Mehan elaborates on the latest ESG framework that is trending now-a-days. Read on to know more about how the new drift has advanced and where it is leading the industry!

Getting to know the ESG framework!

Your business, just like other businesses, is entwined with environmental, social, and governance aspects, and this is what ESG stands for! ESG framework is a set of prescribed practices and guidelines to aid companies address their ESG commitments.

The ESG framework helps develop ESG reports that will document the ESG progress at  an organizational level. Many NGO’s, governments, stock exchanges, etc create ESG reports to track their ESG advancement. Such figures then act as an intermediary between ESG investors and corporations that comply with sharp ESG standards.

ESG frameworks are made to standardise the ESG reporting process. This is to cater for the urgency to ensure ESG commitments are fulfilled. There is no fixed rule to ESG documentation as of now, but companies are striving to consolidate these frameworks for improved consistency.

ESG framework gives insight into

The framework enables the users to gauge what key ESG metrics to report e.g. air pollution, employee engagement levels, etc. It helps with structuring the content of the report and what order to follow.

The ESG framework also elaborates on how to meet the  ESG commitments by considering the following concerns: 

• How to strategize?
• What tools to use?
• What social connections to make?
• What benchmarks to comply with?
• What is the risk of ESG failure in the industry you operate?
• What regulatory bodies to constitute for ensuring strict conformity to ESG standards?

Now let’s look into what is ESG reporting and why is it important?

The ESG reporting procedure

Organizations set ESG goals and then aim to achieve the objectives by using the ESG framework. Companies track, document, and eventually disclose their  ESG progression via news letters and press releases

The procedure is very similar to corporate financial reporting. Instead of publishing accounting figures, qualitative ESG measures and metrics are revealed.

Some tracking indicators include:

• Environmental aspects e.g. wastage and resource over usage.
• Social metrics like community welfare investment, diversification or gender pay ratio.
• Governance characteristics like fraudulent incidents or executive compensation and perks.

You cant just claim that you conform to ESG standards and pretend that’s sufficient! You have to show formal reports to ESG stakeholders to show that you are committed to this cause

Now when we have grasped the ESG reporting system, let’s discuss how important it is for businesses nowadays!

Significance of the ESG framework

Having a strong ESG proposition is becoming compelling day by day, but it is not a legal obligation for corporations to follow. The world economy is gradually shifting towards cementing their ESG commitments and it is trending nowadays. This is putting pressure on companies around the world and everyone is inclined towards providing transparency in ESG initiatives.

ESG reporting allows companies to enjoy multiple aspects. Let’s dive into how complying to the ESG protocols allows companies to capture value in environmental, social, and governance terms.

Improved credibility

ESG reporting serves as a mechanism to establish healthy public relationships. You can also showcase that you stand by your commitments and claims. This would attract ESG investors as well as future employees to work with you towards a noble cause.

Enhanced accountability

ESG reporting allows everyone to take up accountability for their actions as everything is documented and showcased publically. This encourages employees to contribute with great spirit as everything is measured and reported. Also, it promotes ESG compliance, both within and outside the organization.

Easy access to capital

By properly conforming to ESG standards, you can build trust in the eyes of investors and have more opportunities for raising funds.  Nowadays investors are dismissing companies that are not ESG-friendly. This is an alarming situation for many businesses, and it is due to this reason that organizations are incorporating ESG measures at a larger scale.

Bottom Line

it is becoming essential to follow healthy environmental, social, and governance ESG principles now when everyone is openly accepting the new concept. ESG framework offers a new way of aligning your values with your work portfolio and investments. Such initiatives help build a conducive area for growth and development, especially in emerging economies. Therefore, setting ESG goals and assenting to high ESG standards is becoming the need of the hour.

Mehan has demonstrated how ESG frameworks can optimally promote your business ranking as well as your industry image.

Stay in touch to know more interesting news in the future!