The Future of ESGThe Future of ESGThe Future of ESGThe Future of ESG
  • Who we are
  • What we do
  • Who we work with
  • News and views
  • Get in touch
✕



Reete Rool
Sustainability Analyst

The rising popularity of ESG investment creates a clear business case for sustainability.

 
 
ESG Blog Pt2 Header-3
 
 

The Potential of the ESG industry

Despite its current shortcomings, ESG could in fact be an effective tool for advancing towards a more sustainable world. Though the ESG industry grew out of the need to provide investors with a more accurate measure to assess a company’s performance, shareholders are not the only party to be interested in evaluating corporate sustainability. Mandatory and standardised ESG reporting could decrease the information imbalance between companies and their stakeholders as well as introduce balanced disclosure of both positive and negative impacts – an issue which the current voluntary reporting frameworks have been unable to successfully address.

Most importantly however, the rising popularity of ESG investment creates a clear business case for sustainability. Despite the talk about switching to “stakeholder capitalism”, a cost-benefit analysis is inevitably still part of any company’s decision to address sustainability issues. While carbon emissions reductions can be tied to cost reductions then social sustainability actions, such as increasing board diversity, are much harder to quantify to financial benefits. Therefore, the pressure on ESG risk management can push companies to address sustainability in a more holistic manner and increase focus on social sustainability, which has so far been playing second fiddle to environmental issues.

Aside from the wider societal benefits, integration of ESG considerations into the company’s strategy is advantageous for a variety of reasons:   

  1. Competitive advantage – whether or not effective ESG risk management brings about higher financial returns is still a matter of debate (though there are indications that it might be the case), but regardless, given the high interest of investors and regulators in ESG, good ESG performance can be a source of competitive advantage. Consideration of ESG risks and opportunities in the company’s strategy can help stay ahead of regulations and make the company more attractive to investors as well as clients, since there is increased focus on ethical spending.
  2. Improved risk management – while ESG assessments should not be central to the company’s sustainability strategy, they do offer opportunities to learn about the potential risks the company is facing due to the changing climate. Carrying out TCFD and CDP assessments, for example, can help a company to map out its most imminent risks and define prevention and mitigation measures. Taking a proactive approach to ESG issues enables to increase operational resiliency.
  3. Increased stakeholder engagement – ESG assessments can be effective tools for communicating the company’s sustainability efforts to the wider group of stakeholders. Their value lies in compressing the complex concept of sustainability into a numerical value or a grade that is easily communicable and thereby enables to engage employees and customers who are not perhaps used to discussing the intricacies of the company’s sustainability performance on a daily basis. They also provide a snapshot view of the company’s progress and give an indication of the end goal that the company needs to work towards.
  4. Higher quality sustainability and ESG reports - as sustainability has become a buzzword and companies are attracting accusations of greenwashing, ESG standards and frameworks can guide companies on how to substantiate their sustainability claims with high-quality sustainability data and provide balanced reporting on both positive and negative impacts of their operations. ESG performance is now considered to be a factor affecting the company’s ability to attract and retain talent, so effective communication on ESG issues is a must.
  5. Measure of progress – we currently lack effective tools for benchmarking companies’ sustainability performance, ESG ratings and standards can give an indication to stakeholders on how the company is performing on certain sustainability issues. However, while the ESG standards can be used as yardsticks to evaluate whether the company is on the right track, they are yet to be as matured to accurately take into account all aspects of a company’s sustainability performance, and therefore they should not be treated as the be-all and end-all of sustainability performance and strategy.

Moving towards standardisation

The ESG ratings, standards and frameworks industry is not yet mature, rendering ESG reporting rather challenging, however steps are being taken to increase standardisation and transparency. The EU is in the process of developing the Corporate Sustainability Reporting Directive (CSRD) in the aim of creating higher standards to ESG and sustainability reporting, the International Sustainability Standards Board (ISSB) was created last year in the hope of establishing a global baseline for sustainability reporting. The US Securities and Exchange Commission (SEC) has also recently unveiled their proposal for climate disclosures, with disclosures on corporate board diversity, human capital management and cybersecurity risk governance still in the works.

