Friday, April 22nd, the United States and other countries recognized Earth Day 2022. Earth Day 2022, with Invest in Our Planet being its theme, emphasized Environmental, Social, and Governance (ESG), as an important metric in evaluating activities that may have an impact on human health and the environment. This is the final alert in a series by Bradleys Environmental Law team to mark Earth Day 2022. We reviewed the 50-year history and progress made in addressing environmental problems in the U.S. in the first article. The second article focuses on the origins of the ESG metric and current status of various efforts at standardizing how ESG issues are measured. This includes the proposed rule of the Securities and Exchange Commissions that governs ESG disclosures. This article will provide practical guidance on how you can establish or refine an ESG programme.
Step 1: Leadership Buy-In
Before an entity adopts or considers an ESG strategy, it is crucial that it is fully committed to the process. Additionally, any policy must be supported by the entity’s leadership and workforce. Without this commitment, the entity risks losing credibility with many stakeholders, including regulators, investors, customers, and members the general public. It is important to develop a process that ensures support from all entities and participation in the ESG Policy.
Step 2: Ten Principles
Review of the Ten Principles of the Global Compact should be the starting point for any ESG program or guideline. These principles are fundamental responsibilities that cover human rights, labor, the environment, and anticorruption.Universal Declaration of Human RightsTheInternational Labor Organizations Declaration on Fundamental Principles & Rights at WorkTheRio Declaration on Environment and Development, andUnited Nations Convention Against Corruption. The principles are generally non-controversial and are therefore not controversial. However, each principle’s application to a particular organization might differ. The eighth principle, for example, requires that businesses take initiatives to promote environmental responsibility. For some businesses, this could mean providing recycling containers to their customers and employees. But for others, this could mean eliminating a product or practice that has a negative impact on the environment or depleting natural resources.
Step 3: Go over the Sustainable Development Goals
The United Nations adopted an Agenda 2030 plan in 2015. As part of the Agenda 2030 plan, 17 Sustainable Development Goals were established. The SDGs encompass a variety of aspirational objectives (e.g. no poverty and zero hunger) as well as others that are more specific (e.g. affordable and clean energies and climate action). After the entity has reviewed and evaluated the Ten Principles, it should review the SDGs to determine how the entity could adopt policies, programs, or procedures that contribute to a specific SDG. Even if an entity determines that one or several SDGs are not relevant to their business or business philosophy, it’s likely that there are programs or projects that could be implemented or supported that align with one of these SDGs.
Although no one entity can eliminate poverty globally (SDG 1) there are programs that can be partnered with entities to help them achieve this SDG. A business entity might not be able to end hunger (SDG 2), but it could partner with food banks and other organizations to achieve that goal. If an entity wants to establish an effective ESG strategy, they will evaluate each SDG and ask these questions:
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Is this a good goal for the communities in our business?
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If yes, are there any actions we can take to address that goal, or are there organizations with which we can partner in our local communities to help achieve that goal.
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How can we evaluate the effectiveness/partnerships identified under b?
An effective ESG policy starts with identifying the goals and actions of an entity. Then, a mechanism is created to measure the impact of those actions.