Is Your Business ESG savvy Enough?

You may have heard such efforts next to the term ‘ESG’, or ‘environmental, social, and governance’, a set of standards widely used to measure a business’s environmental and social impact.

This ethos has come a long way from being a ‘nice to have’ philosophy to one that is now encoded in UK law. But there are a whole host of reasons for your business to be thinking about its ESG approach other than ensuring it stays on the right side of the law.

Is ESG mandated by law?

Far from being just a buzzword, your business’s approach to ESG is carefully measured according to UK legislation. There are some practices that your business must follow as a matter of law. Failure to comply can result in hefty fines and even criminal proceedings.

Some legislation is more punitive while others merely discourage bad ESG practice. The Landfill Tax Regulations 1996, for example, charges a company extra tax the more waste is sent to landfill, while companies whose vehicles emit fewer CO2 and nitrogen particulates get to pay less tax. The introduction of multiple low-emission sites across the UK is a good example of a policy that merely dissuades bad ESG practice while not making it illegal.

How do you make sure your business is compliant?

There are a number of ESG based regulations and directives that the government requires businesses to comply with as a matter of law. The issue is that these mandates are not set in stone and are subject to change.

Many businesses employ someone specifically in charge of ensuring the business remains compliant in an increasingly environmentally and socially conscious world.

Importantly, this does not delegate the responsibility of the business to just this individual or team, but they will be able to highlight and bring to your attention important updates in the law and advise your business on how best to proceed.

The benefits of an ESG conscious strategy

It’s not just about ensuring your business remains on the right side of the law; taking ESG practices seriously offers impressive business benefits, including:

• Reducing outgoing costs if raw material and energy usage is reduced
• Boosting your corporate image
• Improved health and safety standards
• Increased employment opportunities.

Seven key ESG areas

If you were building your ESG strategy from the ground up, you’d need to incorporate these seven key areas:

• Sustainability
• Waste management
• Atmosphere emissions
• Water body emissions
• Noise control
• Hazardous substances
• Energy usage.

 1. Sustainability

According to the Chartered Institute of Personnel Development, corporate social responsibility (CSR) is about ‘the ethics which drive an organisation’s activities and how it operates so that it’s viable over the long term.’[1]

Your business’s approach to sustainability will therefore quite closely overlap with your CSR, as both emphasise the importance of meeting long-term objectives over short-term convenience. Sustainability will be involved in every aspect of your business, from product research through to the customer receiving their goods or services.

2. Waste management

Prevention is always better than intervention, and waste management is no different. You’ll want to make sure your business has got effective waste management methods in place in the first instance – at the beginning of business processes, not the end – to save both money and time.

This could take the form of:

• Using products that have been designed to minimise raw material use, or require less energy and water to produce.
• Business processes that create comparatively less pollution and waste during production.
• Creating products with a longer lifespan that have an increased ability to be recycled.
• Segregating waste in the first instance so it doesn’t have to be done off-site (this is also far more cost-friendly for the business).
• Hiring registered waste carriers to properly handle and dispose of all business waste (although remember that the holder/producer of the waste, i.e. your business, ultimately remains responsible for the waste).

Not only is a preventative waste management method going to save you a lot of time and money in the long run, but it’s also essential for your corporate image. More and more, we’re seeing consumers ‘vote with their wallet’ as they increasingly support businesses whose ethics align with their own.

3. Managing emissions to the atmosphere

Fibres, smoke, dust, grip, vapours, mists, droplets – all of these substances are considered atmosphere emissions, and all of them can be emitted through business activity.

Your business’s atmosphere emissions are measured through the continuous emission monitoring (CEM) system, the results of which are then compared to emission limit values (ELVs) to check your business is compliant with legislation.

If your business is interested in reducing its atmosphere emissions but is unsure how to go about it, don’t worry; while changing your practices is one option, many businesses prefer a more direct solution, whereby your existing machinery engineered to reduce contaminants in the waste stream.

4. Managing emissions to water bodies

Your business’s emissions to the ocean and other water environments fall into three categories: physical, chemical, and biological. You can therefore minimise this type of emission in a few different ways.

• Mark and identify all drains
• Provide easy access to pollutant containers, like bunding, drums and IBC spill kits
• Manage the delivery of liquids and gas to their proper containment with delivery and storage controls
• A robust fire-fighting strategy
• Consider implementing a fire-fighting lagoon to capture residual pollutants from fire-fighting efforts
• Use of penstock valves, where appropriate.

5. Noise control

While noise at work is regulated by health and safety legislation, businesses also have a responsibility to control environmental noise. Environmental noise, typically referred to as any reasonably undesirable sound, has been proven to have a huge impact on human health, from sleep disturbance, poor performance at work, poorer educational achievement, and even cardiovascular issues.

Environmental noise can be caused by:

• Machinery (both within and outside of buildings)
• Tannoy systems
• Transport
• Agriculture
• Construction
• Quarrying and mining
• Pubs and clubs.

You can control the environmental noise your business generates in a number of different ways (depending upon your type of business), which can then be measured and monitored.

6. Hazardous substances

Hazardous substances can have an extremely broad and variable impact on society and the environment, from causing minor physical ailments like dermatitis to rendering whole regions of land inhabitable to humans.

Globally, the Chernobyl nuclear reactor disaster in 1986 and the Deepwater Horizon oil spill in 2010 caused untold devastation to human life and the environment, the aftereffects of which are still seen in the world today.

It therefore doesn’t need to be stressed that your company’s hazardous substances controls are amongst the most important elements of your ESG strategy to get right. Part of this is making sure that the relevant people have processes in place to ensure that hazardous substances controls are being stringently observed.

7. Energy use

Energy usage is the most easily adapted of all the seven areas discussed, with widespread energy usage changes able to be implemented on a wide scale without significant capital expenditure or disruption to business. In this regard, businesses should therefore focus on ensuring the right controls are in place that notate energy usage, and how energy is used, as precisely as possible. Having access to precise energy usage information will enable your business to make more informed decisions about the best energy change solutions.

If you have any questions about information on this article, please contact your usual Towergate adviser.

Sources

[1] Corporate Governance | CIPD

About the author

Mark Holroyde CMIOSH MIIRSM DipNCRQ DipCII has over 30 years' experience in insurance, risk management, and health and safety. He is a Chartered Member of IOSH, a qualified internal and second party auditor for ISO45001 and ISO14001, an approved IOSH trainer, and a member of the CII. He also holds the NEBOSH National Certificate in Fire Safety and Risk Management. Mark is currently studying for an honours degree qualification in Environmental Management.