ARTICLE
17 January 2023

An Introduction To ESG And Your Organisation

HC
Herrington Carmichael

Contributor

Herrington Carmichael is a full-service law firm offering legal advice to UK and international businesses. We work with corporate entities of all sizes from large PLCs through to start-up businesses.
In 2023, organisations are increasingly devoting resources to their environmental, social and governance (ESG) strategies so that they can make a positive impact...
UK Corporate/Commercial Law
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In 2023, organisations are increasingly devoting resources to their environmental, social and governance (ESG) strategies so that they can make a positive impact not just on the environment and society but on their stakeholders, employees and investors.

ESG is becoming an increasingly important factor amongst governments, investors and clients as climate change is at the forefront of society's consciousness. Businesses are needing to make significant changes quickly in order to conduct themselves in a way which benefits both the environment and the business itself. Each organisation's ESG strategy is going to look different

What is ESG?

As the name suggests, businesses usually break down ESG into three ways they consider their impact: environmental, social and governance. These three factors inform investors and other stakeholders.

Environmental:

This is an organisation's impact on the environment such as through physical climate risks. Organisations may consider their carbon footprint and pollution as part of ‘environmental' and work towards goals in line with their regulators or what their competitors and clients are doing in relation to environmental factors.

Social:

This measures how an organisation treats its employees and customers and forms part of the wider society.

Governance:

This is how an organisation operates in terms of its shareholder and board rights and internal controls.

What can ESG look like?

The impact and visibility of ESG will of course vary from company to company, given the different strategies used to implement it, the different visions of the directors and shareholders and the input and enthusiasm from all employees. However, a reduced carbon footprint, a happier workforce and a well organised internal structure may all be good indicators that a company is working hard to implement ESG practices.

Training:

There are a range of things that we can offer you, your board and your employees training on. We can help to review your supplier contracts to ensure they have appropriate ESG measures in place, with the ultimate goal of helping your company achieve net zero. We can also offer employment contract reviews and can look to suggest new employee initiatives. We have a dedicated corporate governance team, who are on hand to review your internal policies and controls.

Policies & procedures

We can run through ESG policies with you and help you to create a clear procedure of how these will be introduced, enforced and empowered throughout your company. These can range from the very minor, for example, only expensing employee meals if they are vegetarian thus lowering economic impact, to the more significant, such as offering a discount on electric vehicles as a company car.

Monitoring

It is important to make sure that the policies and procedures that you have put in place continue to be monitored, evaluated and updated as necessary. Monitoring performance and progress is a key way to measure success and will help to indicate which of your policies is generating the most impact.

Due diligence and reporting

ESG due diligence will deliver insights into how a company operates their ESG, including a review of the efficiency of their policies, their performance, any past statistics available and any improvements since this date. Due diligence reports should differentiate between each of the criteria: environmental issues, social issues and governance issues, whilst helping potential investors to mitigate risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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