Sustainability: Environmental, Social, and Governance (ESG)

Understanding the environmental, social, and governance (ESG) issues of today’s business world are key to understanding the discussion of sustainability and climate change (a sub-topic of each ESG and sustainability). For example, a sustainable business that demonstrates strong ESG planning, will often include climate change risk management.

Today’s press informs that mounting pressure from the United Nations participants continues to build a focus on reducing greenhouse gas emissions. The UN’s 25^th Session of the Conference of the Parties (COP25) to the UN Framework Convention on Climate Change was held in Madrid from December 2 – 13. The U.S. filed a notification of withdrawal from the Paris Agreement on November 4, 2019. The U.S. State Department has announced it will continue to participate in ongoing climate change negotiations and meetings, such as COP25, to ensure a level playing filed that protects U.S. interests. Also, the UN released its report noting the emissions gap they observe that demonstrates the difference between amounts of carbon dioxide emitted now and lower levels predicted as necessary to stop global warming. The question being asked is whether there are missed opportunities to achieve GHG reduction goals.

Domestic and international companies are in the process of reviewing their ESG reports to assess last year’s accomplishments and in setting goals and action items for the new year of 2020 and beyond. Climate change and other sustainability concerns like waste management are clearly on the minds of many. There is no single formula for a well-developed ESG strategy and report, since each is as unique as the individual company about which the report speaks. There are common ESG themes, however.  The UN Sustainability Goals provide a convenient list of well-refined issues against which a company (or individual) can assess their opportunities and vulnerabilities. The goals set forth a number of environmental, social, and governance topics worthy of note to include: poverty, hunger, good health, education, gender equality, clean water, affordable and clean energy, decent work and economic growth, industry/innovation/infrastructure, reduced inequality, sustainable cities/communities, responsible consumption and production, climate action, life below water, peace and justice, and partnership to achieve the goal. These are the types of issues to consider when exploring ESG and sustainability. Consultation of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) can also assist. Keep in mind that there is no one gold standard metric against which to measure ESG ratings or accomplishments. The reason for that is simple, each company has a different complement of skills, talents, and opportunities or stated differently, ESG risks and solutions.

If you were to review a few ESG reports found on corporate websites, it will become apparent the differences and unique qualities of each reporting company. Geographic locations of operations can define the ESG goals. If operating in major metropolitan cities as opposed to emerging countries, the corporate responsibilities are quite varied. If manufacturing consumer products, packaging is an attractive target for reduction in waste. However, if manufacturing items used in the value chain, perhaps an ESG goal is managed through energy consumption during manufacturing or delivery of products. If providing medical services, the ESG goals can be energy, water, supply chain, waste, etc. Just as each of us possess capabilities and assets we can use to invest in our future, the same is true for companies. We must acknowledge the unique accomplishments and actively invite the benefits gained from a collective effort.

The final item listed by the UN Sustainability goals is partnership, meaning the efforts and benefits should be shared. We all must work together to achieve the change we need. All contributions must be welcomed to build the sense of common good.

Kathy G. Beckett is a partner working within the Environmental Practice Group of Steptoe & Johnson PLLC. Her office is located in Charleston, West Virginia.