ESG - What Is It?

ESG, or environmental, social, and governance, as it is more commonly known, has become increasingly influential in corporate decision making.

It was originally used to differentiate the value that companies deliver beyond just financial returns, but its use has grown as companies and investors have become more aware of the long-term benefits. The results of these initiatives have since been adopted as key deliverables by many countries and companies.

The following list illustrates the various considerations that companies must address in order to deliver benefits beyond just financial returns within the three main areas of ESG:

Environmental

  • Sustainability
  • Climate impact

Social

  • Local community
  • Diversity
  • Human rights
  • Anti-corruption

Governance

  • Management structure
  • Employee relations
  • Executive compensation
  • Employee compensation

Companies are unlikely to address all of the considerations at once because of the complexity and resources required for changes. Companies can, however, prioritize and plan how to introduce changes by identifying where they are currently lacking and determining what is important to address or by following government directives.

In addition to considering ESG internally, companies should also examine their suppliers to make sure they adhere to the same values. It means communicating clearly to potential suppliers the ESG values that are important to them and integrating them into the overall evaluation process along with quality and cost.

It is possible for SMEs to promote their ESG values to suppliers with the help of one procurement software application, oboloo. oboloo is an intuitive self-service solution that incorporates Sourcing, Contract, Supplier and Savings Management to enable companies to be supplier smart. To learn more please visit www.oboloo.com

 

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