Understanding ESG - It’s not just an acronym, but do people really get it?

Updated: Jan 25

Environmental, Social and Governance (“ESG”) policies, regulations and discussions have become regular appearances on the minutes of boardroom agendas, CEOs, directors and senior managers are either choosing to be or are being forced to address the reality that a failure to act on any one of the issues associated with ESG will have a significant impact both reputationally and financially for an organisation.


With the high level of importance placed on ESG topics, it is fundamental for financiers, consultants, fund managers and others along the chain of value to ensure that the expectations in this area are kept front of mind. A lot of emphasis is placed in financial reporting and the high standards that are expected regarding ESG, and the same will equally yield risks and opportunities.


Increased standards and regulatory compliance in relation to sustainability, married with internal governance, investor pressure and other workplace issues will require regular ESG reporting and demonstrated improved due diligence. ESG is without question one of the most challenging areas for business to navigate in 2022.


Since 2001 and before United Nations Secretary General Kofi Annan coined the acronym, I-OnAsia has been successfully assisting global clients in navigating ESG risk and compliance and has steered senior executives, boards, individuals, family offices and other stakeholders through the ever-changing compliance and due diligence requirements of the same.


A fundamental consideration for all those involved in ESG matters is actually understanding what the term means.


Environment


During the last decade, it has become almost impossible to ignore and deny the impact of climate change and the decimation of the environment as a result.


Environmental activism has blossomed into regular feature in the media and a rallying cry among global youth.This increased attention has put climate change and a move to a greener economy high on the agenda for big business and societies right across the globe.


As more and more scrutiny is focused on different sectors, large organisations are being called out not only for their impact on the environment, but their lack of action in tackling this problem.


As a direct result, the management and implementation of climate change initiatives have retained pole position at most political agendas.


Equally, these initiatives pose a complex issue for organisations both to understand and then take appropriate action. This is where I-OnAsia has stepped up its level of support, providing very important granular detail into clients’ local environmental impacts with ‘boots on the ground’ throughout Asia.


Social


More often than not we hear what’s social all about in ESG, and how can we measure it?”

Social challenges for corporations include, but are not limited to, conduct that impacts the communities in which they do business, employee engagement, human rights considerations, supply chain management, gender and diversity inclusiveness, health and safety and anti-bribery and corruption.


The consequences of public health issues, such as the pandemic, are also a concern to corporations as they directly affect employee and contractor presence at work and the overall morale of the workforce.


CEOs, directors, and senior managers and human resources specialists should overtly demonstrate a positive attitude to social impacts by developing good Corporate Social Responsibility (“CSR”) policies.


These policies enable and direct better relationships with local partners and stakeholders, increased openness and active reporting on social risk, and close investigation of supply chains to co-ordinate enforcement.


Recognizing and engaging these social risks as well as becoming more proactive in enforcing CSR policies can have a very positive effect on the company’s ultimate market position. However, failing to understand and address these risks can ultimately lead to any recognised credentials being lost, market position being destroyed, and possible regulatory action.


I-OnAsia has been providing support to corporations on many social issues, from anti-harassment and whistle-blower investigations to human rights and supply chain due diligence and working conditions for staff in remote and isolated areas. Preparing for the return to work following the management of Covid-19 employee labor conditions as well as similar issues within the supply chain is becoming a very relevant area of risk for CEOs, directors, and managers.


Governance

The fundamentals of defining culture and the relationship between management and stakeholders, both internally and externally, requires strong and good corporate governance.


It cannot be understated how important corporate governance is in determining how members of an organisation behave.


It is critical for senior management and leaders to be visible in taking responsibility for risk management and held accountable for the success or failure of the same. Values must be established, which define far more than profit generation, to guide the governance, decision-making, and ongoing strategy of companies.


I-OnAsia has extensive experience in supporting global organisations in the development of good corporate governance, from examination and investigation of executive contracts, competition, antitrust and anti-bribery and corruption concerns as well as activism.

I-OnAsia continues to advise large corporations on how ESG risks can lead to good corporate governance.


https://www.ionasia.com.hk/esg-due-diligence







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