What is this ‘ESG’ Thing You’ve Been Hearing About? Let Us Explain….
The term ‘ESG’ has become a business buzz word, and conversely, topic of much debate.
What is ESG? Why does it matter?... How is it related to Replate? Let’s get to the bottom of it!
We’re happy to offer some insight….
What is ESG?
ESG stands for Environmental, Social, and Governance. It refers to a set of criteria that investors use to evaluate a company's sustainability and ethical impact. ESG goes beyond traditional financial metrics and takes into account factors such as a company's impact on the environment, its treatment of employees and customers, and the quality of its leadership and governance practices.
How is ESG measured?
Companies receive a ranking based on how they score against a variety of factors within each element. According to the World Economic Forum, environmental factors include use of renewable fuels; recycling practices; greenhouse gas emissions; climate risk and water management. Social factors include employee benefits; working conditions; diversity & inclusion; and impact on local communities. Governance factors include ethical standards; stakeholder engagement; and board diversity.
There are several methods for measuring and improving ESG. Third-party consultants can review a company's ESG performance based on a range of criteria, and provide a rating. ESG indexes track the performance of companies that meet certain ESG criteria. And ESG frameworks help provide guidelines and principles for companies to follow in order to improve their ESG performance.
Why does it matter?
Mainly it’s important to investors and external stakeholders, and demonstrates that a company’s working towards better practices.
Investors today want to ensure that their money is making a positive impact on society, and similarly, customers want to know the companies they support align with their values. ESG provides a framework for this assessment. ESG metrics help investors identify companies that are better positioned to manage long-term risks and opportunities, including those related to climate change, social issues, and governance practices. ESG also promotes positive social and environmental outcomes, encouraging companies to prioritize sustainable and ethical practices and ultimately drive positive change.
And this is controversial because….
One of the main controversies surrounding ESG is the lack of standardization and consistency in measuring and reporting performance. It can be difficult to compare the ESG performance of different companies or to assess the effectiveness of ESG investment strategies. This has led to concerns about "greenwashing," or the practice of companies making misleading or exaggerated claims about their ESG performance.
There’s also debate as to whether ESG factors are relevant to a company's financial performance. Some investors argue that ESG factors are important and can have a significant impact on a company's long-term financial performance, while others believe it’s immaterial. There are similar arguments around the effectiveness of ESG investment strategies. Some studies have shown that ESG investing can lead to improved financial performance, while others have found little to no impact on financial returns.
Finally, some critics argue that ESG investing can be overly restrictive and limit investment opportunities. This can be true in certain industries, such as fossil fuels or defense, where companies may not meet certain ESG criteria but are profitable.
But the point is to benefit the environment and community, right? ESG showcases which companies are working towards that mission, and how they’re taking the steps necessary to achieve those goals.
How can Replate help?
Businesses who utilize Replate to donate surplus food can earn higher scores in all three elements of ESG.
When you donate food rather than throw it away, you improve your waste management practices, recycle resources, save water, and reduce greenhouse gas emissions.
+4 for the environment!
Replate also helps clients support local, underserved communities, contributing to both social and governance factors as well. Further, we collect and analyze data on the impact of food donations that companies can submit to attest to their ESG performance - it’s all built into our dashboard!
That’s the gist of it!
For more information on Replate, visit our website.
You can learn more about ESG here.