Contact
Offices
DRV Online
Search
Article
ESG
ESG stands for Environmental, Social and Governance. ‘Environmental’ refers to a company’s environmental impact, ‘social’ to how it deals with internal and external stakeholders (for example whether it has an HR policy of diversity and inclusion in place) and ‘governance’ to good governance. The term ESG is often used to describe the degree to which an organisation has embedded sustainability and CSR in its operations.
Published back in 1987, the United Nations report ‘Our Common Future’ provides a definition of sustainable development: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In 2015, the 17 Sustainable Development Goals (SDGs) were adopted, which have been endorsed by the UN member countries to serve as their compass.
All large companies as well as small and medium-sized listed companies will have a legal obligation to draw up a sustainability report. EU legislators have set requirements to be met by the report, which are laid down in the Corporate Sustainability Reporting Directive (CSRD). The obligation will be introduced in stages:
In the sustainability report, you must report your organisation’s impact on people and planet. Aspects to be covered include carbon emissions and workforce diversity. You must also demonstrate that you have drafted and implemented an ESG policy. That requires preparation. Setting to work early on defining a sustainability ambition and policy and identifying sustainability risks and opportunities is therefore of the essence. Talking of opportunities: Research has shown that companies that have implemented ESG particularly well are better off for it in terms of sales, profit and staff recruitment. These reasons, too, speak in favour of setting to work sooner rather than later.
Organisations pretending to be greener or more environmentally friendly than they really are will no longer get away with it. Such ‘greenwashing’ is especially risky for large organisations with many different stakeholders. Many companies have come to this realisation. And many companies now recognise the strategic importance of having an ESG policy in place. Organisations genuinely want to make a positive social and environmental impact, but frequently fail to understand just what is required of them: to embed this ambition in their core processes. Of course, you can start by making some social or ‘green’ improvements and continue from there to define an ESG ambition and policy. Importantly, however, your organisation should avoid the Seven Sins of Greenwashing.
A member of the UL Global Network and one of the largest independent testing and certification organisations, TerraChoice has defined the ‘Seven Sins of Greenwashing’.
| Sin | Description | |
|---|---|---|
| 1 | Sin of the hidden trade-off | A claim suggesting that a product is ‘green’ based on a narrow set of attributes without attention to other important environmental issues. |
| 2 | Sin of no proof | An environmental claim not substantiated by easily accessible supporting information or by a reliable third-party certification. |
| 3 | Sin of vagueness | A claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the consumer. |
| 4 | Sin of irrelevance | An environmental claim that may be truthful but is unimportant or unhelpful, such as ‘CFC-free’. |
| 5 | Sin of lesser of two evils | A claim that may be true within the product category but that risks distracting the consumer from the greater environmental impacts of the category as a whole, such as organic cigarettes. |
| 6 | Sin of fibbing | Environmental claims that are simply false. |
| 7 | Sin of worshipping false labels | A product that, through either words or images, gives the impression of third-party endorsement where no such endorsement exists. |
Corporate sustainability and corporate social responsibility (CSR) present major challenges for entrepreneurs in the real economy. Our unique ESG Framework helps organisations achieve their ESG goals. Not only is the framework easy to understand and implement, it also has the potential to bring about fundamental change in your organisation. We will be happy to tell you more about this service.