Businesses are increasingly being confronted with a new imperative: the need to balance economic success with environmental, social, and governance (ESG) responsibilities.
The growing demand for corporate sustainability is driven by a variety of factors including evolving regulatory requirements, rising societal expectations, and the need to address urgent global challenges such as climate change and social inequality.
When building a corporate sustainability program, it’s important to understand the different methodologies your business can use to drive impactful outcomes. However, with a variety of approaches and nuanced terminology, it can be confusing to know where to begin.
That’s why we’ve created this article to break down the following questions to help you get off to a clear start:
What is Environmental, Social, Governance (ESG)?
Environmental, Social, Governance (or ESG) is a strategic plan or system incorporated into business operations, decision-making, and risk management.
The "E" stands for environmental considerations, looking at how a company performs as a steward of the natural environment, and includes factors like carbon emissions, waste management, energy efficiency, and conservation practices.
The "S" signifies social factors, which refer to how a company manages relationships with employees, suppliers, customers, and the communities where it operates, and covers areas like labor practices, diversity, human rights, and consumer protection.
The "G" refers to governance, which involves a company's leadership, executive pay, audits, internal controls, shareholder rights, and transparency in its operations.
What is the difference between ESG, CSR, SDG, and TBL?
There’s several terms that fall under the umbrella of corporate sustainability, and it can be confusing to keep them all straight. However, it’s important to understand the difference in program types so you can effectively communicate your vision and frame your goals.
Common corporate sustainability acronyms you may come across include ESG, CSR, SDG, and TBL. The good news is that these different types of sustainability programs share the goal of integrating ethical, social, and environmental considerations into business practices, but they do so from distinct angles.
ESG
Environmental, Social, and Governance (ESG) program, as previously stated, focuses on three core areas of a business's impact: the environment, social relations, and corporate governance. It is an investment-focused approach that examines these elements to make decisions and assessments about a company's future performance and ethical standing. ESG is often seen as a risk management approach, assessing potential future risks and liabilities, and is used by investors to identify companies with business practices that are sustainable and ethical.
An example of a company with an ESG program is Siemens. Siemens' strategy includes a wide range of ESG goals, such as reducing emissions, improving resource efficiency, and improving their business through diversity.
CSR
Corporate Social Responsibility (CSR) is a self-regulating business model that helps a company to be socially accountable to itself, its stakeholders, and the public. It's a more traditional way for businesses to contribute to the societal good by giving back to the community and making charitable donations. It covers aspects such as philanthropy, volunteer efforts, and ethical labor practices. The main difference between ESG and CSR is that CSR does not necessarily tie directly into the financial performance of a company.
An example of a company that uses a CSR framework is Microsoft. The company has developed comprehensive CSR programs focusing on areas such as digital inclusion, sustainability, and accessibility.
SDG
Sustainable Development Goals (SDG) are a collection of 17 global goals set by the United Nations General Assembly in 2015 for the year 2030. They include goals like no poverty, zero hunger, quality education, gender equality, clean water and sanitation, and more. Businesses often align their sustainability strategies with SDGs to contribute to global efforts to solve these societal and environmental challenges. It provides them with a universally accepted framework to guide their sustainability efforts.
An example of a company aligned with SDGs is Legos. Legos is supporting inclusive and equitable education as well as responsible consumption and production, which are two of the 17 global goals.
TBL
Triple Bottom Line (TBL), also known as PPP (People, Planet, Profit), is a sustainability framework that proposes that businesses should not solely focus on profit but also consider their impacts on people (social) and the planet (environmental). The key difference between TBL and the others is that it explicitly puts a company's social and environmental impact on equal footing with its economic performance. The triple bottom line is a holistic approach to measuring a company's performance and emphasizes a company's responsibility towards both its stakeholders and the environment.
An example of a company with a Triple Bottom Line (TBL) approach is Patagonia. Patagonia has built its reputation on a commitment to environmental sustainability, fair labor practices, and corporate transparency, striving for a balance of profits, planet, and people.
Why should my business care about building an ESG program?
In recent years, ESG programs have gained momentum in the business world due to increasing regulatory pressures, evolving customer expectations, and the rising influence of socially conscious investors.
Investors and stakeholders are increasingly using ESG metrics as a lens to evaluate a company's financial performance, risk profile, and strategic direction. They recognize that companies with strong ESG programs are often better positioned to mitigate risks, seize opportunities, and drive long-term value creation. In fact, as of 2020, 88% of publicly traded companies and 67% of privately-owned companies had established ESG Initiatives.
Therefore, a well-implemented ESG program is more than just a corporate sustainability initiative; it is an integral part of the business strategy that can impact:
New Customer Acquisition
Today's consumers are increasingly concerned about the environmental and social impact of the products and services they purchase. In fact, 76% of consumers say they will stop buying from companies that treat the environment or people poorly, while 80% say that companies should be actively shaping ESG initiatives.
By demonstrating a commitment to sustainability, ethical practices, and good governance, a company can strengthen its brand image, build trust with consumers, and ultimately acquire new customers.
Company Culture
An ESG program can significantly enhance a company's culture and improve employee engagement. Many employees, particularly younger generations like Millennials and Gen Z, prefer working for companies that are socially and environmentally responsible.
According to a 2023 study by Deloitte, businesses can expect ESG considerations to have an influence on their recruitment efforts and employee retention. Approximately 55% of the participants stated that they research companies' environmental practices and impact before accepting a job, and over 40% mentioned that they have either switched jobs or intend to do so in response to climate-related concerns.
