ESG Environmental Factors: Understanding The 'E'

What can be reported on in regard to ESG environmental factors? Preparing and submitting environmental, social and governance (ESG) reports is of vital importance in order to ensure businesses are operating sustainably.

A range of areas fall under the broad ESG heading, including biodiversity, climate change, customer relations and supply chains. In particular, the 'E' in 'ESG' relates to how firms perform as a steward of nature, and how they utilise natural resources in the course of doing business.

It also takes into consideration environmental concerns and how companies mitigate their output in light of environmental concerns. This blog post considers businesses' governance practices and how firms can ensure they have an appropriate ESG strategy in place.

On this page:

Carbon emissions and energy usage

Water usage and management

Waste management and reduction

Biodiversity and habitat conservation

Pollution and toxic chemical usage

Supply chain sustainability

Climate change adaptation and resilience

Carbon emissions and energy usage

Key concerns in today's modern age are carbon emissions and how to limit the environmental risks they pose. Firms should think of their environmental risks as added to by their business output - these are the emissions a company generates and how much of them they produce.

Businesses are advised to factor sustainable investing into their decision making and when deciding on their ESG principles.

There are a handful of steps companies can take to help to reduce their carbon footprint. These steps include implementing a comprehensive carbon reduction plan that combines energy efficiency measures with the sourcing of renewable energy and the offsetting of carbon and working to mitigate their environmental impacts by carrying out socially responsible investing in renewable energy, such as hydro power, solar power and wind farms.

ESG investing focuses businesses on environmental issues and encourages companies to consider any sustainability issues they may have in regard to the products and services they provide to their clients and also within their supply chain.

Companies should consider such ESG investments as energy management systems, which can aid in helping to protect the natural world by minimising businesses' emissions.

ESG-focused organizations use energy management systems to help in monitoring their energy usage in their factories and facilities, thereby providing business owners with the ESG metrics for their company. By implementing energy management systems, business leaders can help in protecting the natural or physical environment and also save funds.

Water usage and management

Water scarcity is a significant issue for many individuals across the globe. Business leaders are encouraged to consider their social criteria: this takes a look at businesses' relationships with suppliers and the communities in which they operate successfully.

Community relations and human rights must be considered, and water pollution in locations where businesses manufacture their products adversely affects local communities. In our modern age, failure to ensure manufacturing processes do not harm the environment may cause reputational damage for companies.

Companies are advised to make use of water conservation and management strategies in order to help minimise water usage and the effects of their operations on local water resources. Water reuse and recycling systems can be implemented to achieve this aim and assist in reducing the impact of manufacturing on local communities and the local environment.

Consider the environmental risk your business poses to local water supplies - can your company partner and collaborate with community leaders to address water-related issues? Doing so may help to promote sustainable management practices.

Waste management and reduction

Similarly to addressing water usage, companies should seek to implement waste reduction and effective recycling practices to help minimise the amount of waste they generate. If your company manufactures products, consider the types of material you use - can they be recycled?

Recycling everything that can be repurposed will help your business to become sustainable and eco-friendly. Zero-waste policies help to boost companies' ESG performance and help to mitigate adverse ESG factors.

Biodiversity and habitat conservation

Businesses are encouraged to establish policies to aid in the minimisation of their operations on local habitats and biodiversity. Carrying out environmental impact assessments will help companies to ascertain the impacts of their business on local animal habitats.

Some firms may wish to develop and implement conservation plans to help preserve local wildlife. Consider forming partnerships with local wildlife and conservation charities to help promote habitat restoration and biodiversity conservation.

Sustainable sourcing is another aspect for businesses to take into consideration. Are you able to certify that your products are ethically crated and sourced? Consumers are keen to learn whether products they are seeking to purchase have been made with ESG practices in place within the production process.

Pollution and toxic chemical usage

In order to minimise pollution and toxic chemical usage, the companies involved should implement comprehensive environmental management systems and behaviours. Consider developing policies to monitor and control the usage of chemicals in the manufacturing process. Can safer and more biodiverse elements be used instead?

Similarly to ensuring local water supplies are free from pollution, businesses are advised to collaborate with communities to ensure toxic chemical usage does not affect local biodiversity sites and wild habitats.

Companies in England should check whether environmental stewardship schemes are available in local communities - these supply ESG investment funds to farmers and land managers with the aim of both economic growth and delivering effective environmental management on farm land.

Supply chain sustainability

Are your supply chains sustainable? Do they help to reduce waste and support local biodiversity schemes? Seek to establish supplier sustainability programmes and guidelines to ensure your products are ethically sourced and manufactured.

Once such programmes have been implemented, business leaders should perform supplier sustainability assessments and provide training and support to their suppliers in order to help them improve their ESG standards and meet environmental criteria associated with the ethical production of products.

Climate change adaptation and resilience

Climate change and awareness of environmental factors is certainly a hot topic in today's day and age. Ensuring businesses limit their carbon emissions, minimise the amount of waste they generate and create supply chain practices and procedures centred around sustainability are of vital importance in preserving biodiversity and caring for our planet.

Business leaders are encouraged to develop a climate change action plan and implement measures aimed at reducing their company's greenhouse gas emissions and energy usage. Creating such a plan and implementing environmental policies helps to reduce waste and in the midst of the ongoing cost-of-living crisis, minimise energy costs for struggling firms.

Climate change action plans should also outline resilience measures, which should highlight how a business can continue to operate in extreme weather events. Stringent resilience measures include emergency response plans and guidelines on protecting critical infrastructure.