In the “EHS to ESG: Making the Pivot” session of the 2021 VelocityEHS ESG Conference, presented by David Staples, Senior Solutions Strategist, ESG, VelocityEHS, and moderated by Roger Bottum, Senior Vice President of Product, VelocityEHS, attendees were given a (refreshingly real) lowdown on what ESG really means, how it differs from EHS, and how organizations can more easily develop and build an impactful ESG program.
Environmental, social and governance (ESG) is ramping up, with customers and investors putting their dollars into companies that work to have a positive impact on the world, and environmental health and safety (EHS) folks are already feeling overwhelmed. There’s a lot of pressure for organizations to show improvements in ESG, receive high sustainability scores, have a good story to tell behind why and how they did so. This often ends up falling onto an organization’s EHS team because the two subjects do overlap – which means that ultimately, you can’t have good ESG without good EHS.
So, what’s the difference between ESG and EHS?
While the two subjects are similar, both pertaining to the safety, health and wellness of people and the environment, there are some valuable differences between them.
EHS:
- An operational function
- About reporting what you’re currently doing
- Designed to reduce individual risks
- Poor EHS performance leads to a loss of reputation, fines and generally bad things
ESG:
- A method of analysis
- About reporting what you will do in the future, how a business will align with ESG
- Designed to reduce systemic risks and create new opportunities
- Poor ESG performance leads to a higher cost of capital and catastrophic outcomes
Starting the Pivot to ESG
Successful ESG revolves around a strategy, not just starting things blindly. ESG is about being proactive versus responsive, so the goals of the strategy shouldn’t come from a customer request or s survey. An ESG strategy should be based on the organization’s internal journey, aligning with the organization’s values. Maybe it’s reducing the organization’s carbon footprint, improving their sustainability, or doing more for human rights.
Communicate and Train
A solid place to begin implementing an ESG program is with employee awareness of ESG and ESG training. Educating employees and executives of the differences between EHS and ESG and what they mean for an organization will help the ESG plan as it evolves. Explain the business benefits of having good ESG performance like reduction in costs and liabilities, and increased customer retention.
Identify the Right Stakeholders
Just like discovering the values to include in an organization’s ESG strategy, the right stakeholders need to be identified for the program to move forward. Think about who has the greatest relationship to the ESG plan. Do the employees, suppliers, local community, investors or clients influence the economic, social or environmental performance, or are they influenced by the organization’s ESG performance? Who will be strongly involved in the future?
It is mainly the financial community and investors looking at ESG, so they want to see aspects of the program that can be measured and tracked. But that doesn’t mean that the financial folks should be the main stakeholders. Employees should be prioritized as the top 1-3 stakeholders (they’re the ones performing the actions of the ESG plan) so it’s important to remain aware of their issues and priorities and keep those woven into the plan.
Find Easy Wins
A materiality assessment can be conducted to find where an organization should put its efforts first, but it’s also helpful to identify some items that would be easy to address and have an immediate positive impact. These wins could be things like installing new energy-efficient equipment in manufacturing facilities or screening suppliers on their labor practices. This can put some momentum behind the ESG plan and help it move forward, allowing people to quickly see the benefits.
Think about Desired Outcomes when Designing ESG Goals
Think of what the stakeholders want or need and the organization’s corporate goals to determine ESG goals. An ESG program should benefit your stakeholders, so think about what the employees want or need; then think about the organization’s corporate goals. Does the company want to be net-zero by a certain date? Do they want to save more money to use elsewhere for the ESG program?
Don’t Just Report: Communicate ESG Progress with Transparency
“Stakeholders will respect you sharing your dirty laundry.” – Roger Bottum (Something you never thought you’d hear an executive say)
While it’s important to know what metrics to track and report on the ESG program’s progress, it’s not just about sharing numbers and being done. There should be active, open communication with each group of stakeholders about what’s going on in the ESG program — even if it’s not going well. If the first action doesn’t work out as planned, remaining transparent and communicative in reporting lends credibility to the program.
Change Your View
Developing a plan for ESG may seem like bad news, more work, more to do — but it doesn’t have to be an overwhelming chore. Watching the “EHS to ESG: Making the Pivot” session will help you see that ESG is about looking at things from a different paradigm, and spark ideas of how you can begin your own ESG program.