Interact team | May 17, 2023

Image credit: Buffalo Boy/Shutterstock

As legislation around mandatory sustainability reporting begins to hit the enterprise sector, there has never been a more important time to measure your sustainability impacts. However, it can be a minefield deciding which framework to go with.

What is ESG and why does it matter?

ESG is a set of standards against which a business can measure their impact on society and the environment, to be accountable and transparent with their data. Investors, potential employees and consumers are becoming increasingly concerned about the impact a company makes on the world. ESG helps stakeholders highlight any risks or opportunities for a company. One recent KPMG survey reveals that potential employees are looking for a company with clear ESG goals – 46 per cent of the 6,000 UK workers and students surveyed want the company they work for to demonstrate a commitment to ESG and 20 per cent have turned down a job offer when the company’s ESG commitments did not align with their values.

At the same time, sustainability regulation is fast approaching, and most companies will soon need to report on their activities against this. Put bluntly, investing in ESG reporting will soon be mandatory, creates value for your stakeholders and can give your company a competitive advantage.

What frameworks are there for measuring ESG?

A range of standardized assessment platforms are available to measure ESG, but how do you decide which to choose? We take a look at which ESG frameworks are out there, and which are the most appropriate for your organisation.

B Corp

B Corps certification probably has the strongest brand identity out there for consumers and potential employees looking for a company that reports its sustainability impacts. Consisting of a two-step process administrated in the UK by B Lab, it consists of incorporating stakeholder governance into your legal structure (so that you are legally accountable to our workers, customers, the environment and our community) and completing and submitting the comprehensive B Impact Assessment digital tool to measure your policies and practices against a set of social and environmental standards across the following areas: governance, environment, workers, customers and community.

As well as having a strong brand identity, B Corp certification is a wide-ranging and comprehensive assessment that identifies areas of weakness as well as strength. We chose B Corp certification for Interact exactly because of its rigorous nature. Interact are currently certified as a Pending C Corp and are on course for a huge score at full certification.

One of the limitations of using B Corp self-assessment is the lengthy and complex process with associated costs around making the necessary changes to company policies and practices. It has also been criticised for its pricing structure (based on turnover) as the administrative and legal costs can make it difficult for large businesses.

EcoVadis

EcoVadis, established in 2007, is the new kid on the block. It has been making waves with rapid adoption among businesses globally (more than 100,000 rated companies across 175 countries), as it enables companies to quickly assess the ESG performance of its suppliers. EcoVadis provides a sustainability ratings service of companies, delivered via an online platform, and covers a range of ESG issues grouped into four themes: Environmental, Labour & Human Rights, Ethics and Sustainable Procurement impacts.

Assessment is organised by EcoVadis following a self-assessment questionnaire and results in a scorecard, rating the company from zero to one hundred, and assigning the company a bronze, silver or gold medal. Scorecards provide guidance on strengths and areas for improvement.

As well as a strong brand identity in the B2B market, benefits of an EcoVadis certification include the fact that the initial questionnaire isn’t onerous and is sector-specific, the scorecard presents information in a easy-to-read manner and certification, which lasts for a year, includes a free reassessment (handy, if you need to improve your score). It is also useful that EcoVadis will accept documentation from other frameworks. So, if you carry out a B Corp Assessment as a smaller company, you can potentially use this information for EcoVadis as you grow.

The downside to EcoVadis is that the assessment is not transparent – there is no explanation about how your answers relate to your score.

ISOs

ISO 14001 is the veteran of the environmental management systems world: it has been helping organisations identify and control their environmental impact since 1996. According to the International Standards Organisation, there are more than 300,000 certifications to ISO 14001 in 171 countries around the world.

The other ISO standard you need to know about is ISO 50001, which relates to energy management. This is excellent for large energy users who need to demonstrate energy reductions over time. It is seen as an easy way to handle Energy Savings Optimisation Scheme (ESOS) regulations.

The advantage of ISO certification is that companies are externally audited by an independent certification body that then provides them with an ISO certification. ISO 14001 and ISO 50001 are internationally recognized, provide reliable credentials about a company, give immediate notice about the environmental performance of an organisation and can help to reduce waste, carbon and costs. It is often seen as an essential supply chain requirement, for instance for companies specialising in IT asset disposition.  

The disadvantage of ISO certification is that, if the auditors are not happy with the processes in place, changes can be extremely costly to implement, often requiring major organisational change.

UN SDGs

The UN Sustainable Development Goals (SDGs) cover 17 global pledges for a better world. Companies supporting the SDGs generally identify key areas that they could improve, set ambitious, measurable targets against this and then report on these year-on-year. The framework is free to use and, with its strong international branding, is globally recognised. The beauty of the framework is that you can set your own targets focusing on positive action, rather than mitigation of existing environmental impacts, and there are no penalties for failing.

Affiliated organisations such as Support the Goals award you stars as you publicise your efforts, to recognise those companies who help to educate their supply chain around sustainability.

Although not much use if you are asked to report on ESG, setting UN Global Goals is an important way to make employees feel invested in your corporate sustainability and helps to create a culture around sustainability and a shared mission. Although less stringent than other frameworks, UN SDGs are a good way of communicating your sustainability actions and engaging both employees and other stakeholders.

Just the beginning…

Hopefully, this summary is a springboard to help you choose the relevant framework(s) for your ESG reporting. Prior to choosing any one framework for environmental management and reporting, you should take into account the size, sector and whether your company is B2B or B2C. Many companies may require more than one framework. Work in this area is evolving, so watch this space for more information.