The ESG framework in general has 3 main parts and each part zooms in on many subparts. Below you will find the main topics that are discussed in each main part.
E = ENVIRONMENT
The Environmental factors assess a company's impact on the planet. This includes aspects like energy consumption, greenhouse gas emissions, pollution and waste management, resource usage, and strategies for mitigating climate change.
- Energy usage and efficiency: This includes a company's consumption of different energy sources (fossil fuels, renewables) and their efforts to reduce consumption or switch to cleaner sources.
- Greenhouse gas emissions (GHG): Companies report their total GHG emissions and efforts to reduce them.
- Pollution and waste management: This covers a company's waste generation, pollution control measures, and waste disposal practices.
- Resource use and sustainability: Reports on a company's use of resources like water and raw materials, and their efforts towards sustainable practices.
- Climate change mitigation and adaptation: Companies may report on their strategies for dealing with the effects of climate change.
S = SOCIAL
The Social factors examine a company's relationship with its workforce, stakeholders, and the community. This covers areas like diversity, equity, and inclusion, labor practices, human rights, community engagement, and product safety.
- Diversity, equity, and inclusion (DE&I): This covers a company's workforce demographics, equal opportunity practices, and efforts to promote diversity and inclusion.
- Labor practices: This includes aspects like employee wages, benefits, working conditions, health and safety practices, and collective bargaining rights.
- Human rights: Companies may report on their efforts to uphold human rights throughout their operations and supply chain.
- Community engagement: This covers a company's involvement with the communities it operates in, such as charitable giving and social responsibility initiatives.
- Product safety and quality: Companies report on their commitment to product safety and responsible production practices.
G = GOVERNANCE
The Governance factors focus on a company's leadership, ethics, and risk management practices. This includes the composition of the board, executive compensation, risk management strategies, commitment to business ethics and anti-corruption measures, compliance with regulations, and transparency in reporting.
- Corporate leadership and board structure: This includes information on the composition of the board of directors, executive compensation, and diversity among leadership.
- Risk management: Companies report on their risk management strategies for various ESG factors.
- Business ethics and anti-corruption: This covers a company's commitment to ethical business practices and measures to prevent corruption.
- Compliance and legal issues: Companies report on their compliance with relevant environmental, social, and governance regulations.
- Transparency and disclosure: This refers to the company's openness in reporting on ESG performance.
What's next: CSRD
The Corporate Sustainability Reporting Directive (CSRD) is the main driver for ESG reporting in the EU. It applies to a broader range of companies compared to previous regulations and mandates more comprehensive reporting on ESG factors.
CSRD implies that your organisation has to start reporting to the EU in 2025 over the current year 2024.
