True Business Sustainability: ESG

November 18, 2022
Liza Nollsch

Bad, Better, Best: Keeping your company truly sustainable using ESG (Environmental, Social and Governance) Criteria

According to Green Print, a corporate sustainability company, 64% of Americans are willing to pay more for sustainable products, and 78% are more likely to buy a product that is clearly labeled as environmentally friendly. Many companies now utilize ESG criteria to show and legitimize their claim of being a sustainable business. However, as the desire for more eco-friendly business grows, some businesses may be left wondering how to keep their company environmentally sustainable, and what that means. To understand this, it's important to recognize the distinction between ESG and corporate sustainability and how to avoid greenwashing.  

Bad: Greenwashing

Greenwashing occurs when a company claims to be environmentally friendly or sustainable with no real substantiated claim as to how or why. Companies can easily throw the word "green" into marketing and advertisements to convince buyers their company is productive to the environment, but oftentimes there is no proof their claims are true. Organizations sometimes spend more time and money on marketing themselves as "green" or "sustainable" than they do trying to minimize their environmental impact. Greenwashing is merely a capitalization on consumer demand for more environmentally sound products and nothing more. 

Better: Corporate Sustainability

Corporate Sustainability is a big leap in the right direction toward eco-friendly business. However, just claiming a company is "sustainable" may not be enough, as the term sustainability has been so heavily used in recent years and its meaning may have been watered down and diluted. Under the term "Corporate Sustainability" falls many different responsibilities, such as Corporate Social Responsibility (CSR) which, in itself, encapsulates things like human rights, fair labor practices, the environment, fair operating practices, and consumer issues. So, it's safe to say the term Corporate Sustainability is quite a large umbrella term for many environmental, social, and economic issues. 

Though it is such a large term, there are ways for companies to refine their definition and practice of sustainability by implementing the following: 

  • Sustainability Strategy. A sustainability strategy is a focused list of company priorities that drive investment and performance with a focus on how to sustain the company long-term with minimal environmental impact. 
  • Sustainability Program. The sustainability program is incorporated into a sustainability strategy. It is the "roadmap" that tells a company's sustainability story. A successful sustainability program will give the company room to grow organically and address the company as a continuum.  
  • Sustainability Plan. A sustainability plan is the most specified sustainability goal a company has. The sustainability strategy lays the groundwork for the programs, and those programs are then split into Sustainability plans. From here the company has a specific set of goals and ideas to kickstart its sustainability journey.  

Though some specificities can be made, Corporate Sustainability encapsulates so many issues and goals that a company's performance in these areas may be difficult to discern. Though practicing corporate sustainability is absolutely a step in the right direction, there are still other ways for businesses to ensure they are as transparent as possible about their environmental goals. 

claiming a company is "sustainable" may not be enough

Best: ESG (Environmental, Social and Governance)

ESG is a term that evolved from corporate sustainability. It is a more narrow and more efficient way of measuring the true environmental impact of a business because it sets specific criteria.  

  • Environmental. Some examples include but are not limited to, climate change strategy, biodiversity, and energy efficiency. 
  • Social. Examples are equal opportunities, health and safety, human rights, and customer and product responsibility. 
  • Governance. Examples are compliance, business ethics, board independence, and executive compensation. 

Investors typically prefer ESG over corporate sustainability term-wise, because ESG captures a more specific and measurable set of goals. There are terms within ESG criteria that allow for these goals to be measured. 

A company’s ESG Metrics would supply statistics on things such as greenhouse gasses, waste, and employee health and safety. It would effectively provide a clearly defined map of how well the company complies with ESG criteria and if it would be worth investing in. 

Additionally, a company’s ESG Policy would be the policies and standards put in place to ensure these metrics were met. Company policy ensuring safe work environments and a focus on creating an eco-friendly company would be in consideration when policies for the company are being created.  

Providing a narrower view on the sustainability of a company and being willing to share specific statistics and policy with future customers and investors not only creates a better consumer-company relationship but also ensures the creation of a safe and healthy company for the people and the planet.  

How do you avoid greenwashing and practice real ESG sustainability?

To best avoid greenwashing within a company, it is always best to implement efficient criteria within the company that leads to more self-aware governance. Be specific in how you handle your company's affairs and practice transparency with potential clients, investors, and customers. Follow ESG and Sustainability criteria, implement ESG Policy and provide ESG metrics to consumers, and/or create a sustainability strategy and program. Fundamentally, try to minimize the negative impacts of your company on the environment, create a safer workplace for employees, and govern your company ethically. 

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