG risk management include assessing climate change risks to regular operations, assessing workplace culture, company diversity, etc.
ESG risk management supports sustainable, long-term growth by proactively evaluating potential issues; early knowledge of potential risk provides more time to adapt and develop cost-mitigating strategies.
The quality of a company’s ESG-related risk management is important to investors in weighing overall risk and return.
How to implement an ESG strategy?
Common ESG approaches for investors
There are four main ESG strategies in the field of investing that can help guide one’s understanding of ESG application:
- ESG integration refers to identifying ESG risks and implementing policies that will help set and achieve ESG goals. For investors, ESG integration often means defining the ESG criteria that will help assess and evaluate companies and their risk profiles. Note that ESG criteria can be tailored in-house to an individual company’s needs, or can be based on pre-set criteria from an extra-financial rating agency.
- Exclusionary screening rejects companies whose practices do not meet a certain standard.
- Inclusionary screening selects for companies that do meet a certain standard.
- Impact investing creates portfolios with the express aim of enacting positive, measurable environmental or social change, along with financial return (the desire for environmental and social benefit is built into the company purpose).
Most of the time, modern corporate ESG strategy will draw on elements of the four strategies, as each company tailors their ESG strategy to their unique strengths, weaknesses, opportunities, challenges, and timeline.
Guidelines for tailoring an ESG Strategy for companies
1. Identify the parties that will be responsible for implementation and oversight of the ESG program
Board involvement and managerial support is critical to creating value through ESG strategies. Active involvement by corporate boards can help guide and shape ESG best practices and reinforce the idea of the ESG strategy as a priority. Companies may also want to create an ESG team or committee, bring in staff experts, and/or write up a charter to stay on track.
2. Determine which ESG issues and data the company should focus on
Identifying specific ESG issues and metrics to focus on can be difficult, due to the diversity of ESG frameworks and lack of a universal standard. Nevertheless, ESG frameworks are systems meant to standardize the reporting of ESG metrics, so they are helpful starting points for figuring out key benchmarks and metrics. Some of the most commonly used ESG frameworks and standards include:
- Global Reporting Initiative (GRI)
- Carbon Disclosure Project (CDP)
- Climate Disclosure Standards Board (CDSB)
- Sustainability Accounting Standards Board (SASB)
- Task Force on Climate-related Financial Disclosures (TCFD)
- UN Principles for Responsible Investment (PRI)
- World Economic Forum (WEF) Stakeholder Capitalism Metrics
Some corporations may choose to rely directly on one of these frameworks; the benefit to that approach is that the benchmarks have already been established, and often already provide an ESG score based on fixed criteria that allows corporations to compare their performance with peers of similar scores.
If a company chooses to tailor its metrics, there are usually a few basic metrics that universally make sense for ESG performance (for example, energy and water consumption for Environmental considerations).
The selection of other metrics will depend on considerations such as: the priorities of the company’s stakeholders, the ESG goals that the company decided to focus on, the company’s ability to consistently gather good data on the topic, etc.
3. Set SMART goals
Once the contextual research has been completed, companies will need to set the goals that will become the company’s roadmap for ESG matters. Goals should be Specific, Measurable, Achievable, Relevant, and Time-Bound. These parameters will help set a clear timeline, and facilitate the tracking process.
4. Incorporate ESG practices into company culture
This step is rather long-term because it involves altering mindsets. Management and employees need to be trained and to buy into the ESG goals, and the company as a whole needs to continually work towards improving company culture and practices.
5. Produce ESG reports for stakeholders/investors/the public, and establish a consistent reporting procedure
In determining which ESG issues and metrics to report on, the company has already done part of the work.
Compiling the gathered information into an ESG report allows firms to spotlight their initiatives and successes, thereby demonstrating progress to their stakeholders.
Transparency through these reports also has the potential to boost employee morale; being able to see the impact of their day-to-day work can encourage even stronger buy-in for ESG goals.
ESG reports are often produced annually, but timeline and distribution method can vary from company to company; the key is to have a strong and consistent reporting process.
6. Ensure that public facing information is consistent with ESG disclosures
Companies must ensure that their ESG narrative aligns with the brand and the company’s vision and future direction.
Lip service and greenwashing without evidence to back up claims of adherence to ESG factors is arguably worse than doing nothing, because a lack of authenticity can erode consumer trust and do lasting damage to the company’s reputation.
The need for ESG only seems to be growing as society enters unprecedented times: climate change, protests and social upheaval, increasing technological capabilities, the ongoing COVID-19 pandemic.
The lack of existing data on the situations that we now face make clear a need for frameworks that can quantify and mitigate unpredictable risks. ESG strategies can help meet those needs, while providing some guidelines on how to build more resiliency into the corporate universe.
To conclude...
In conclusion, no company can prosper nowadays if it is not involved in the community and the people around.
Companies need to take an active role in the community, beyond just making a profit. The positive benefits of this strategy include the company’s expansion and durability of its success.
So, what are you waiting for? Start implementing ESG today!
And this is where we can help:
If you want to succeed in your sustainable journey… Save time, get organized, and stay compliant with our tool!
Thanks to our AI, apiday provides you with a simple and efficient process for your data collection, verification, reporting, and certification.
Get your organization started and book a call with our ESG experts!
Frequently Asked Questions
What is ESG?
ESG stands for Environmental, Social and, Governance, the factors companies integrate as part of their business strategy.
Why is ESG important?
Companies should be concerned with ESG because it helps them do business in a way that is more consistent and aligned with their values and their stakeholders’ expectations. This approach minimizes risk and can help them avoid reputational damage. A company’s ESG performance also affects its bottom line, its ability to secure funding or retain employees.
What is included under ESG?
The “E” captures energy efficiencies, carbon footprints, greenhouse gas emissions, deforestation, biodiversity, climate change and pollution mitigation, waste management and water usage.
The “S” covers labor standards, wages and benefits, workplace and board diversity, racial justice, pay equity, human rights, talent management, community relations, privacy and data protection, health and safety, supply-chain management and other human capital and social justice issues.
The “G” covers the governing of the “E” and the “S” categories—corporate board composition and structure, strategic sustainability oversight and compliance, executive compensation, political contributions and lobbying, and bribery and corruption.