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ESG acronym: what does it mean?
THEacronym ESG Indicate the 3 fundamental factors of sustainability report. When we talk about sustainability, we tend to think only of environmental factors; these are certainly very important for an activity to be defined as sustainable, but the meaning of ESG reveals that in reality there are three macro-areas on which to act.
- Environmental: everything that has to do with the protection of the environment and biodiversity, the reduction of CO₂ emissions, the management of waste and toxic substances.
- Social: the criteria that concern the conditions and well-being of workers, such as health and safety, the right to medical care, support for education and training, and the management of fair hours and salaries.
- Governance: that is, compliance with regulations; this area includes corporate ethical choices that concern the fight against corruption, fair competition, the corporate structure, the guarantee of equal opportunities and much more.
Learn more about ESG and the advantages for companies - Download the free guide!
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ESG rating: how it is obtained and why it should affect all companies
Pay attention to 3 ESG pillars is important for all companies, because it demonstrates their active commitment to protecting the environment, respecting workers and current regulations, not only in the country where they operate, but also internationally.
To obtain a ESG rating first of all, it is necessary to collect and declare to the outside the actions taken by the company in each of the 3 areas (environmental, social, governance) and based on this information, or through special questionnaires, the company will be able to obtain a score of its performance.
Tale ESG rating is carried out by international organizations that are responsible for promoting performance reporting and they make an assessment (ESG rating).
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What is a high ESG rating for?
- Attracting investors: a ESG report does not proclaim the values of the company, but tells in a timely manner what actions have been taken to put them into practice. Which can be crucial for attract partners and investors aligned with the same values and interested in the ethics of the realities with which they work or in which they invest.
- Reduce legal and regulatory impacts: the transition to a net-zero economy is one of the main objectives of the European Commission, which in December 2019 adopted the Green Deal, the European Union's development strategy. Being in line with these objectives means avoiding incurring penalties or sanctions for the company.
- Be in line with consumer interests: consumers, today more than ever, want companies to act to improve their impact on society and the environment, and they declare themselves ready to reward or penalize brands accordingly. According to a report from Google's Consumer Survey, the 74% of Italian consumers would like brands to be more transparent and provide more information in relation to their sustainability; for this reason, for us at Up2You it is so important to follow companies until the sustainability results obtained are communicated.
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How do you communicate your actions in the 3 ESG areas?
One of the most useful tools is the sustainability report, also called non-financial reporting or non-financial statement, for larger companies that are required by a European directive. This is a document that is drawn up by companies precisely to tell their values with respect to ESG criteria.
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How to draw up your company's sustainability report
According to the Directive number 95 of 2014 (2014/95/EU), transposed at the end of 2016 by the Parliament and the European Council, this document is mandatory for large companies, which have 500 or more employees.
However, even small companies should start collecting data and information on their environmental, social and governance impacts. This could help them build their financial statements over time, and have terms of comparison with the past and continuous transparency towards their stakeholders.
To do this, it is necessary to consider the ESG criteria listed above and then report all the activities that the company carried out in the previous year (or in the semester, or in the quarter) for:
- protect the environment and reduce greenhouse gas emissions;
- improve the disposal of waste and toxic substances produced;
- guarantee fair wages to its staff;
- create a work environment where health and safety are a priority;
- comply with anti-corruption laws;
- compete fairly with competitors;
- ensure non-discriminatory treatment towards staff and customers.
This is only a small list, which can be expanded based on the sector the company deals with and all the activities it carries out.
Once drafted, complete with diagrams and reports to support it, the sustainability report can be shared with potential investors, but not only: as we have seen, consumers are also increasingly interested in knowing the sustainability policies of the brands they trust, and share your ESG rating improves brand awareness in a transparent way.
You can also create a special section on the brand's corporate website, so that everyone can freely download the sustainability report. For example, Ours can be read freely here.
Do you want to draw up your sustainability report? Click and find out how to do it!
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What we can do to improve your ESG rating
The activities and products of Up2You they are clearly and transparently certified and can be easily reported within the sustainability report.
For our business philosophy, the focus is on the letter And about ESG, that is, on everything that has to do with environmental sustainability, but it is not the only sector in which we operate.
The international organizations that are responsible for providing the ESG rating companies (such as CDP; MSCI, which publishes the MSCI ESG Ratings; S&P Global Corporate Sustainability Assessment (CSA); Sustainalytics; EcoVadis; Vigeo Eiris; Standard Ethics), also suggest the criteria according to which a company obtains a higher rating: calculating and reducing its greenhouse gas emissions, addressing the issue of climate change and, even, Achieving carbon neutrality are fundamental criteria for increase your ESG rating.
We accompany you throughout the environmental sustainability journey, from the calculation of your business emissions, to the communication of the results obtained; in addition, we help you in staff involvement in training and education activities oriented to sustainability.
In short, the services of Up2You they help you increase your company's ESG rating in a variety of ways, which can be customized based on the specific needs of your industry.
Not sure where to start? Contact us to understand how we can help you!
