ESG Trends in 2022
The latest trend dominating business strategies across all industries is incorporating ESG criteria. ESG or Environmental, Social and Governance describes standards under which an organization can prove they not only care about meeting financial goals but also consider sustainability of their business.
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E or Environmental Criteria factors in how an organization looks at energy use, waste, pollution, use of natural resources and their treatment of the surrounding ecosystem. When organizations factor in environmental risks, they can minimize future government intervention and minimize waste and unnecessary use of resources.
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S or Social Criteria evaluates how an organization works with internal and external stakeholders. Under this evaluation criteria employees must be able to work in a safe and secure working environment encouraging diversity and productivity. When the organization shows strong resolve around maintaining a healthy and happy employee base and considers the opinions of other stakeholders they are more likely to achieve success and longevity.
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G or Governance criteria ensures transparency around activities within the organization to higher level stakeholders and compliance with government rules and regulations. Avoiding legal conflicts of interest ensures a business does not get riddled with fines and prevents unfavorable treatment from the government moving forward.
As ESG criteria become non-negotiable, it is important for organizations to pre-empt the latest trends in the field and align accordingly. Here are the top trends to consider in ESG for 2022;
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Stronger ESG Data Quality
As reporting requirements around ESG grows, the quantity and quality around the data offered will steadily increase. The ongoing global standardization around ESG requirements will remedy the difficulty investors face when collecting and comparing data. Within Europe, the SFDR or Sustainable Finance Disclosure Regulation offers mandatory ESG disclosure obligations. Simultaneously the EU Taxonomy offers a list of environmentally sustainable economic activities an organization can incorporate.
It would be in any organizations best interest to establish strong disclosure frameworks and better quality data around how ESG is incorporated into their business strategy moving forward.
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Focus on the Social Aspect
The COVID-19 pandemic brought social issues to a forefront with emphasis around maintaining safety protocols and the health of the workforce. These measures extended beyond professional environments and into global patterns of behaviour in order to keep everyone safe.
Companies paying attention to the social risks of their actions have proven stronger financial resilience moving forward. ESG investors are now paying special attention to diversity and inclusion and the social reputation of an organization before making an investment decision.
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The Mainstream Appearance of Carbon Offsetting
Carbon Offsetting describes the process of compensating or minimizing greenhouse gas emissions. While simple solutions like planting trees or working to restore degraded land are easy to implement, the newest trends will include more advanced and complex solutions.
These solutions include carbon capture and storage technology to remove the CO2 emissions from the air. Jumping on this bandwagon as it gains popularity will prevent an organization from lagging behind and maintain their competitive edge.
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Understanding the Impact on Biodiversity
The relationship between time, economic development and environmental preservation is clear; over time the world has placed importance on economic development at the cost of the environment. As more information presents itself, the global economy is pivoting to ensure large scale habitats are no longer cleared for agriculture needs and avoid the discovery of zoonotic diseases.
France is currently spearheading the revolution by mandating organizations disclose their biodiversity impact. As of January 2022, organizations operating within the EU will have to follow the same protocol.
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Asia’s Focus on ESG Commitments
The global pandemic highlighted the lack of consciousness or care businesses operating within Asia place on waste creation. As a result, the need for more sustainable economic practices including the use of renewable energy sources and greener buildings has come to light with China currently introducing practices to control coal use and achieve carbon neutrality by 2060.
As this focus grows, MNCs and other organizations looking to operate within Asia must have a solid plan to move forward and meet ESG compliance terms.
Businesses unsure of how to move forward can recruit ESG advisory services for ESG consulting to assist with crafting a bespoke plan of attack incorporating the latest in ESG trends as practically as possible.
