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Accelerating the ESG agenda


The Environment, Health & Safety (EHS) and Environmental, Social and Governance (ESG) agendas share a desire to transform organisations and to create long-term value through the effective management of non-financial risk and by optimising business processes. Both strive to engage and inspire people in the workplace to act for the greater good, to think about what we do every day, why we do it, and how we can continually improve.

The role of EHS in progressing the ESG agenda is obvious to most — the “E” is self-explanatory, and the majority are now making the link between occupational health and safety and the social agenda (after all, the only “S” metrics many organisations publicly disclose are health and safety metrics). There is, however, a higher-level contribution that the EHS profession can and should make.

As a profession, we have a lot to contribute from our experience. We bring a wealth of relevant knowledge and transferrable skills to the table, as well as lessons learned over many decades of pursuing EHS maturity and performance. As leaders and stewards of organisational change, EHS professionals have an important role, and an ethical responsibility, to contribute to the ESG conversation. We should do so proactively, and with confidence.

EHS professionals need to understand broader ESG issues, and take the opportunity to leverage the current attention ESG is attracting in the board room and at the executive table, to elevate the visibility of health and safety in organisations.

What is ESG?

ESG encompasses a comprehensive set of factors for defining and measuring organisations’ non-financial risks and impacts on sustainability — essential for evaluating and benchmarking sustainability performance. These factors include:

  • Environmental: Climate risk, carbon emissions, energy efficiency, biodiversity, use of natural resources, waste, pollution
  • Social: Occupational health and safety, human capital, employee development and labour practices, diversity, equity, inclusion, community, human rights including First Nations peoples’ rights
  • Governance: Board diversity, corruption, fraud, bribery, business ethics, compensation policies, general risk tolerance


There is an increasing demand from investors for greater transparency of organisations’ sustainability and ESG performance.
Interest in ESG has grown to historically high levels, partly thanks to the expectations of a new generation of investors who are calling for action on ESG to secure long-term value.
According to EY 2021 Institutional Investor Survey, 78% of investors believe companies should invest in improvements relating to ESG matters, even if it dents short-term profits, but only 55% of business leaders hold the same view.

Demystifying ESG reporting

A plethora of ESG frameworks and indices have emerged globally to provide organisations with guidance on capturing the complexity of non-financial disclosures in a meaningful way.

However, there is now a recognition of the need for international consensus regarding ESG reporting — increased collaboration on requirements and metrics will enhance ESG reporting overall and make performance data more relevant. In fact, 89% of investors surveyed in the EY 2021 Institutional Investor Survey responded saying that they would like to see ESG performance reporting set against globally consistent, mandatory standards .

The launch of the International Sustainability Standards Board is a significant development in this regard. It is poised to bring much needed consolidation, consistency and comparability to ESG reporting, developing a global baseline of sustainability disclosure standards.

The growing harmonisation of standards comes at a critical time given the lack of relevant, decision-useful information to allow market participants to assess risk and encourage investment in adaptation and mitigation efforts – increasingly seen as a barrier in the transition to a green economy.

How do EHS professionals meaningfully contribute?

Momentum is building around the ESG movement, and much work is needed. Among the top challenges faced by organisations as they implement their ESG programs are activating leadership support, establishing governance structures, engaging stakeholders, assessing materiality and risk exposures, facilitating culture change, investing in systems for better measurement and tracking of data and demonstrating improvement.

EHS professionals will immediately recognise the above program challenges – they are similar to (if not the same as) those faced by EHS. While the technical aspects of ESG may differ significantly from EHS, the need for program design, leadership, implementation, change management and review are common, and familiar. By drawing on our knowledge and experience, we can help ESG avoid the pitfalls of the past and fast-track its maturation.

EHS professionals possess several transferable skills and knowledge expertise relevant to the ESG agenda. We are well-versed in the topics of reputational risk and ethics, and are comfortable discussing these in the boardroom or on the factory floor. EHS professionals approach of assessing risk and prioritising based on risk, our ability to collate, analyse and draw insights from data and our capability to problem solve with leaders and workers are all relevant. We know that leadership, management systems and incentives will influence behaviour and we have gained insight into what works… and does not work.

Where do we start?

When helping to progress the ESG agenda, EHS professionals can start by informing themselves of the emerging challenges and opportunities of the ESG agenda — ask better questions, listen and reflect on where EHS professionals can have an impact. The seven levers of the EY HSW Transformation model can assist with structuring our thoughts. Use the thought prompters and questions below to start a conversation with your sustainability colleagues today.

Contact EY

The EY Climate Change and Sustainability Services team includes EHS and ESG professionals, working closely every day. Together, we are working to advance ESG and EHS, to the betterment of our organisations, our communities and our planet.
  
To discuss how we can help, please contact your EY HSW advisor.

Summary

EHS professionals can leverage their expertise to support the broader ESG agenda, bringing a wealth of relevant knowledge and transferrable skills to the table, as well as lessons learned over many decades of pursuing EHS maturity and performance.


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