What is

i n B u s i n e s s

An acronym for Environmental, Social and Governance - ESG is a concept that has gained a lot of traction in recent years.

The ESG framework helps an entity measure itself against risks and opportunities related to environmental, social and governance factors (ESG factors)

Initially ESG measurement was designed for investors looking to invest in an entity. They would measure risk and opportunity against certain standards However, the concept has evolved and any stakeholder - customers, suppliers, employees are all interested in understanding how sustainable an entity is

Sustainability, within the ESG framework, assumes that this is more than just environmentally sustainable The ESG framework looks at diversity and inclusion within an organisation, social impact within the communities they operate in, shareholder rights, transparency and accountability in leadership and many other considerations. The approach is more holistic, than traditionally

Currently this is not standardised in South Africa, as it is for example with the BEE Codes of Good Practice However, there are generally accepted standards that various entities look at when measuring or assessing ESG factors

Globally these standards may look slightly different For instance, in South Africa as part of the Social aspect of ESG entities may consider looking at a company's BEE implementation to measure diversity, social impact etc

Currently there is somewhat of a convergence of standards, guidelines and recommendations on what ESG factors and data companies should be disclosing.

However, looking at global trends, it is only a matter of time before there is an agreed mandatory requirement for ESG compliance.

The expectation is that financial reporting in future will include an integrated ESG report. This means that all the moving parts of an entity need to be aligned to the common ESG goals. CEOs, CFOs, Chief Sustainability Officers will al be working towards achieving whatever ESG goals the company sets out for itself

Regardless of how small your entity may be, you may want to start researching options.

While ESG generally applies to larger companies and more expected of JSE listed entities, it is always a good idea to integrate ESG goals and measurements into your entity You can identify the parameters of what they may look like. If you are a bigger entity there are many applicable legislations that include some sort of ESG considerations. Migrating towards a "net zero" commitment means you're creating a responsible identity for your business and will organically mean greater sustainably for your business

If you need more information there are many ESG specialists that can help your business with your ESG goals