ESG and ESG reporting: a primer

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As part of the Business Council of British Columbia's five-part series, ESG in B.C.: An opportunity for a sustainable economy, Denise Mullen, the Council's Director of Environment, Sustainability and Indigenous Relations has prepared an overview of the ongoing ESG evolution and its emerging impact on today's business landscape.

The goal of this series is to move B.C. forward in our ESG journey. To achieve this, we encourage you to think critically about where we are as a province, an economy or as individuals firms and where we need to go. This is an opportunity to explore the possibilities openly and with optimism, because the ESG conversation is not new, and it is not going away. Lastly, this is a forum for forthright and genuine sharing of perspectives on both the opportunities and the challenges we face to become a differentiated destination for ESG investment and leadership.

In Denise's paper, she provides an introduction to the concepts driving ESG, and the various reporting and measurement tools being used, and contemplated in the rapidly evolving area of ESG.

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WHAT IS ESG?

ESG is the latest evolution of corporate responsibility divided into three focus areas — environmental, social, and governance. Whether it is referred to as ESG, sustainability, sustainable investing, or socially responsible investing, it amounts to the same thing — the consideration, measurement, and reporting of environmental, social and governance factors alongside financial aspects in the investment and/or business decision-making process.

Environment: Stewardship of natural resources and a firm’s environmental footprint is the focus of E. This includes reducing impacts on and maximizing the benefits from land and resources with a usual focus on, but not limited to, energy and water use, greenhouse gases, natural resource conservation, materials, packaging, and waste.

Social: Relationships and communities is the focus of S. It covers everything from a company’s approach to diversity and inclusion, working conditions including health and safety of its employees and child labour and slavery, philanthropic investments, partnerships with contractors and suppliers, and commitments to investors. Importantly, S also includes I — Indigenous rights and responsibilities. In fact, S has the biggest portfolio of components in the ESG equation.

Governance: G is the foundation. Good governance is essential for success. Positive outcomes on E and S are not possible without a strong governance framework. Governance is a system and a process for decision-making, accountability, control, and behaviour. It influences how an organization’s objectives and commitments are set and achieved, how risk is monitored and addressed, and how performance is optimized. Done well, good governance cultivates a culture of integrity, strengthens stakeholder confidence, enables a nimble response to a changing external environment, and creates value for all stakeholders.

ESG is most often associated with the outcome — a sustainability report. But this is the final step. Arriving here requires both an internal and external process that reconciles the specific meaning of ESG to a company, its culture, and its stakeholders. In its detail, ESG means different things to different companies based on many considerations including the industry, location, services, and products, to mention a few. No two companies will have the same ESG metrics or strategies.

Read more: Download the paper here.