ABC Analysis: ESG for CS Professional

ABC Analysis of Key Environmental, Social, and Governance (ESG) for Company Secretary (CS) Professional

Introduction

Milton Friedman 1970 article "The Social Responsibility of Business Is to Increase Its Profits" in the New York Times Magazine is probably one of the most debated papers on social issues. The Contents of the article have become alive in today time in the form of Environmental, social, and Governance factors in the corporate world. ESG appeared probably for the first time in the UN Secretary-General and UN Global Compact report "Who Cares Win: Connecting Financial Markets to a Changing World" in 2004. ESG considers so many things like executive salary, labor norms, community integration, greenhouse gas emissions, etc.; as a result, a CS position in ESG is now more crucial than ever.

ESG Importance and Adoption in the Corporate World

The Significance of ESG for an organization may be simplified as follows:

• E in ESG - The organization could detect the possible risks posed by the environment, the supply chain, and its reputation, which avoids adverse effects on its financial performance.
• S in ESG - Businesses with high-priority ESG may draw socially conscious clients and investors. This could create environmentally friendly business operations.
•  E and S in ESG - ESG may promote innovation in new goods and services that tackle social and environmental issues.
• G in ESG - ESG may draw the attention of all the parties concerned and create the most sustainable business model that encourages long-term involvement.

Businesses may adopt ESG principles by -

• Evaluating ESG performance and scope of improvements
• Lowering carbon footprints, setting labor standards, etc
• Creating policies for corporate Governance, social responsibility, and the environment.
• Engaging stakeholders

The necessity of adopting ESG business practices

1)  End users and investors are growing more concerned about the effects of business on people and their environment in today socially conscious world. Businesses can benefit from local communities and the environment by exhibiting commitment, and the company reputation among them is guaranteed by the best ESG practices.

2)  Investors understand that businesses with sound ESG policies are better equipped to handle economic downturns and produce steady, long-term returns. Companies with strong ESG practices would attract investors and succeed in the long run.

3) ESG practices can assist the business in increasing staff retention and recruitment by creating a supportive workplace environment that values sustainability and social responsibility.

4) Governments are enacting new laws and regulations in nations to encourage businesses to ensure ESG practices. The organization can comply with these new laws and standards by creating and implementing a corporate ESG strategy. This can lessen the possibility of legal or regulatory action and help businesses establish a reputation for being ethical and sustainable enterprises.

Advantages of ESG

• Increase your fame
• Lower the risks
• Secure money from wastage on things like trash reduction
• Long term value

Probable Disadvantages of ESG

• The cost of implementation of ESG is so high that small and medium companies cannot afford ESG easily.
• Currently, there is no agreed-upon framework for ESG, which would lead to a lack of standardization.
• Some businesses may look for short-term gains, which would affect ESG long-term valuation.

Role of CS in ESG

The Company Secretary ensures the proper functioning of the Board of Directors and compliance with all legal and regulatory obligations.

As such, the ESG becomes part of the CS role by default.

1. ESG integrator: The CS should ensure that ESG is a part of the company policy. They collect, collate, and report on ESG-related data.
2. Be a communicator: The CS plays an important role in communication between management and stakeholders. As such, CS should communicate with and involve stakeholders in ESG-related activities.
3. Facilitator: The CS should facilitate the board of directors and staff members on the organs of ESG and encourage their active involvement in its implementation.
4. An advisor: CS should highlight the risks and possibilities around ESG and pinpoint the areas of the company that could improve ESG performance.
5. Risk Manager: ESG works as a risk identifier, and with the help of ESG, CS can determine whether the company sticks to relevant laws, regulations, and industry standards related to ESG.
6. A value creator: ESG helps the CS in making practices that benefit the environment and society and contribute to competitiveness in a sudden change in the business environment

Conclusion

CS can aid businesses in enhancing ESG compliance, luring in more socially conscious investors, and generating long-term value for stakeholders. Company Secretaries can make sure that ESG policies and procedures are ingrained into the organization culture and operations and that ESG has been considered in all decision-making processes thanks to their knowledge of Corporate Governance and regulatory compliance.

Nowadays, ESG is very important for businesses to make a good reputation, provide innovative ideas for new inventions, reduce risks in business, and create long-term wealth. ESG needs a complete approach to implementing ESG practices, which involves assessing ESG performance, setting goals and objectives, developing policies and procedures, implementing ESG practices, monitoring them, and communicating with stakeholders. Businesses that prioritize ESG can create a more sustainable business plan that aims to provide long-term value for all parties involved, including workers, communities, and shareholders.

The growth of company secretaries in ESG addresses the importance of businesses as change agents and their multifaceted responsibilities in ESG integration, reporting, Governance, stakeholder engagement, risk management, and policy implementation are instrumental in driving sustainable business practices. As ESG considerations continue to shape the corporate landscape, the role of Company Secretaries will undoubtedly remain pivotal in steering organizations toward a more sustainable and responsible future.

References

1. https://www.linkedin.com/pulse/role-company-secretaries-esg-compliance-reporting-jsrk-associates-j1s2f/
2. https://www.linkedin.com/pulse/abc-esg-evolution-drivers-next-phase-santosh-k-singh/
3. https://medium.com/@harishraj1296/the-critical-role-of-company-secretaries-in-esg-compliance-fb87a559867a
4.  https://www.cgi.org.uk/knowledge/subject-resource
5. hub/esghttps://www.icsi.edu/media/webmodules/Academics/ENVIRONMENTAL_SOCIA L_AND_GOVERNANCE_ESG_PRINCIPLES_PRACTICE.pdf
6. https://www.proskauer.com/blog/the-abcs-of-esg