This is the question No. 1 that sustainability consultants get asked right now- what others do and how they do it. ESG takes over the business internally and everyone wants to be ‘in the loop’.
At the same time, companies don’t want to take unnecessary risks and experiments, they want a clear picture of what to expect, how much time it will take and how much each effort along the sustainability path will cost, so they can plan and prepare effectively.
The answers to these questions can be split in several main groups, related to the most sought-after and widely-used practices in the world of corporate sustainability, according to an analysis by denkstatt consultancy.
Reporting
In most cases, this is how ESG is introduced into a company. It is more and more often that businesses decide to take this step by themselves. However, it is not uncommon for a company to be forced to make this step as a result of evolving regulations.
The main goal of a report is to show how a company manages its environmental and social impacts. And this is the “new normal” – the way to manage a business today.
The process of reporting usually starts with a materiality assessment of the company. This assessment includes all managers and key employees, but also stakeholders – consumers, partners, non-governmental organizations, etc.
Everyone has the right to express their opinion and decide on assessments, which reveals the relevant material topics for the company. Later on, these material topics have to be monitored.
In fact, it is very often that companies have a decent amount of the needed information but don’t realize it – for example, electricity, water, and fuel costs. These are also the indicators that guide the reporting.
In the end, the report presents the conclusions – which go over the important material topics and how the company manages them. Setting targets is a crucial aspect of this process, allowing the company to track its progress, measure the effectiveness of its sustainability measures, and report on the results achieved.
That’s why goals are never abstract – it is not enough to simply declare that you will improve, but how you will do it and when.
For example, a major food retailer in Bulgaria recently issued its first corporate responsibility report. The report highlights 10 important material topics, such as environmental management, retail packaging, working with local suppliers, and responsible employment practices.
They monitored their progress over the last two years and set new goals to achieve. The difference could be seen in an instance – the entire chain adopted a plastic reduction policy and consumers are now charged if they want to buy food in single-use plastics packaging, denkstatt says.
What is the goal of such report? Its main idea is for businesses to start assessing and managing their impacts and to be more transparent. This is the key to a sustainable business – the consistency and predictability that make some more competitive than others and differentiate them in the future.
Although it is currently not mandatory for sustainability reports to be validated by an auditor, this is expected to change in the near future, according to the consultancy.
Decarbonization
A very important thing to clarify is that decarbonization is a process, not a single operation. It started years ago as a voluntary choice of the biggest companies to reduce their environmental impact. However, it has quickly evolved into something else.
Businesses are now decarbonizing to meet or get ahead of the pressure put by regulations.
The first step of decarbonization is again collecting data – a company has to know where their emissions are coming from. This happens with the help of the so-called greenhouse gas inventory. Basically, it is a collection and summary of all company data.
The process is complex because most companies are aware (to some extent) of the direct emissions from their operations but do not realize that the scope is much wider – it extends to their suppliers and partners or those that are upstream or downstream in the supply chain and what their impacts are.
But the core part of decarbonization starts after the calculations. Targets have to be set and their completion depends on different approaches. This must be individual and tailored to the specific business.
For example, in a high-energy production, the focus is usually on reducing energy costs, but this can often come at a very high price.
It is even more complex if the major impacts come from the partners and suppliers – then their impacts have to be requested and sought, and also calculated and reported.
However, once again the goal justifies the means – if you approach decarbonization as more than a voluntary act to better manage your business, the requirements will increase.
And now we are back to where we started – decarbonization is a long process, so the earlier you start the better for you. Because it requires engaging people, collecting data, and lots of time in between those processes. And as we know, time is money.
Decarbonizing your business on time gives you something else – you raise you reputation among your competitors and minimize future financial risks.
Product life cycle
This is the way to assess the direct impact of a particular product on its surroundings. It covers all stages of a product’s life – from manufacture through usage to end-of-life and disposal or potential recycling.
More and more consultants are producing these types of analyses because a huge proportion of businesses manufacture something or work with components that are manufactured by subcontractors.
Where to start? First, a company should be aware of why is doing it. Many companies use it for their internal processes – to know more about themselves, their production, and what they can improve.
Product life cycle assessments could be helpful when a company wants to reduce its energy costs, for example, which will definitely provide a clearer picture of the impacts.
More frequently, the life cycle is evaluated to boost the image of the company. The other scenario is when a business is part of a bigger chain and the partners want the smaller firm to evaluate its impacts.
Usually, these are large corporations that are pressured by the regulations and must report their impacts throughout the production and supply chain.
What did one of the world leaders in the production of automotive components do, for example? This is a company that makes dozens of items and is connected to many other smaller companies that also do something for the parent company.
For this purpose, they are developing a tool that has many functions – a calculator, where all the data about suppliers, materials, component weight, energy consumption, packaging and waste could be input.
Every company wants to manage these processes on its own, but the individual approach provides the best results, denkstatt points out.
What else?
Corporate sustainability is not limited to the topics above, although companies are most often confronted by them.
Biodiversity, which becomes highly regulated and companies have to manage their impacts on nature, is more significant than ever.
Banks are literally taking on the role of ESG consultants who have to decide whether a business is sustainable enough to lend it money.
The goal is the same for everyone. Responsibility comes through reporting, and business influences through regulations. This undoubtedly delivers results, however, it does not motivate companies to voluntarily and naturally improve their environment, but rather to meet the requirements, denkstatt warns.