The field of ESG reporting is developing rapidly and the discussion on the advantages and disadvantages of upcoming developments will need to be left into another blog post. What is clear, however, is that setting higher standards for ESG reporting is of crucial importance as ESG investment continues to reach new heights with Bloomberg estimating ESG assets to exceed $50trn by 2025[i]. If the underlying assumptions of these 600+ ESG ratings, standards and frameworks are erroneous, then we are misallocating enormous amounts of resources and considering that the 2050 deadline for achieving net-zero is approaching with neck-breaking speed, we have little margin for error.

[i] https://www.bloomberg.com/company/press/esg-assets-rising-to-50-trillion-will-reshape-140-5-trillion-of-global-aum-by-2025-finds-bloomberg-intelligence/

 

Further reading:

Chatterji, A. K. et al. (2016) ‘Do ratings of firms converge? Implications for managers, investors and strategy researchers’, Strategic management journal, (8), pp. 1597–1614.

Eccles, R. G., Lee, L. E. and Stroehle, J. C. (2020) ‘The Social Origins of ESG: An Analysis of Innovest and KLD’, Organization and Environment, 33(4), pp. 575–596

Kölbel, J. F. et al. (2020) ‘Can Sustainable Investing Save the World? Reviewing the Mechanisms of Investor Impact’, Organization and Environment, 33(4), pp. 554–574

Ştefănescu, C. A., Tiron-Tudor, A. and Moise, E. M. (2021) ‘Eu non-financial reporting research – insights, gaps, patterns and future agenda’, Journal of Business Economics and Management, 22(1), pp. 257–276.

 

Veenstra, E. M. and Ellemers, N. (2020) ‘Esg indicators as organizational performance goals: Do rating agencies encourage a holistic approach?’, Sustainability (Switzerland), 12(24), pp. 1–15.

 
 
Support Global Goals and improve business performance
 

Related posts

November 2, 2022

What is “Sustainable Development”?


Read more
August 3, 2022

Mainstreaming Sustainability


Read more
June 6, 2022

How Fair is Fair Trade?


Read more

Stay in touch

LINKEDIN

Trustpilot

© TBL Services Ltd 2023 | The Gordon Manley Building, Lancaster University, Lancaster, LA1 4YQ | Co No. 10499126 | Vat No. 242 5277 15

       

      Share

      What is this?

      Sharing your sustainability progress isn’t only a way to engage staff, customers and suppliers. It can be a powerful PR tool. It can help you stay one step ahead of your legal requirements. And it can help you with other ESG ratings like CDP, EcoVadis and Support the Goals. We’ll help you spread the word about the good you do.

      Sustainability reporting

      Our standalone Reporting service gives you a comprehensive 20-page (approx.) report to share with staff, customers, investors and the press. Comprising your priority goals, commitments, case studies and more, and designed to match your corporate branding, it’s the simplest way to bring all your sustainability work together.

      Find out more

       

      Measure

      What is this?

      You’ll want to measure the results of your actions to assess progress towards your commitments. But what should you measure and how should you do it? When you don’t have the in-house tools, capabilities or expertise, we do.

      Our support package can help

      It’s not always easy to measure the impact of sustainability actions. There’s a clear formula for carbon reporting, for example, but how do you assess social impact? Where should the data come from? What are the accepted reporting standards? And how should you display your results to ensure people understand it? We and our partners can help you measure the impact of the actions you take.

      Find out more

       

      Act

      What is this?

      You take the next steps on your sustainability journey. We’ll provide the guide and the map.

      Our support package can help

      It’s not easy figuring out where to go next on your sustainability journey, or how to get there.

