What is ESG
(Environmental, Social and Governance)?

‘Environmental, Social and Governance’, or ‘ESG’ as its more commonly referred to, is having an increasingly important influence on how companies operate.

Originally used as a way of differentiating the value that companies deliver beyond just financial returns it has grown as companies and investors have become more aware of the long-term benefits for everyone. They have subsequently been adopted as key deliverables by many countries and companies.

As can be seen below, each of the three main areas of ESG are made up of many different considerations for companies to address in order to deliver benefits beyond just financial return:

Environmental

  • Sustainability
  • Climate impact

Social

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

Governance

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

Due to the complexity and resources required to make changes its unrealistic for companies to address all the considerations at once. However, by identifying where they are currently falling short and choosing what is important for them to address or by following government directives companies can then prioritise and plan how to start delivering changes.

As well as addressing ESG considerations internally companies need to also look at their suppliers to ensure they are also applying similar values. This means companies clearly communicating the ESG values that are important to them to potential suppliers and having them as integral part of the overall evaluation process as well as quality and cost.

There is one procurement software that enables SMEs to easily put their ESG values at the core of their sourcing activities and promote them to suppliers. 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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