Corporate Governance Training
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Importance of ESG Policy

An ESG policy refers to a guiding principle that revolves around the environmental, social and governance measures a company adopts to safeguard the interest of its stakeholders. This framework is an integral part of modern corporations. These critical elements are intertwined to maximize both the bottom line and the public interest.

Environmental principles put focus on how the Company manages its utilization of the energy resource, its waste management and actions it undertakes so as to mitigate any adverse effects its activities would have on the environment. The principle helps to assess the environmental risks the organization bears and how to address the same. Some of the factors included within this principle are energy efficiency, reduced carbon footprint and disposal of hazardous waste.

The Social principle takes into consideration how the organization relates with its labor force, suppliers and the ripple effects of these relationships on the broader community. Some of the factors considered include diversity, inclusivity, employee welfare and adherence to labor laws and regulations.

The governance principle evaluates the organization’s internal controls, practices and procedures which it adopts to ensure adherence to regulations, transparency and best practices. Some of the factors considered include board composition; adherence to disclosure requirements, political exposure, shareholder rights and the governance structure among others.

Recent occurrence with regards to the Covid-19 pandemic has provided an opportunity for Corporations to re-evaluate the effectiveness of the ESG framework. This is happening in the wake of increasing scrutiny from investors keen to do their due diligence and regulators whose regulatory noose tightens with each day.

Benefits of a robust ESG framework:

Reduces operational overheads-An ESG framework that is critical on energy efficiency result in cost reduction owing to the reduced consumption of energy and water;

  • Attracts investors and consumers who are environmentally cautious.
  • Foster positive relationships with the broader community through the adoption and implementation of sustainable practices.
  • Promotes transparency resulting in greater social credibility which is critical in this age of increased public scrutiny.
  • Positively affects Return on Investment through mitigation of revenue risks and investor risks.
  • Implementing a robust ESG policy ensures compliance with regulatory requirements thus mitigating the risks posed by non-compliance.

As we cheer, celebrate and salute our gallant servicemen that are holding stethoscopes instead of guns and draping white lab coats in place of military combat gear, let us also play our part by embracing technology and utilising it in ensuring that we keep the Country running as we observe the guidelines for mitigating the spread of the virus.