      With a TBL support package, you get the expertise, the tools and the guide, and you follow a road we’ve already travelled – many times. It makes setting a direction easier. You follow established best practice so there are fewer dead ends. And with our tracking tool, you’ll always have a clear view of progress made and next steps.

      Find out more

       

      Commit

      What is this?

      Once you’ve identified the sustainability goals that matter most to you, you’ll want to do something about them.

      Commit is about setting measurable targets for meeting your highest priority goals. It’s about making the credible, impactful, achievable commitments everyone can buy into. And it’s about agreeing governance, so the right people are accountable for achieving the commitments you agree.

      What might this look like?

      For example:

      • Gender Equality (Goal 5): 50/50 gender split at board level by 2025
      • Affordable and Clean Energy (Goal 7): Use only clean energy to power offices by 2030
      • Climate Action (Goal 13): Net zero across the value chain by 2035

      Our support package can help

      A TBL support package gives you access to expert advice that can help you set environmental and social commitments including net zero and science based targets.

      Find out more

      Employee Engagement

      If we want a more sustainable world, everyone needs to get involved. That includes your employees. Our experts help you do that in a way that builds understanding and encourages involvement.

      We will:

      • Help your employees understand how to be more sustainable at work and at home
      • Help your people understand their personal carbon footprint, your sustainability strategy and the personal difference they can make; and
      • Make it easy to visualise and update progress, with apps and dashboards that help you review and document your actions simply

      Talk to a TBL expert

       

      Identify

      What is this?

      How do you know which sustainability/ESG issues to target, and which to tackle first? Identify is about exploring the issues that matter most to your organisation and finding where your actions can make the biggest impact.

      How we’ll support you

      Our lively half-day workshop explores the issues through the lens of the Global Goals. You’ll end the session with a clear, visual presentation of low, medium and high priority sustainability goals, and get clear guidance on what to do next.

      Find out more

       

      Employee Engagement

      If we want a more sustainable world, everyone needs to get involved. That includes your employees. Our experts help you do that in a way that builds understanding and encourages involvement.

      We will:

        • Help your employees understand how to be more sustainable at work and at home
        • Help your people understand their personal carbon footprint, your sustainability strategy and the personal difference they can make; and
        • Make it easy to visualise and update progress, with apps and dashboards that help you review and document your actions simply

      Talk to a TBL expert

       

      Circular Economy

      A circular economy model designs out waste from your business, keeping products and materials in use. Operating a circular economy model can cut costs. Many organisations are now using it to create entirely new revenue streams.

      Our experts will show you how, by adapting your processes, you can be part of the circular economy – and do it in a way that’s the right ‘fit’ for your organisation.

      Talk to a TBL expert

       

      Policies & Standards

      For compliance. To meet the standards of a ratings agency. Or simply to be a responsible business. When you need the right sustainability policies and standards, we’ll help you develop ones that are engaging, easy to understand and relevant to your business.

      Talk to a TBL expert

       

      Training

      If we’re to create a more sustainable world, everyone needs the skills and understanding to be able to play their part.

      Every day, our advisers are helping senior teams understand sustainability within their organisation. They’re teaching suppliers to buy more sustainably or building the skills of new in-house sustainability managers. And they’re helping your employees become more carbon literate so they understand what carbon is and the personal difference they can make in work and at home.

      Build the skills and understanding of your people.

      Talk to a TBL expert

       

      Reporting & Frameworks

      Reporting the environmental and social impact of your business is an essential part of governance, openness and transparency, but with so many frameworks, it can be difficult to know which should demand your focus.

      Our experts will help you meet the mandatory requirements of regulatory frameworks like SECR. They’ll help you prepare for soon-to-be-mandatory frameworks such as the Task Force on Climate-related Finance Disclosure (TCFD).

      And when you’re exploring new, voluntary accreditations with ESG, DJSI or Sustainalytics, or want to improve your ranking with a supply chain framework such as EcoVadis or Support the Goals, they’ll help you choose the framework best suited to your business, boost your rating and gain the badges.

