Environmental, Social and Governance (ESG) strategy is one of today’s hottest topics in boardrooms around the world. Now forward-thinking businesses are tapping Environment, Health & Safety (EHS) frameworks to grow ESG’s impact beyond compliance.
A Dynamic ESG Landscape
The momentum behind ESG legislation in Europe, the United States and other regions is driving enormous interest in ways to update processes and technologies. Over the next couple of years, nearly 50,000 companies will be required to start reporting their ESG impacts under the European Union’s Corporate Sustainability Reporting Directive (CSRD). At least 10,000 non-EU companies will be subject to the regulation.
In the U.S., large, publicly traded companies will likely soon be required to report their Scope 1 and 2 emissions, and some may also need to report their Scope 3 emissions under the Securities and Exchange Commission’s (SEC) proposed climate-related disclosure rules. Understandably, the new regulations have led to a focus on compliance, yet ESG provides a useful framework for performance improvement.
As businesses increasingly seek to approach ESG in more meaningful ways, we are beginning to see a convergence between EHS and ESG. Traditionally, EHS functions have concentrated on ensuring that business services, products and processes are safe for employees, surrounding communities and the planet. ESG can be a natural extension of that work. To take ESG efforts to the next level—and sharpen the focus for both ESG and EHS functions—these two business units need to work together around shared goals. Read on to find out how EHS and ESG can work together to move beyond the status quo.
5 Steps to Drive EHS and ESG Performance
- Identify what data is most material to business decisions. The best way to begin the process of ESG-EHS operationalization is by conducting a materiality assessment. This approach provides insight into current operations and assures that resources are allocated to the highest-priority sustainability issues throughout an organization’s value chain.
- Understand current data and determine gaps. Many overlaps exist between EHS and ESG data-gathering and reporting. Take stock of available EHS data—this may include emissions, energy consumption, environmental incidents, employee safety, accident rates, policy and documentation, and compliance data. The process will also help ESG teams identify information gaps and prioritize future data collection strategies.
- Evaluate existing technology. While ESG is new to many organizations, one of your first steps should be to review your current EHS infrastructure. In fact, often EHS processes and systems can be adapted to incorporate all relevant ESG topics and provide state-of-the-art capabilities, such as automated data collection and quality checks; auditable, traceable data storage; and analytic functionality to set targets, measure progress and report it to key stakeholders.
- Establish collaboration frameworks. EHS and ESG teams can partner for greater efficiency and support. To facilitate collaboration, organizations should establish communication frameworks early on, outline respective responsibilities and integrate workflows. Equally important is identifying areas where ESG and EHS do not overlap. Cross-training on ESG and EHS solutions can ensure both teams function in a complementary, but not redundant, fashion.
- Think about investments to complete a successful transition. Lastly, business leaders can begin to strategize investments to drive greater EHS and ESG performance. Companies can improve ESG ratings and attract new investors, partners and talent by reporting through reporting and disclosure frameworks that include (but are not limited to): CDP, Global Reporting Initiative (GRI), International Sustainability Standards Board’s (ISSB) SASB standards and the Task Force on Climate-related Financial Disclosures (TCFD).
These five steps can help organizations harmonize ESG and EHS functions. Collaboration will help organizations efficiently manage the expanding scope of ESG and sustainability initiatives. Being successful in this process will be all about clarifying business priorities, collecting the right data and using the right technology to support your people.
EHS Excellence Is Essential
It is important for businesses, especially those in high-risk industries, to have a scalable, configurable and easy-to-use solution for traditional EHS activities like health and safety management and performance improvement, integrated risk management, and environmental and operational compliance. Now it is also increasingly important that those solutions incorporate ESG elements.
This year, Verdantix named Sphera a market leader in EHS software solutions and gave our platform top rankings for management of ESG and sustainability, greenhouse gas emissions and air emissions. Our comprehensive offerings currently are being used to support EHS, ESG, operational risk management (ORM) and product stewardship efforts around the world.
