ESG and Sustainability: How Responsible Business is Changing
Tuesday, 7th June 2022
The world of business is going green. Consumers are increasingly choosing sustainable brands, while Infogrid research has shown employees are even considering environmental factors when they choose where to work.
But, crucially, investors too are making green concerns a key part of their investment decisions. And that’s largely happening through ESG.
Yet ESG and sustainability are not exactly the same things. Sustainability generally refers to any practice that may help the environment, ESG—environmental, social, and governance reporting—demands something more formalised and precise. In short, to prove your ESG performance, your business will need to track specific, widely agreed metrics.
In this post, we’ll explore the difference between ESG and sustainability in detail.
By the way: At Infogrid, we empower businesses, facilities managers, and landlords to gain granular insight into their ESG performance. Thanks to smart IoT sensors—combined with our proprietary AI platform—we can support you in tracking, validating, and reporting your ESG data.
So, businesses shouldn’t just claim they are sustainable. They need to prove it. And we can help them do this.
ESG and sustainability: The benefits for your business
Whether you’re obliged by new ESG regulations to monitor your environmental data, or you simply want to prove your sustainable credentials to your consumers, you’re doing the right thing. Making greener decisions is great for the planet—but it’s also great for business too.
Here’s why:
Customers are willing to pay more for green products. Whether you’re a consumer brand or a business-to-business company, your customers want to know you’re committed to sustainability. One study found that consumers are willing to pay more for green goods. And with millennials constituting 75% of the workforce by 2025, your business clients will likely be from this value-driven generation.
Staff want their employers to act on climate. Recent Infogrid research found that roughly half of employees would be more likely to apply to and stay at a company if it had a strategy to cut carbon emissions.
Investors are increasingly making decisions based on a company’s ESG. 85% of investors now say they consider a company’s environmental impact, social impact, and corporate governance when making investment decisions. Responsible investing is here to stay—and if you want to benefit, it’s time to comply.
Mandatory ESG reporting is on the horizon. In June 2021, G7 backed the adoption of mandatory ESG. Later that year, the International Sustainability Standards Board was established to attempt to standardise ESG policy. New ESG regulations look like they will be based on the Task Force for Climate-Related Disclosures recommendations.
Yes, sustainability and ESG will both drive positive change for your company. But they’re not the same thing. Here’s why.
What’s the difference between ESG and sustainability?
ESG and sustainability are terms that are often used interchangeably. However, it’s really important to know the difference. In short, ESG is measurable, benchmarkable, and relied upon as a metric by the business community. Sustainability isn’t.
Let’s explore these in detail.
Sustainability
In reality, these days, sustainability is little more than a buzzword. While its intentions are good, pretty much any brand can call itself “sustainable” or “green” without any real need to prove it. It’s a term that’s imprecise, often abused, and too often confused with other similar (but distinct) terms like “corporate social responsibility”.
Back in 2015, the United Nations launched the Sustainable Development Goals, as “a blueprint to achieve a better and more sustainable future for all people and the world by 2030.” These 17 goals—involving aims such as preventing climate change, limiting energy usage, and securing human rights—were intended to catalyse states, business, and civil society to do better for the planet and for society.
Yet the term “sustainable” itself has come far from these goals. And unfortunately the term is often little more than a marketing tool for businesses.
Instead, to identify companies that really are serious about their environmental impact, capital markets prefer the term ESG.
ESG: Environmental, social, and governance
ESG builds on the values behind sustainability, but it reinforces them with rigorous measurement and more mature, sustainable business practices. And, crucially, it goes further. ESG is not solely based on environmental sustainability, but it looks at all of the impacts of a company’s processes.
There are admittedly many different ESG frameworks that businesses or financial institutions can use. They all offer a specific set of criteria to follow and measure against.
Unlike “sustainability”, ESG is not just a value, but a strict programme to follow:
Environmental. Environmental ESG criteria include metrics on waste production, energy usage, and air quality. With ESG, you can no longer just say you’re having a positive impact on the planet, but you need to prove that with hard information too.
Infogrid can help. Our smart sensors can inform you in real-time about the energy efficiency of your building, alongside water waste and indoor air quality. This way, you can meet your ESG goals and prove your green credentials to your stakeholders.
Social. Alongside environmental criteria, ESG requires that you measure your social impacts too. Are you paying people fairly, throughout your supply chain? Are the human rights of your employees protected? Can you prove their level of wellbeing? ESG reports should provide proof of this too.
Governance. Finally, your corporate governance is an essential part of your ESG reporting. Here, you’ll need to provide data on the demographic makeup of your board, the transparency of your business processes, and the steps you have in place to prevent corruption.
As a result of this analysis, you’ll ultimately receive an ESG score. As such, it’s much more precise and in-depth than “sustainability”.
Yes, it requires much more effort. But with the right support, it’s perfectly manageable. Here’s what we can do to help.
How to meet your ESG obligations with Infogrid
At Infogrid, we can help to guide you through everything you need to do to ensure you meet your ESG goals. Here’s how:
Begin with measurement. ESG reporting starts with measuring your social and environmental impacts. Depending on which ESG framework you use, there’ll be different ways to do this. But many of the same metrics will usually apply.
Don’t do this manually and waste labour and time and risk inaccurate results. Instead, smart systems like Infogrid’s Healthy Building System can help you track the environmental impacts of your building easily and accurately. And, it will keep on tracking data when you’re not there.
Validate the data. Again, the specific ESG framework you use will determine how you present and report the environmental data. But we can help with this too. Our system can help you ensure that the data you report is valid and error-free. And we can help you ensure that it’s presented in line with the demands of your specific framework.
Keep on measuring. ESG—like sustainability—is not something you just measure once. Instead, it’s a commitment to a different way of doing business, for the better. With Infogrid’s Healthy Building System, we can help you access data on your externalities and put steps in place to improve.
Get started with Infogrid
As investors, consumers, and employees demand environmental action from business, it’s time to act. But you don’t have to navigate the world of ESG alone. We can help. Get started with our demo.
