A company is more than just profit. You should also be looking to contribute to society, but the impact here is less quantifiable.
The new market means in-demand talent will care about the impact their work has socially as well as economically. The best talent and investments may decide to work with you based upon your ESG score. But what is an ESG score precisely?
What Is An ESG Score?
Different agencies use different methods and gradings to score an ESG rating: some use numbers whereas others use letter grades. Essentially, an ESG score is a representation of a company’s environmental, social and governance performance.
This can encapsulate their carbon footprint, code of conduct, employee benefits, as well as any schemes they may have in the local community or how much profit is donated towards charity. The idea is that this score will be an indicator of how ethical a company is.
How Do They Calculate ESG Scores?
An ESG score is tabulated based on what knowledge a company makes public. It is good to be humble, but showing that you are being ethical is crucial. The organisations that rate ESG practices give out scores based on what your company publishes as well as news reports, social media posts and blogs. This is why it is important to be transparent.
What Makes An ESG Score Good?
There are a variety of agencies out there publishing ESG scores, but what makes one good is if it incorporates future projections alongside current ones. Your ESG score might not be the best at this very moment in time, but if you are making concerted efforts to improve, then that should be taken into consideration.
Why Is A Good ESG Score Important?
Having a good ESG score is just good business. It has been proven that companies who have a solid ESG strategy are 40% more likely to produce a profit margin of double that of their unethical competitors.
Companies that focus internally on ESG also retain employees for longer. With the great wave of resignations upon us and the risk of talent loss, every organisation needs to focus on what can attract as well as retain the best workers.
It will also help you be prepared. There are likely to be many changes coming in terms of environmental compliance. The latest IPCC report is dismal and we need to do all we can to change the tides. ESG practices are likely to be at the centre of business development in the coming years, so it is important to keep on top of this.
How can you improve your ESG Score?
You can improve your ESG score with these simple steps:
- Disclose your environmental and social impact.
Whether or not this paints you in a good light, the first step is seeing areas for improvement and recognising where you are already excelling. Your ESG score can only be accurate if you are honest.
- Outline the steps you are taking to improve.
Most ESG scores take into account future projections. You should be transparent and demonstrate clearly the course of action you are planning to take. This could be software you are going to invest in, or social projects you have planned. This may also mean reshaping your hiring process to ensure more diversity. Whatever it is, it can only help your brand and your ESG score.
- Consider how you will communicate this.
You should give thought to how you will communicate your ideas to the general public as well as internally. It is important that ESG becomes a core part of your business practices.
A report may be a good start. However, what form of report is up to you: will it be part of your annual report or a stand-alone document? It may also be useful to update your code of governance to show your commitment to these values.
How Can Convene Help You Improve Your ESG Score?
The features of our all-in-one board portal solution are designed to help your internal processes. Our board document library helps to assure secure, remote access to any necessary papers and reports. Convene’s roles-based access controls ensure that only those permitted can see sensitive information whilst still allowing company-wide access to other documents.
We are a paperless solution which instantly makes us a more environmentally friendly choice to traditional board packs. Convene has had a long experience in the industry and our user-friendly interface is award-winning! Just read our customer stories to see how successful we can make your organisation!