Earth Day Series 2022: Environmental, Social & Governance Part 3 – Practical Steps to Develop or Refine an ESG Policy

On Friday, April 22, the USA and the remainder of the world acknowledged Earth Day 2022. With “Invest in Our Planet” as its theme, Earth Day 2022 centered extra consideration on Environmental, Social, and Governance (ESG) as an essential metric for evaluating actions that will affect human well being or the setting. That is the third and remaining alert in a sequence of publications by Bradley’s Environmental Legislation crew in recognition of Earth Day 2022. Within the first article, we regarded again on the greater than 50-year historical past of Earth Day and the progress that has been made in addressing environmental points within the U.S. Within the second article, we mentioned the start of the ESG metric and the present standing of assorted efforts to standardize the best way ESG points are measured, together with the Securities and Alternate Fee’s proposed rule governing ESG disclosures. This remaining article gives sensible steerage on how to set up or refine an ESG program.

Step 1: Management Purchase-In

Earlier than an entity considers or adopts an ESG coverage, it’s important that the entity is dedicated to the method and that any coverage has the help of the entity’s management and workforce. With out such dedication, the entity runs the danger of dropping credibility with numerous stakeholders, together with regulatory companies, traders, prospects, and members of most people. Growing a course of that ensures entity-wide help and participation within the ESG coverage is important.

Step 2: The Ten Rules

The start line with any ESG program or guideline needs to be a evaluation of the Ten Rules of the International Compact. Designated as basic tasks within the areas of human rights, labor, setting and anti-corruption, the rules had been derived from Universal Declaration of Human Rights, the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, the (*3*), and the United Nations Convention Against Corruption.  Though the rules are common in nature and largely non-controversial, the applying and attain of every precept to a specific group could fluctuate. For instance, eighth precept requires companies to “undertake initiatives to promote greater environmental responsibility.” For some companies the applying of this precept could contain merely offering recycling containers for using their workers and prospects; for different companies, this will contain eliminating a product line or apply that impacts the setting or depletes pure sources.

Step 3: Overview the Sustainable Improvement Targets

In 2015, the United Nations agreed to a plan known as “Agenda 2030.” Seventeen Sustainable Improvement Targets (SDGs) had been established as a part of the Agenda 2030 plan. The SDGs embrace quite a lot of aspirational targets (e.g., no poverty and 0 starvation) and others which might be much less outlined (e.g., reasonably priced and clear power and local weather motion). After an entity’s evaluation and analysis of the Ten Rules, the following step needs to be to evaluation the SDGs and resolve how the entity may undertake applications, insurance policies or procedures that will contribute in direction of a specific SDG. Even when an entity finds that one or extra SDGs should not relevant to their operations or enterprise philosophy, it’s doubtless that each entity may discover one or extra applications or initiatives that it may implement or help that matches with one of many SDGs.

Whereas no single entity would give you the chance to remove poverty on a worldwide scale (SDG 1), there are applications in most communities with whom an entity may associate to contribute in direction of that SDG.  Equally, a enterprise entity might not be geared up to finish starvation (SDG 2), however partnering with meals banks and different organizations can be a means to handle that purpose in a neighborhood and important means. An entity with a need to set up an efficient ESG coverage would consider every SDG and ask the next questions:

  1. Is that this an acceptable purpose for the communities wherein we do enterprise or have important stakeholders?

  2. If sure, are there actions we’re geared up to take that handle that purpose or are there organizations that we are able to associate with in our communities to leverage that purpose?

  3. How can we consider the effectiveness of actions/partnerships recognized in b?

Figuring out the targets for an entity, the actions that the entity will take in direction of these targets, and a mechanism to measure the affect of those actions gives the idea for an efficient ESG coverage.

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