Introduction on ESG
ESG stands for Environmental, Social, and Governance. This set of standards for a company’s behaviour is most useful for measuring sustainability.
In addition to profit, companies that do business responsibly, also include the impact on society and the planet in their policy. Think of companies that provide good conditions for their employees and consciously recycle their waste. By contrast, some companies use child labour and trash dropping. Or some companies oppress their employees through a minimum salary and refuse union members.
How do a company’s actions affect the environment? This includes questions about supply chain sustainability and the reduction of carbon footprint.
How can a company increase its social impact, both within and outside its community? Inclusion, gender equality and diversity are some factors to consider.
How are issues related to executive compensation, leadership diversity, and internal hierarchies addressed by a company?
Take action now.
The purpose of writing an ESG charter is to formally set out the commitments of your company regarding ESG practices. A charter can include a mission, vision and values statement all of which formalise the actions and objectives of an organisation.
So, in an ESG charter you lay down short-term and long-term environmental, social and governance objectives. In addition, you link actions to your commitments. You give an answer to the question: how is your company going to achieve these ‘better world goals’?
These principles shall guide management teams in their investment and strategic decisions. This also implies to communicate transparently to all key stakeholders on the development and results of the set responsible goals.
ESG communications include any sustainability-related messages you send (through reports, press releases, social media posts, etc.). It informs people about your ESG-related policy and the things you do around it.
Key steps in communication:
- What should be communicated? The essence should be short and clear. Be specific about your goal (think about ‘Why’).
- To whom? Define your target audience, know your customers and their value profile. Try to involve them in your mission and pave the way for co-creation.
- How? Let your leaders do the talking, they must lead by example and embrace transparency.
- Communicate from the foundation: “Why do you do what you do? What is your vision of a more beautiful world? What do you want to commit to with your company?”
- Be transparent: a sustainable brand is open and honest. Share the good and the bad and show that you take responsibility for your company’s impact.
- Research the ‘supply pain’: much of a company’s sustainability depends on production. Talk to your suppliers and ask clear questions about their production. You need to know what you are talking about.
- Do not use container terms: sustainability is such a concept. Because the word has so many meanings, it is often used by companies that Greenwash. Concrete words increase the confidence of your consumer.
- Tell authentic stories: the value of your product is determined by stories and emotion. When customers are aware of the raw materials and manpower that went into a product, they will pay for it and take care of it.
- Choose your battles: choose a problem of which you really want to be part of the solution. Incorporate that into the foundation of your business, make promises and commit to them.
Pretending to be more sustainable than you are is called greenwashing. Greenwashing is a marketing ploy. Companies use the trick to appear sustainable and thus polish their image. It seems harmless: exaggerating your green actions to show your customers that you are a sustainable business.
But greenwashing can cause you to be known in a negative way. You can even get fined for it. Some greenwashing is unintentional, due to a lack of knowledge or understanding on the part of management, but often greenwashing is carried out intentionally through marketing efforts.
- There is a growing demand for sustainable products. Consumers prefer to buy goods and services from ESG focused brands.
- There is no regulated guideline that makes a company ESG compliant. Environmental, social and governance (ESG) compliance has become an increasingly complex and challenging regulatory environment for companies to navigate.
The European Commission recently launched a proposal for a directive on green claims that should ensure that consumers are better informed about how ‘green’ a product actually is. This proposal is part of the European Green Deal in order to become the first climate-neutral continent by 2050.
- Do not promote a natural ingredient if it is only present in limited quantities.
- Do not use vague or ambiguous words/terms.
- Do not use misleading images.
- Never create an environmental label/certificate yourself.
- If your product has an environmental benefit, inform it sufficiently.
- Truly green products or companies support their claims with facts and details. When you claim something, always check whether the information:
- is completely correct;
- does not mislead the customer;
- can be verified.