      Talk to a TBL expert

       

      Science-based Targets

      Setting science-based emissions reduction targets consistent with Paris agreement-aligned pathways is how your organisation moves closer to net zero. We’ll help you establish your current baseline, then help you set the targets (including Scope 3) that give your actions direction and purpose.

      And as always with our experts, we’ll make the journey easy.

      Talk to a TBL expert

       

      Carbon Reporting

      For any large organisation, reporting your Scope 1 & 2 emissions is a regulatory requirement. You meet that requirement by making a Streamlined Energy & Carbon Reporting (SECR) statement part of your annual report.

      Our experts can help you with that – and they can help you go further. Our simple, powerful dashboards will make understanding your carbon footprint easy (whether you’re required to report on it or not). And when you want to take the next step in understanding your indirect (Scope 3) emissions, we’ll help you do that too.

      Talk to a TBL expert

       

      Sustainable Materials

      Increasingly, your clients and customers demand sustainability not just from the way you operate but from the materials you use.

      Our experts in materials and packaging help you understand how sustainable your existing products are. Then we recommend alternatives that deliver improved sustainability whilst protecting production costs and product quality, and keeping customers happy.

      Talk to a TBL expert

      Circular Economy

      A circular economy model designs out waste from your business, keeping products and materials in use. Operating a circular economy model can cut costs. Many organisations are now using it to create entirely new revenue streams.

      Our experts will show you how, by adapting your processes, you can be part of the circular economy – and do it in a way that’s the right ‘fit’ for your organisation.

      Talk to a TBL expert

      Sustainable Materials

      Increasingly, your clients and customers demand sustainability not just from the way you operate but from the materials you use.

      Our experts in materials and packaging help you understand how sustainable your existing products are. Then we recommend alternatives that deliver improved sustainability whilst protecting production costs and product quality, and keeping customers happy.

      Talk to a TBL expert

      Science-based Targets

      Setting science-based emissions reduction targets consistent with Paris agreement-aligned pathways is how your organisation moves closer to net zero. We’ll help you establish your current baseline, then help you set the targets (including Scope 3) that give your actions direction and purpose.

      And as always with our experts, we’ll make the journey easy.

      Talk to a TBL expert

      Carbon Reporting

      For any large organisation, reporting your Scope 1 & 2 emissions is a regulatory requirement. You meet that requirement by making a Streamlined Energy & Carbon Reporting (SECR) statement part of your annual report.

      Our experts can help you with that – and they can help you go further. Our simple, powerful dashboards will make understanding your carbon footprint easy (whether you’re required to report on it or not). And when you want to take the next step in understanding your indirect (Scope 3) emissions, we’ll help you do that too.

      Talk to a TBL expert

      Reporting & Frameworks

      Reporting the environmental and social impact of your business is an essential part of governance, openness and transparency, but with so many frameworks, it can be difficult to know which should demand your focus.

      Our experts will help you meet the mandatory requirements of regulatory frameworks like SECR. They’ll help you prepare for soon-to-be-mandatory frameworks such as the Task Force on Climate-related Finance Disclosure (TCFD).

      And when you’re exploring new, voluntary accreditations with ESG, DJSI or Sustainalytics, or want to improve your ranking with a supply chain framework such as EcoVadis or Support the Goals, they’ll help you choose the framework best suited to your business, boost your rating and gain the badges.

      Talk to a TBL expert

      Training

      If we’re to create a more sustainable world, everyone needs the skills and understanding to be able to play their part.

      Every day, our advisers are helping senior teams understand sustainability within their organisation. They’re teaching suppliers to buy more sustainably or building the skills of new in-house sustainability managers. And they’re helping your employees become more carbon literate so they understand what carbon is and the personal difference they can make in work and at home.

      Build the skills and understanding of your people.

