By now we should all know what ESG stands for and for the people who are new to this podcast ESG stands for Environmental Social and Governance, I will explain the basics of ESG below and the legality of ESG.
Environmental
- Carbon sustainability
- Carbon reduction plan
- CBAM (Carbon Border Adjustment Mechanism) to be implemented by 2027. The UK CBAM will place a carbon price on some of the most emissions intensive industrial goods imported to the UK from the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron, and steel sectors. Further detail, including the precise list of products in scope, will be the subject of consultation in 2024. Read the link from the Government website below:
- Noise pollution
- Building standards Solar, smart lighting, Heat source pump, energy efficiency buildings
- Business waste & general resources
Social
- Human Rights and equality
- Diversity in the workforce, Gender equality Employee Benefits
- How the business treats clients & workers employed & self employed
- Decent management structure and responsibility and relationships with people
- Global supply chains and local communities
Governance
- How is the company run?
- How does a company measure its metrics and its positive direction
- How is the company seen or accepted in the broader society rather than looking at the balance sheet?
- If a company is compliant, avoid future risks and bad press and bad practices
BP in 2016 was affected by their deepwater horizon incident, this affected their corporate responsibility because they outsourced maintenance of their offshore oil wells responsibilities, Facebook has been affected in the past due to their data privacy concerns they have been downgraded large cap growth they scored poorly compared to other tech companies.
- MCSI have researched companies with poor ESG ratings and the bottom 10% potentially suffered 90% share drop
Is it a legal requirement?
ESG reporting is a mandatory requirement for large companies listed greater than 500 employees or £500 million annual turnover, the UK has passed a law for targeting net zero greenhouse gasses by 2050, the UK has looked to farmers to achieve these some 10 years before the UK target and to achieve this by 2040 and Scotland farmers 5 years after the UK for 2045. In 2025 The UK is expected to adopt the International Sustainability Standards Boards, the new sustainability standards focus on sustainability related risks and opportunities and will be aligned with UK listed companies. Following a consultation next year the Uk Government is expected to implement the new standards by quarter of 2025, this means that the law will change to smaller businesses SME (Small medium size Enterprise) it’s predicted the following year 2026 this will affect sole traders & partnership businesses and when successfully implemented would have covered all types and scopes of businesses.
Don’t leave it too late. Get in touch today for an ESG audit and report.
Todays podcast was presented to you Andy Hunter.
