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Measuring ESG

What is ESG?

ESG means "environmental, social and governance". It is used to measure how well workplaces treat the society in which they operate - in the widest sense. It is a part of "corporate social responsibility" or CSR.

ESG is important to consumers, shareholders, and corporate customers. ESG measurement applies throughout the supply chain and not just to the company at the top (often a retailer). ESG disciplines are increasing being required by law, regulation and stakeholders throughout business, from the field or the factory all the way through to a product's end of life.

How do we measure "ESG"?

This is, perhaps, the most crucial question of all. If we cannot measure compliance with ESG, how can we hold companies to account?

In fact, this is a very much a ES3G point: measure it, manage it, improve it.

Measuring ESG compliance is difficult, especially if the goal is to be fully objective,. That means avoiding so-called "greenwashing".

  • Greenwashing is a term used when companies claim compliance with ESG standards but are actually not delivering.

  • In our experience, very few businesses deliberately seek to obscure their performance - it is just that rigorous measurement of compliance with ESG standards is very difficult to achieve.

ESG measurement version 1.0

ESG measurement systems have been developed over the last 30 years and there are some very large and well-capitalised service providers operating on a global basis. These are largely based on annual surveys and evidence-based self-certification. This provides base line data, perhaps once each year - allowing a foundation to be established and then change to be measured.

The main issue with this model is that it is relatively easy to abuse - but on the other hand, it is the best that we have and the one that largely will continue as the bedrock for ESG compliance, control, and improvement going foward. And continued investment in process and systems around the concept of the annual review will improve these systems as every year goes by. Companies like Ecovadis, Bureau Veritas, Sustainalytics, Reprisk etc. are well-known global providers of services in this space.

ESG measurement version 2.0 - ES3G

A new breed of ESG measurement systems is emerging: ESG version 2.0 or "real-time ESG".

Real-time ESG is provided by technology-driven companies that aim to deliver ESG measurement at the level of the individual supply chain, a single workplace, even down to a single "SKU" 0r stock-keeping unit shipped to a business. Measurement at this level is only possible with technology - but starts to deliver a level of granularity that is much harder to greenwash and capable of real-time responsiveness.

And with real-time responsiveness comes the ability to drive change incrementally all the time, rather than based upon annual snapshots.

To find our more about our worker app which measures social and governance compliance (the S + G of ESG) in real-time, click: here.

What is the future?

We all need to pay attention to ESG: measure it, manage it, improve it. And this goes across all of the UN SDGs that relate to environmental, social and governance issues.

With the emergence of ESG version 2.0, we may well be able to start holding companies much more to account for their performance under the social contract. We have to continue investing in technology to achieve this - and ES3G is leading the way.

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