In today’s blog, we will be discussing ESG factors which have been a growing consideration for businesses, investors and shareholders. We will be looking at the key points which make up the pillars of the ESG framework and the impact ESG has on the business world that surrounds us.

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The ESG framework refers to a group of non-financial metrics that guides businesses to evaluate the impact of the company’s risks and practices towards the environment, society and governance.

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The environmental criteria examines how a company safeguards the environment through its business practices. For instance, businesses establishing corporate policies on how to address the energy resources used by the company, the waste produced and its impact towards the climate as well as their intentions and actions towards reducing the environmental impact.

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Social criteria consider how the company manages relationships with employees, particularly on the employees’ health and safety as well as employment practices. These criteria also take into account the suppliers, customers and their data privacy, the communities where it operates and human rights.

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The “G” in ESG framework is the key to ensuring that the ESG practices are incorporated into the company culture and strategy. This calls for a top-down approach. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. This also includes the governance of the business in an environmentally and socially sustainable manner, supply chain of the organisation, corporate governance and risk management, and compliance.

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Additionally, the ESG framework integrates the concept of “green governance” which focuses on how a board approaches governance from the viewpoint of environmental issues that affect the company’s shareholders, customers, and other stakeholders.

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The board must ensure that their ESG goals are aligned to the brand as well as their vision and future directions. Entities will only be able to establish environmental and social structures when they have a strong foundation of governance structure and are able to integrate green governance concepts.

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A great example of a company that has been contributing towards building a more sustainable business is Ireland’s postal company, An Post. In 2021, they are the first postal company in the world to achieve zero emissions deliveries in all of Ireland's cities - Dublin, Waterford, Cork, Limerick, Galway, and Kilkenny, resulting in no tailpipe emissions or noise pollution. Apart from that, they have also contributed zero waste to landfills for 5th consecutive year in 2022.

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In terms of social contribution, An Post has supported Ukrainian refugees arriving in Ireland and collected over €2.1m in charitable donations for Ukraine and Creeslough through their Post Office network. To top it off, in 2022 they have also maintained zero gender pay gap for a second consecutive year. From these great achievements, An Post has portrayed great commitment in ensuring their business is contributing back to the environment and people. They definitely have strong governance structures that are able to be environmentally and socially responsible towards the communities they operate. In this case, An Post is a large company and requires mandatory sustainability reporting.

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However, this implementation should not be looked over by small entities where sustainability reporting remains to be optional. There is still a need to have a great level of awareness to implement ESG practices as small businesses play an important role too towards the people and environment.

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All in all, it is essential for every company to understand the holistic view of ESG’s impact on the long-term strategic goals of the companies. ESG strategy does not only help the environment but will provide a competitive advantage to the company. There are huge opportunities for companies that do it right.

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ESG practices will help entities in strengthening organisational value, attract more customers, generate superior returns over time, create new opportunities for employees and attracting future employees as well as gain investors' and shareholders’ confidence. Hence, focusing on sustainable development will be the essence of competitiveness and sustained success for businesses moving forward.

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Reach out to our team of experts for more information at info@cooneycarey.ie.