Learn the difference between sustainability and ESG software 

23 April 2021 | BLOGS

We’ve all heard the buzzwords around sustainability. It’s a topic central to almost everyone from those concerned with humanitarian efforts to those concerned about their financial investments. From advocates concerned about the welfare of our natural ecosystems to CEOs concerned with keeping their business alive in a volatile competitive landscape. Yes, everywhere you go it seems that someone is ready to share an impassioned stance on one of these issues.

The challenge for corporate sustainability leaders is that many of these conversations begin to blur together. Though we, undoubtably, live in an interconnected world, it’s important to align your sustainability programs along strategic initiatives – measuring and differentiating each while maintaining visibility across them all. This will, of course, lay a successful foundation when it comes time to evaluate the sustainability and ESG software that fits your needs best.

First, let’s take a look at the difference between sustainability as a broader initiative and ESG. While some companies fall into the trap of using these terms loosely and interchangeably, there are some noteworthy differences. Keeping in mind that they can be two very different things – requiring a different set of resources, skills, and technology to enable their success.

What are environmental, social and governance (ESG) factors?

ESG comes largely into play with regard to the financial health and valuation of a company. Investors in public equities often look to ESG factors – criteria used to evaluate a company’s environmental, social and governance – as a way of assessing risk within the organization. The appeal to many investors is that the longevity of the company and its resiliency to market upheaval can generally not be ascertained from traditional financial statement analysis alone. Leveraging a sustainability and ESG software can help companies see and interpret factors including toxic waste disposal, negligent behavior that may expose the company to legal ramifications, or social risks including worker strikes or government intervention.

“Because ESG investing considers an organization’s environmental, social, and governance risks and opportunities that could have material impact on its performance, these factors are used to comprehensively expand upon and enhance the traditional measurements of company performance in informing investors decision-making.” – S&P Global

How does a sustainability initiative expand beyond ESG

While there are sustainability and ESG software solutions that focus primarily on meeting the reporting standards required to appease potential investors, progressive organizations are realizing the full potential of sustainability as a strategic initiative. Sustainability programs – and the more comprehensive sustainability and ESG software solutions that support them – focus on the reporting required to make actionable steps toward strategic growth.

Sustainability programs generally put an emphasis on visibility into three key areas:

  • Environmental sustainability

    Similar to the interests of ESG programs, sustainability programs ensure and validate compliance for regulatory certifications and audits, but they also monitor and drive business activities like product traceability and ethical sourcing. Visualized in prebuilt sustainability reports within the sustainability and ESG software solution, a comprehensive understanding of these practices make the organization more stable in the long-term and proactively mitigates risks associated with changing regulations.

  • Employee health and safety

    Human rights impact assessments and reviews aren’t just the right thing to do by your existing employees, ensuring their wellbeing on the job. But they also offer the measurable competitive advantage of workforce retention and desirability to attract new qualified employees.

  • Social and corporate sustainability

    This category closely aligns with the financial goals of external investors because there are operations of significant investment within an organization which are subject to risk and cost inflation. With transparency, companies can reduce risk across your business operations through sustainable supplier relationships and regulatory compliance.

 

To learn how to set your program up for success with a sustainability and ESG software solution designed specifically for commodity-intensive businesses, learn more about our solution here.

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