Increased Reporting, Accountability Important in Meeting ESG Goals

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Managing and tracking environmental, social and governance (ESG) objectives are an increasing focus across industry and supply chains as businesses weigh growing demand to disclose results and improve on the impact of those initiatives. An ISN analysis that included responses from 11,000 contractors and suppliers shows the current ESG risks and and what companies can do as they attempt to tackle those concerns.

While nearly 60% of the companies ISN surveyed have implemented an environmental management system (EMS) to improve on sustainability performance, fewer than 7% of the contractors and suppliers actively tracked their environmental impacts, according to the report.

One way companies can address this shortfall, ISN says, is to create is to develop an annual sustainability report. That way companies can be transparent by stating what their sustainability targets are and explain how they plan to meet those goals while reporting data on their ESG performance.

Supply chains have a significant impact on a company’s ESG performance and the UN Global Compact ranks supply chain as the biggest challenge to improving sustainability. According to the Greenhouse Gas Protocol’s Corporate Value Chain Standard it is estimated that supply chain activities can account for up to 80% of business’ overall emissions.

As a result, the ISN report says companies should make material assessments to determine the greatest ESG impacts to the businesses. Common assessments listed by ISN include the Global Reporting Initiative, the Task Force for Climate Related Financial Disclosures and the Value Reporting Foundation’s SASB Standards. Additionally, there are increasing regulatory requirements for ESG data disclosures in many regions. The US Securities and Exchange Commission also has weighed heavily on the top in recent months.

By putting reporting methods in place companies will be better able to understand the impact of supply chains and be in a better position to mitigate its risks, the report says.

Even though the scope of environmental issues can vary among businesses, there are areas of impact across industry. These topics include greenhouse gas emissions, renewable energy sources, water conservation polices and waste management strategies.

The survey shows many businesses have work to do in the area.

Despite 70% of contractors and suppliers saying they have waste management policies in place, many fall behind in all the other areas. According to the ISN survey, 19% of contractors and suppliers have a plan in place to reduce their greenhouse gas emissions. About 10% of those surveyed say they have a plan to advance or further utilize renewable energy sources and 27% say they have a plan for reduce, reuse or conserve water in their operations.

In order to make improvements in these areas, the ISN report says companies need to identify their environmental risks and make sure they are managed at all levels. To do this they can review written EMS programs, monitor environmental citations and configure an evaluation tailored to their specific scope of work.

Improving on ESG initiatives can reap big benefits for companies. Online education company Get Smarter recently found that companies with high ESG ratings consistently outperform the market long term while attracting customers that are looking for environmentally friendly businesses.