By embedding ESG values into the company's culture, businesses can attract and retain talent, foster a sense of purpose among employees, and boost productivity. Employees who feel that their work contributes to positive social and environmental outcomes are often more motivated, engaged, and committed to their jobs.
Cost Savings
From a financial standpoint, an ESG program can lead to both cost savings and potential revenue generation. Implementing environmentally-friendly practices, for example, can result in significant savings through improved energy efficiency, waste reduction, and lower resource consumption.
What are examples of ESG initiatives?
There are many types of sustainability programs that you may consider incorporating into your company's sustainability portfolio. Here are some examples of programs along with specific initiatives within each program that can be cost-effective and impactful:
Energy Efficiency
Energy efficiency programs focus on reducing energy consumption and increasing efficiency in buildings and operations. Some examples of initiatives within this program include:
Conducting energy audits to identify areas of inefficiency and implement energy-saving measures, such as upgrading lighting, HVAC systems, and insulation.
Implementing a "smart" building management system that automatically adjusts energy use based on occupancy and other factors.
Encouraging employees to adopt energy-saving behaviors, such as turning off lights and electronics when not in use.
Renewable Energy
Renewable energy programs focus on generating energy from renewable sources, such as wind and solar power. Some examples of initiatives within this program include:
Installing solar panels or wind turbines on company buildings or properties.
Purchasing renewable energy credits or entering into power purchase agreements with renewable energy providers.
Encouraging employees to use electric vehicles and providing charging stations.
Carbon Footprint Reduction
Carbon footprint reduction programs focus on reducing greenhouse gas emissions from company operations and supply chains. Some examples of initiatives within this program include:
Reducing travel-related emissions by promoting telecommuting, using video conferencing, and encouraging employees to take public transportation or use alternative transportation options.
Sustainable Supply Chain
Sustainable supply chain programs focus on promoting ethical and sustainable practices throughout the supply chain. Some examples of initiatives within this program include:
Implementing sustainable sourcing policies and working with suppliers to reduce environmental impacts and promote ethical labor practices.
Reducing packaging waste by implementing more sustainable packaging options and encouraging suppliers to do the same.
Conducting supplier audits to assess environmental and social performance.
Waste Reduction, Recycling, and Composting
Waste reduction and recycling programs focus on reducing waste generation and increasing recycling rates. Some examples of initiatives within this program include:
Implementing composting and recycling programs in company facilities and promoting recycling and composting among employees.
Reducing waste generation by implementing more sustainable product design and packaging options.
Running a supply chain audit of your manufacturing or production site to identify areas to reduce waste.
Employee Wellness
Employee wellness programs focus on promoting health and well-being among employees. Some examples of initiatives within this program include:
Offering wellness programs that encourage healthy eating, physical activity, stress reduction, and work-life balance.
Providing incentives for employees who adopt healthy behaviors.
Community Engagement
Community engagement programs focus on building relationships with local communities and addressing social and environmental issues. Some examples of initiatives within this program include:
Partnering with local organizations to address social and environmental issues, such as promoting clean energy, improving air quality, and reducing waste.
Engaging with local stakeholders to understand community needs and concerns and address them through company operations.
Supporting local charities and community organizations through philanthropic donations and volunteerism.
Diversity, Equity, and Inclusion
Diversity, equity, and inclusion programs focus on promoting diversity, equity, and inclusion in the workplace and beyond. Some examples of initiatives within this program include:
Implementing policies and programs such as diversity and inclusion training, mentorship programs, and employee resource groups.
Engaging with diverse communities and stakeholders to better understand their needs and perspectives.
At CompostNow, we're committed to providing services that check the boxes for multiple programs listed above. For example, while the core benefit of our service is Waste Diversion, we have onboarding and training programs to encourage Employee Engagement; we track and share data for every service, so whether your running an audit to reduce costs or just trying to reduce your Carbon Emissions, you can have access to reliable data; and our Garden Partner Program shares the compost your business generates with local garden and farm partners at no cost to the growers, so you're supporting Community Engagement and Diversity, all through the simple act of composting with a service provider.
How do I select ESG programs for my business?
In general, the most effective ESG programs are those that align with the company's values and goals, engage employees and stakeholders, and can demonstrate a clear return on investment. When evaluating initiatives, it's important to consider the potential impact and cost-effectiveness of each program, as well as any potential risks and challenges.
Some additional considerations for building a sustainable portfolio might include:
Identifying key performance indicators (KPIs) to track progress and measure success. KPIs could include metrics such as greenhouse gas emissions, energy consumption, water use, waste diversion, employee engagement, and community engagement.
Establishing a sustainability governance structure that includes a cross-functional sustainability team, executive sponsorship, and regular reporting to senior leadership and stakeholders.
Engaging stakeholders throughout the process, including employees, customers, investors, and local communities, to ensure that sustainability initiatives align with their needs and priorities.
Determining how data collection and data transparency will be integrated into the selected programs and initiatives.
Ultimately, building a corporate sustainability portfolio requires a strategic and integrated approach that considers the entire spectrum of sustainability issues and opportunities, and involves collaboration across the organization and with external partners.
By selecting the right mix of sustainability initiatives and implementing them effectively, companies can not only achieve their goals, but also generate business value and create a positive impact on society and the environment.
Conclusion
In an era marked by increasing global challenges and societal awareness, the importance of corporate sustainability programs like ESG, CSR, SDG, and TBL cannot be overstated. These frameworks serve as a testament to a company's commitment to operate responsibly and ethically, balancing profitability with the well-being of people and the planet.
Companies embracing corporate sustainability programs are better positioned to meet the evolving expectations of consumers, employees, and investors. Through these efforts, they are not only contributing to global sustainability but also enhancing their own long-term resilience and success.
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