Discover the importance of your ESG score and how it can help you make a positive impact on the world!
Sustainability is one of the most important things for a company to have in this day and age. If they have it, it can provide immense value. If companies don’t have it, it can negatively impact the customers they get, their investment, and the quality of potential employees wanting to work for a company.
One of the common terms that you may have come across when it comes to sustainability is ESG. We often get people asking us: But what is my ESG score, and why is it important?
Find out the answer to questions such as what is my ESG score and why having a quality environmental, social and governance strategy is important below.
What is an ESG score? The Definition
So, you’re probably thinking, what is my ESG score? First, let’s go into more detail about what an ESG score is.
An ESG score is a rating system that evaluates a company’s environmental, social, and governance strategies and practices. In short, it helps people see beyond a simple balance sheet and into the heart and soul of a company and whether it cares about the planet, its employees and its community (or if it is just interested in profits).
As such, companies with higher ESG scores tend to be on the more socially responsible and environmentally friendly side, which is why this score is great to know.
Also, it makes sense as to why investors care about ESG scores, as recent studies have shown that 66% of global consumers are happy to pay more for sustainable products.
What Exactly Do They Measure?
Overall, an ESG score has several factors that contribute to the overall score. So, let’s go through each section as we explain what specifically they measure.
Environmental
The ‘E’ in ESG stands for environmental. This measures a company’s impact on the world, from greenhouse gas emissions to resource depletion. In short, it helps you understand the eco-footprint of a specific company.
Carbon emissions, water sourcing, biodiversity, toxic emissions and packaging materials are the majority of environmental issues that are covered when ESG scores analyse the environmental aspect of things.
Nowadays, one of the biggest environmental issues is air pollution. As such, air quality is a big factor that ESG scores measure, making sure that companies aren’t actively polluting the environment and keeping the air around them clean.
Social
The ‘S’ in ESG stands for social. This measures a company’s overall impact on society. This looks at things like how the business treats employees, how it impacts local communities, and whether it positively impacts local communities and invests in social causes.
On top of this, you have things like labour management, worker safety training, product safety and consumer financial protection that are also looked at.
Governance
The ‘G’ stands for governance. This one measures a company’s internal policies and procedures. In short, it looks at board diversity, ethics, accounting practices and tax transparency to ensure that there is no shady stuff.
So, all in all, having a good environmental, social and governance strategy will lead you on the path of scoring high in your ESG score and impressing your clients and investors alike.
Why Clean Air Matters When It Comes to ESG
Air quality is crucial to many of the environmental and social issues ESG looks at. However, it is often overlooked by many companies when it comes to building their environmental, social and governance strategy.
Businesses that focus on improving air quality will see an increase in their ESG scores, as they will be reducing their carbon footprint and implementing sustainable practices. However, when looking at air quality, it isn’t only about the company’s impact on the environment; it’s also about the effect on the surrounding area of the business’s location and local communities.
Poor air quality has plagued many areas around the world and is one of the main causes of respiratory issues worldwide. By prioritising clean air, companies can show that they care about the health of their employees, customers, and local community, while also improving their ESG score.
In short, clean air matters, especially when talking about the environmental and social part of ESG. By investing in renewable energy sources, air purifiers and more, companies can set themselves up for long-term success.
How to Find Out Your ESG Score
So, you should now have a pretty good idea of what an ESG score is. But how do you find out your own ESG score?
To find your score, there are various online tools and databases managed by finance companies, NGOs and governmental agencies. If you want your own score, we recommend contacting one of these companies, and their team of analysts will get to work providing one for you.
However, what you must understand is that different ESG rating companies have slightly different criteria for their rankings. Even though the main three categories stay the same, some companies give some elements in each category a higher rating than others.
If you already have an ESG score and are wondering how the organisation that did the score came to the outcome it gave you, just ask, and it will happily give you a breakdown of where you ranked in all categories.
What Counts as a Good ESG Score?
It is common for investors and consumers to measure ESG scores with that of their competitors.
An ESG score ranges from 0 (bad) to 100 (good). However, this is a simplistic view of ESG scores, so let’s break it down below.
A very low score shows that the company doesn’t follow best practices and is actively harming the environment/employees. This is a massive issue and would need to be remedied immediately.
An average score shows that although it is making some effort, it is not enough to make meaningful changes, and more work needs to be done to get back on track.
A great score indicates that the company utilises best practices in all ESG categories and has a positive impact on the planet.
Obviously, if you have a company, having a great ESG score is extremely important. It can affect whether potential employees want to work for your company and if customers are happy doing business with a company with a particular score. Because of all these reasons, it can be seen that having a good ESG score and being a sustainable company has massive economic benefits for any business.
All You Need to Know About ESG Scores
All in all, an ESG score is a fantastic benchmark to see whether a company cares about the environment, the people, good business practices and the surrounding area (or not). By combining the score with other research about the company you’re looking at, you can gain a really clear picture of if a company is environmentally and socially responsible.
We are here to help you improve your ESG rating.
