As society becomes more environmentally and socially conscious, so have consumer behaviors, and people are considering the environmental and social impacts a company makes more than ever before.
Many people today are actively searching for ways to minimize waste in their own lives, become more inclusive, and ultimately create a greener lifestyle. These behaviors in their personal lives also affect where consumers spend their money, with many opting to do business with companies that share the same values.
This shift in behavior has seen a rise in the importance of ESG as a business function.
What is ESG
Environmental, Social, and Governance (ESG) is a term that focuses on an organization's sustainable and ethical impacts and how they can affect that organization's financial performance in the future.
Here are the three areas of ESG:
Environmental: What is the organization's overall impact on the environment regarding protecting natural resources, climate change, and energy? For example, how do a company's business practices impact air quality, deforestation, carbon footprint, and waste management?
Social: How does an organization treat its employees, customers, and the communities it operates in? For example, how does it manage community relations, customer satisfaction, data protection, human rights, and the health and safety of its workers?
Governance: How does a company maintain internal controls and compliance while operating transparently and ethically? For example, how does it manage executive compensation, policy, corruption, donations, and the board of directors?
Why is ESG Important
It isn't just consumers that care about these areas; it's also investors who long ago realized the impact poor ESG performance could have on the future health and profitability of a company.
For example, poor environmental performance or working conditions can result in significant fines and business interruptions and adversely affect a company's reputation. These negative impacts can take years to overcome or kill a business entirely.
As ESG investment continues to grow, companies are starting to pay close attention and apply ESG to their business to create accountability and improve business performance. Things like a company's carbon footprint and how they treat workers are all considerations that modern investors make before investing.
As a result, companies are beginning to take a hard look at their organizations to see where they measure up in these three key areas.
The role EHS plays in ESG operations
Environment, health, and safety (EHS) deal with the management of training, compliance, procedures, and risk mitigation to eliminate or reduce the harm caused by health, safety, and environmental risks. There are many overlaps between EHS and ESG, the biggest being the environment.
Carbon emissions and climate change play a significant role in ESG, and EHS departments have managed this crucial area and its compliance and permitting for many years. EHS departments are also responsible for wastewater management, air quality, and chemical discharge and management. All critical factors within the E of ESG.
However, there is also significant overlap between the social and safety aspects of EHS and ESG. For example, EHS departments have long focused on improving the workforce's safety, health, and well-being through injury and illness reduction and workplace design.
There are so many similarities between EHS and ESG that many EHS departments have absorbed the ESG process in some form or fashion.
In addition, most EHS departments also manage the data associated with EHS and ESG. For example, environmental incidents, employee accidents, policies, and compliance documents are all vital information for EHS and ESG success and are stored in existing EHS data management systems.
Current data management processes
Data plays a big part in an organization's ESG efforts, and departments need a powerful way to collect and analyze this information. However, many EHS departments rely on outdated, inefficient data management systems to compile their information.
Many organizations still have old processes that do not allow easy access to or insight into information. For example, some companies store accident and injury information on paper documents in a file cabinet.
Companies that do use EHS software often have legacy systems that are outdated and unusable because as the world, process, and systems change and evolve, the software has remained the same.
This has been a big issue for EHS departments for many companies for years; however, with the shift toward ESG, the problem has gotten even more prominent.
When demonstrating your company's ESG performance is the difference between securing investment, and not, reliable data is vital, and using outdated methods is unacceptable. Companies must evolve, and adopting modern EHS software that includes ESG is one of the best things a company could do to stay ahead of this shifting focus on sustainability.
EHS software helps companies easily collect, digitize and organize their valuable information to be easily accessible and analyzable. It's the key to a proactive approach toward risk mitigation.
With the amount of data involved in both EHS and ESG for even a small company, the need for a robust system of data collection, storage, and management is crucial for a company. Without one, it opens companies up to the additional risk that is unacceptable today.
Serenity can help
EHS and now ESG are integral parts of the business that can't be ignored and significantly impact an organization's current and future health. However, like EHS before, ESG requires a significant amount of high-quality, actionable data to succeed. Serenity can help.
Serenity helps companies achieve operational excellence with solutions that optimize processes, maximize efficiency, and improve data visibility. Our software is natively built on ServiceNow, enabling companies to integrate operational workflows into their business on a trusted platform.