Where can you find strategic ESG advice?

The evolution of ESG as a benchmark for corporate responsibility has been strikingly rapid. When it comes to seeking ESG advice it is essential you do so from trained consultants. The environmental, social, and governance (ESG) framework originated in the hallowed halls of the United Nations (UN) in 2006. First mentioned in the UN Principles for Responsible Investment (PRI) report released that year, ESG was an acknowledgement that meaningful sustainability went beyond basic environmental concerns like greenhouse gas emissions and carbon footprints. The report reflected an emerging consensus that issues surrounding human capital management and corporate governance were equally significant in determining how sustainable an organisation’s operations truly are. As a result of this initiative, ESG criteria became central to the screening and decision-making process of institutional investors. The performance of investment portfolios became closely linked to ESG issues, and investors are now more demanding of companies in terms of their commitment to ESG criteria. The upshot of these developments is that the execution, monitoring, and reporting of strategic ESG goals within companies have become a critical and highly specialised function: one that would be unwise to leave to unqualified consultants or advisors. Why ESG advice is important for businesses ESG advice comprises a complex set of qualitative and quantitative metrics. These are used to evaluate corporate sustainability not just by investors, but also regulators, policymakers, civil society, and NGOs. Although ESG is mandatory only for publicly traded companies, its fundamental principles are being adopted across a much wider corporate landscape. For organisations and businesses, the ESG framework provides a way of looking at value generation in more than just economic terms. Instead, it approaches value generation from a multi-dimensional perspective, one in which all stakeholders - employees, customers, local communities, and the world at large - stand to gain. Organisations that choose to ignore the wider sustainability concerns ESG aims to address will have to face up to them eventually, and not just in terms of reputation damage but also legal and compliance issues. Even from a purely capitalist perspective, therefore, ESG can bring substantial benefits to companies and their investors. The most significant of these benefits include: Operational sustainability: Incorporating ESG principles as part of a core corporate philosophy can help companies cut energy consumption and costs, optimise the use of resources, increase efficiency and productivity, and reduce operational wastage. Opportunity to reduce costs: Rising prices of raw materials and vital inputs like water and fuel are affecting profitability for companies across the board. Effective ESG policies can help achieve substantial reductions in these costs without compromising efficiency. Improved employee engagement: A strong ESG framework can be transformative for a company's ability to attract and retain quality talent and provide satisfying work experiences. There is compelling evidence to show that satisfied employees generate higher stock returns. Customer loyalty: Environmental concerns have made customers worldwide much more demanding of brands and companies in terms of sustainable practices. Commitment to ESG principles can help businesses solidify market reputations and encourage long-term customer loyalty. Trust capitalisation: Governments and regulators prioritise ESG-compliant companies when it comes to approvals and licences. ESG bona fides can help companies build trust among these agencies and, in return, access new opportunities for growth and expansion. Investor attraction: Sustainability is an overarching priority for most institutional investors and lenders. In a climate of heightened public and regulatory concern, a strong ESG proposition can prove significant in influencing investment decisions favourably. Challenges to ESG implementation and performance Despite its considerable significance in corporate, investment, and governance ecosystems, ESG is still an evolving mechanism of ideas. The search for better long-term values that drives ESG philosophy is a continuous process. As a result, companies keen on integrating ESG protocols face multiple hurdles. The most significant challenges to implementing, monitoring, and reporting ESG come down to a handful of factors. They include: Multiplicity of ESG standards: Sadly, ESG frameworks are not universal. The sheer number of competing standards can be astonishing. There’s the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-Related Financial Disclosures (TCFD), and the Global Reporting Initiative Standards (GRI), to name a few. At the least, this means you’ll have to choose more than one framework to attract investor interest and meet their preferred ESG credit scoring criteria. Inherent bias in ESG scoring: Multiple analyses have concluded the presence of a confirmed bias in ESG scoring. This inherent bias tends to disproportionately favour larger companies. Research has found that ESG scores rise in proportion to a company’s market cap, to the disadvantage of smaller companies. This can lead to ESG investors receiving a distorted picture of a company’s ESG credentials. More importantly, it can make stocks of larger companies look more promising and less risky than they actually are. Data management hurdles: Probably the biggest challenge to ESG implementation comes in the form of data collection and management. Unless efficiently handled, issues related to data transparency, availability, and costs can potentially derail a company’s ESG initiatives. The potential pitfalls in ESG data management can lead to incorrect assumptions, waste resources, and compromise decision-making processes. Any one of these scenarios can mislead stakeholders and potential investors. Concerns related to data governance and sharing are, therefore, critical challenges. What can go wrong with unqualified ESG advisors? A lot, to put it plainly. Blame it on the complex and multi-disciplinary approach that ESG entails. As a result, it can be easy to miss the big picture when it comes to implementing ESG holistically. Let’s understand how with three potential scenarios. Although ESG is an objective framework, some of its components can be susceptible to subjective interpretation. For instance, an unqualified advisor may heavily prioritise diversity over environmental issues or vice versa. This is usually the outcome of an insufficient understanding of the broader rationale behind ESG. Unfortunately, ESG has become a much-politicised topic in recent years. It can be difficult, if not impossible, for untrained ESG consultants to keep their personal political and ideological alignments out of the picture when giving strategic ESG advice. That can result in organisations pursuing ESG goals that are not a right fit for them. Misplaced client priorities can also come in the way of effective ESG implementation. Let's say a company is hyper-focused on climate change and environmental degradation. An unqualified ESG advisor is likely to give in to their client’s demand and pick a stock or fund that addresses the client’s concerns, even if that stock does nothing for the social or governance aspects of ESG! A trained ESG professional is unlikely to make the same error. Mastering the complex web that is ESG advice ESG frameworks are uniquely complex instruments requiring specialised knowledge across multiple disciplines. Successful execution and administration of ESG strategies call for a new level of experience and background. The regulatory, financial, and reputational consequences of ESG present elaborate challenges that must be addressed competently. That is why it is not enough to take ESG advice from consultants who are not critically trained in this field. At the Corporate Governance Institute, we understand that negotiating the ESG landscape requires informed functionaries with the right set of skills. That’s why our globally recognised, first-of-its-kind Diploma in ESG is tailored towards ESG leaders, board advisors, and investment managers. Book a call today to redefine your ESG expectations.

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Where can you find strategic ESG advice?

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Rapidly acquire the skills and knowledge you need to lead.

Diploma in Corporate Governance

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Certified ESG Professional

ESG Strategy and Governance

Company Secretary

Overview of Corporate Governance

AI Governance

CSRD Reporting

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Join the largest global educator of university credit-rated and qualified directors in corporate governance.

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Where can you find strategic ESG advice?

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