What is Environmental, Social and Governance (ESG)?

Environmental, social and governance (ESG) is widely discussed in political forums and major news outlets. However, cleaning and security contractors may want to know if ESG regulations apply to their companies, especially since small to medium-sized businesses make up 90% of businesses globally, reports SME Climate Hub, a non-profit group dedicated to climate change.

The term ESG was first coined in 2004 when the United Nations published Who Cares, Wins. In their report, the UN highlighted the importance of climate change, reducing toxic emissions, human rights-related issues, workplace health and safety and eliminating business corruption. It also provided recommendations on how to better integrate ESG into asset management. 

Since then, environmental social and governance has grown into a global phenomenon representing over $30 trillion in assets. Researchers predict global ESG assets will exceed $40 trillion by 2030 with Europe as its most significant contributor with over $18 trillion in 2030, preserving its 45% global share, according to Bloomberg researchers.

Even though many ESG discussions are motivated by the challenge of raising capital and allocating those resources to ensure environmental social and governance projects can flourish, security and cleaning industry professionals may be wondering if there are requirements that their companies must follow and whether or not there are timetables for ESG implementation.

What is ESG and why is it important? 

Environmental, social and governance generally refers to a set of standards used to measure an organization’s environmental and social impact. Although the term is regularly used by investors, it applies to business owners, their employees and the general public.

As ESG has evolved over the past two decades, it currently focuses on relevant and achievable sustainability outcomes. Committing to ESG practices shows a company considers important issues. For example, businesses can benefit from being more energy efficient and environmentally conscious. Additionally, ESG is concerned with the well-being of employees in regard to human rights and ethical standards. 

Companies that report how their business adheres to ESG concerns can better attract investors. It is also possible to improve customer loyalty and retain quality workers. However, the ESG efforts must be measurable, transparent and sincere.

ESG is important for a variety of other reasons, such as:

• Transparency: companies get to showcase how their operations are providing a positive impact in terms of social responsibility and fighting against environmental concerns
• Investment Opportunity: ESG metrics provide tangible information for investors to learn more about the value of an organization and its potential to grow
• Business Value Alignment: reporting ESG data, company beliefs and how they are achieved can distinguish a company from competitors while promoting loyalty when common visions are aligned.
• Compliance: global regulations are increasing and adhering to ESG standards and making that information available allows companies to showcase their compliance
• Risk management: reviewing potential environmental impacts and disruptions can highlight risks and provide an opportunity for risk management and mitigation 
• Innovation: reporting on ESG can help focus a company to review current practices and processes, initiate performance reviews and identify areas for improvement or efficiency gains
• Company Performance:  ESG reporting can help a company align its focus on performance to achieve specific strategies and ensure long-term accountability 

What are the ESG regulatory groups?

The once abstract concept of business responsibility to society has evolved. Currently, ESG has become the law in different parts of the world. More industries are expected to have to adhere to some type of requirement or legislation, regardless of geographical region. 

In Europe, the Corporate Sustainability Reporting Directive requires companies to report on environmental and sustainability, in addition to ESG initiatives. Created in January 2023, the CSRD generally applies to companies doing business in the European Union. It aims to modernize and strengthen sustainability reporting.

A broader set of large companies will be required to report on sustainability. Some companies may have to provide reports if they generate over €150 million. ESGS regulation may impact some small to mid-sized businesses. In particular, suppliers to large companies that provide resources that help create an end product for a large corporation.

Most recently, the directive on Corporate Sustainability Due Diligence was created in July 2024 to foster sustainable and responsible corporate behavior in companies’ operations and across their global value chains.

The introduction of the CSRD and CSDD will impact relevant companies based on their size and standing. The CSRD is viewed as the originating model for sustainability initiatives reporting. This could lead to localized government regulations based on these same principles.  The CSRD and CSDD are directives in European Union law, which may impact legislation.

Relevant initiatives include the Streamlined Energy and Carbon Reporting framework – a specific UK requirement. In 2019, this legislation was introduced to increase awareness of business energy costs by providing greater transparency. It equips businesses with the guidance needed to create comprehensive and comparable reports. However, it applies to companies with a turnover of more than £36 million or more, balance sheet assets of £18 million or more or 250 employees or more.

Does TEAM Software offer compliance tools?

As TEAM Software technology specializes in data capture, our systems have modules that can help companies with ESG reporting. Contractors can utilize available business intelligence tools to generate forms, surveys and audits that can be individually designed and then deployed throughout the organization to capture front-line data. 

That data captured with the TEAM Software reporting functionality and advanced analytic tools can aid in efficiently creating ESG reports. Business owners can gain access to relevant data points while taking advantage of the reporting capabilities within the system. 

These data and reporting tools can then aid companies during the bidding process. Showing relevant ESG compliance-related data can help earn more business over competitors lacking in these resources. For more information, schedule an appointment with a TEAM Software expert.