      Talk to a TBL expert

       

      Strategy Development

      You know you need a sustainability strategy – but what next? What’s right for the size and nature of your business? And how can you ensure it drives the right actions?

      We’ll help you set a strategy that’s robust and comprehensive because it uses the Global Goals as a framework. And we’ll ensure it’s a good ‘fit’ for your organisation, helping you align people, planet and profit.

      Talk to a TBL expert

       

      Policies & Standards

      For compliance. To meet the standards of a ratings agency. Or simply to show you’re a responsible business. When you need the right sustainability policies and standards, we’ll help you develop ones that are engaging, easy to understand and relevant to your business.

      Talk to a TBL expert

       

      Social Impact

      Your social impact is the effect your organisation has on people and communities as a result of its activities and policies.

      You’ll already be doing good things in your community. Measuring the effect of your charitable work, volunteering, community outreach projects and more is important because it’s how you explain the difference you’ve made to your employees, customers and investors.

      We help you understand how to measure and improve your social impact.

      Talk to a TBL expert

       

      Supply Chain

      Almost 90% of your environmental and social impact exists not in your operations, but in the goods and services you buy from your suppliers. So if you want to make a real impact with your sustainability efforts, your supply chain needs to be involved. Our advisers can help. They will:

      • Help you understand more about your supply chain and the risks and opportunities it presents
      • Profile and assess suppliers so you have a baseline from which to work and can measure improvement
      • Work with you to develop supplier codes of conduct to compel your supply chain to support your sustainability efforts
      • Educate your suppliers on ways to improve

      Talk to a TBL expert

      Marketing & Communications

      You’ve done great things. Now you need to share them. Communicating your successes is a powerful PR boost for your brand. It’s often a simple way to improve your ratings framework score. And it can help others to understand the importance of the work you’re doing and inspire them to get involved.

      Our brand, marketing and communications specialists will help you spread the word with a standalone sustainability report that brings all your ESG efforts together in one document. In addition, we can help you with:

      • Formal sustainability reporting
      • Video content
      • Dedicated web page development
      • Social media
      • Building sustainability into your brand

      Talk to a TBL expert

       

      Strategy Development

      You know you need a sustainability strategy – but what next? What’s right for the size and nature of your business? And how can you ensure it drives the right actions?

      We’ll help you set a strategy that’s robust and comprehensive because it uses the Global Goals as a framework. And we’ll ensure it’s a good ‘fit’ for your organisation, helping you align people, planet and profit.

      Talk to a TBL expert

       

      Social Impact

      Your social impact is the effect your organisation has on people and communities as a result of its activities and policies.

      You’ll already be doing good things in your community. Measuring the effect of your charitable work, volunteering, community outreach projects and more is important because it’s how you explain the difference you’ve made to your employees, customers and investors.

      We help you understand how to measure and improve your social impact.

      Talk to a TBL expert

       

      Supply Chain

      Almost 90% of your environmental and social impact exists not in your operations, but in the goods and services you buy from your suppliers. So if you want to make a real impact with your sustainability efforts, your supply chain needs to be involved. Our advisers can help. They will:

      • Help you understand more about your supply chain and the risks and opportunities it presents
      • Profile and assess suppliers so you have a baseline from which to work and can measure improvement
      • Work with you to develop supplier codes of conduct to compel your supply chain to support your sustainability efforts
      • Educate your suppliers on ways to improve

      Talk to a TBL expert

       

      Marketing & Communications

      You’ve done great things. Now you need to share them. Communicating your successes is a powerful PR boost for your brand. It’s often a simple way to improve your ratings framework score. And it can help others to understand the importance of the work you’re doing and inspire them to get involved.

      Our brand, marketing and communications specialists will help you spread the word with a standalone sustainability report that brings all your ESG efforts together in one document. In addition, we can help you with:

      • Formal sustainability reporting
      • Video content
      • Dedicated web page development
      • Social media
      • Building sustainability into your brand

      Talk to a TBL expert