As an organisation, and even as an investor, it’s almost impossible to ignore ESG. These sustainability and ethical criteria assess how companies engage with people, society, and the environment. But what does this mean in practical terms, and how should your organisation address it?
What is ESG?
ESG stands for Environmental, Social, and Governance and refers to criteria that investors and other stakeholders use to evaluate an organisation's sustainability and ethical impact. In the Netherlands and Flanders, this is also known as Corporate Social Responsibility (CSR).
In the 90s, there was a shift in how businesses and investors approached operations and investment. Focus expanded from purely financial performance to include social impact. In 1994, John Elkington named this principle “People, Planet, Profit”, which underpins what we now recognise as ESG.
The three pillars of ESG
The ESG guidelines consist of 3 key pillars:
1. Environmental
The environmental pillar focuses on a company's environmental impact, including climate change, CO2 emissions, energy consumption, water use, waste management, and pollution. Companies are assessed on their efforts to implement environmentally friendly practices, such as reducing CO2 emissions, using renewable energy sources, and minimising waste.
2. Social
This pillar addresses how a company tackles social issues, including employment practices, human rights, diversity and inclusion, occupational safety, community engagement, and customer satisfaction. Companies are evaluated on their ability to have a positive social impact, such as fair employment practices, ensuring safe working conditions, promoting diversity and inclusion, and supporting local communities.
3. Governance
Governance pertains to a company's structure and governance, including board composition, transparency, ethical standards, remuneration policies, anti-corruption practices, and regulatory compliance. Companies are judged on their governance practices, such as transparency, board independence, conflict of interest management, and risk management effectiveness.
How is the ESG score calculated?
The ESG score indicates how well a company meets its ESG obligations. This score, ranging from 0 to 100, is calculated by specialised external parties using both the data provided by the company and publicly accessible and government data.
What is a good ESG score?
Generally, a score below 50 is considered poor, while scores above 70 are seen as excellent.
Why is ESG important?
The ESG framework demonstrates how you manage risks and opportunities, and shows your commitment to employees and the environment. It’s essential to develop a clear ESG strategy to score well on all pillars. With a report, you can prove your achievements in ESG goals and avoid accusations of “greenwashing”.
A well-thought-out ESG strategy and a high score offer several significant advantages:
Higher appeal for investors
An organisation with a high ESG score demonstrates care for customers, employees, and the environment, positioning itself better in the market. This makes your company more attractive to investors than competitors with lower ESG scores.
Risk Management
ESG reports help identify potential risks that might otherwise be overlooked, such as climate, reputation, and credit risks
Comply with regulations
Understanding ESG guidelines helps you comply with current environmental, social, and governance regulations, such as the Environmental Management Act. ESG data also forms the basis for the Corporate Sustainability Reporting Directive (CSRD), a sustainability report that large companies will need to provide from 2024.
From nice-to-have to need-to-have
Currently, a complete ESG policy is not mandatory, but some aspects, like the Environmental Management Act, are required. In the coming years, ESG will become increasingly crucial for companies and investors, transitioning from a nice-to-have to a need-to-have. Developing and implementing an ESG policy is a lengthy process, but there are steps you can take now, such as promoting sustainable commuting to reduce CO2 emissions and improving employee well-being.
Toogethr helps companies lower their carbon footprint to better meet ESG criteria. In recent years, IJmond Bereikbaar has saved more than 383,000 kilos of CO2 thanks to Toogethr's bicycle stimulation.
Want to know how we can help you lower your carbon footprint and increase your ESG score? Then get in touch on or schedule a short demo with one of our specialists.
