An Introduction to ESG: Why it’s important

Many of these topics can be categorised into an Environmental, Social, or Governance concern, which is abbreviated as ESG. Each different section of ESG covers numerous issues for which companies need to make sure they are either compliant, or as a minimum working towards targets if they wish to maintain positive internal practices, output, and reputation. As a result, company investors are now particularly interested in these concerns, so companies need to make sure they are compliant.

Environmental

Environmental concerns can be equated to concerns regarding sustainability concerns and targets. These are the damages done to the environment, because of company activities. For example, to reduce environmental impact, companies could be looking to reduce their carbon footprint in line with the Paris Agreement. Companies then should ensure that their packaging can be disposed of in a sustainable manner, by investing in more sustainable or biodegradable materials. They need to ensure that waste is disposed of safely and that the materials which end up in landfills are ultimately reduced.

In short, if there is potential damage to the environment, alternative measures need to be explored, and targets should be set.

Social

This refers to the company’s ‘social responsibility.’ This can refer to the way companies interact with other parties. This can include how the organisation treats its internal employees, how they interact with their consumers, suppliers, and their stakeholders. Companies need to ensure the products they are releasing are of satisfactory quality, and fulfill their intended purpose, limiting the level of risk to consumers. They need to ensure their employees are working in a safe workplace towards a safe, compliant supply chain with effective risk management measures in place.

The ‘S’ in ESG is concerned with the company interacting with the rest of the world in a way that is safe, respectful, and compliant.

Governance

Governance is concerned with the way the company is run, and the structure of leadership. This encompasses issues such as diversity and equality on the director’s board. It would include whether the company is adhering to ethical practices, is free from corruption, and is compliant with acts such as anti-bribery.

The way a company is governed sets a standard for the rest of the company and demonstrates its commitment to positive and safe practices for its employees.

By taking measures to ensure your company is compliant with Environmental, Social, and Governance concerns, and taking measures to achieve targets in these areas, you can have confidence that your company has a positive output, and is a safe, compliant place for your employees to work. You can also have less risk to brand reputation because of risky activities that can potentially cause damage, through more informed decisions regarding the supplier. Additionally, ESG is now a key concern for investors, so it’s never been more important to have these targets and projects in place to demonstrate work and commitment to these areas.

However, to ensure that ESG practices are being adhered to across the board, companies need to take more measures to ensure that their supply base is compliant with ESG practices. Companies have a responsibility to ensure they are working with compliant suppliers, otherwise, they are putting the company, company reputation, and potentially their consumers at risk. Companies need to make sure there is transparency and visibility between the supplier and the buying company. However, this is easier said than done.

ARCUS^® Supplier Information Management (SIM) allows you to efficiently on-board ESG information from your suppliers, significantly increasing your level of transparency. Our configurable questionnaire templates are used to ensure you are collecting all the ESG information that you need from your suppliers.

The information is automatically authenticated when supplier supporting documentation is scanned and verified at the point of upload through Artificial Intelligence, eliminating the need to complete time-consuming, manual checks. Additionally, you will have full confidence that due diligence has been undertaken in your processes, which drastically minimises any risk factors.

By integrating with various other systems across ESG activities, data is centralised within ARCUS^® directly from the original source, which removes data silos and provides you with the ability to view information within a real-time dashboard.  This offers a comprehensive visual oversight of ESG activities across your supply base, making it easy to identify any risk areas, so swift action can be taken, and problems are avoided before they occur.

To learn more about ESG have a look at our new guide here.