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Abbreviations ESG represent the acronym in English of the concepts included in the concept of sustainability composed of the areas: Environmental (environmental), Social (social) and Governance (governance). There are several international ESG information models from which organizations deploy their corporate strategies to integrate sustainability into their business model. Some of them are exposed in this article.
In the bag
One of the mechanisms most used by companies listed on the world’s stock exchanges to present progress on the matter annually are the standards created in 2000 by the Global Reporting Initiative, commonly known as GRI. By using this sustainability presentation method, the company that uses it identifies and evaluates the key material issues in its field of competence under a modular structure of three series comprising:
- Universal Standards. Standard 100, with general guidelines for the use and reporting of the standards for all organizations.
- Sector Standards. They show the most significant topics that are used in each sector.
- Thematic Standards. They include the economic (standard 200), environmental (standard 300) and social (standard 400) sphere.
The companies that use this family of standards are sure that the performance indicators derived from its application are accepted by internationally recognized organizations such as the OECD, ISO, UNCTAD and the IFC, since they provide a universal language in terms of sustainability due to their credibility, consistency and comparability characteristics, facilitating the presentation of sustainability reports similar in their structure with other companies.
It should be noted that the GRI standards allow the company to exclusively report those aspects of sustainability that are critical for the business, without having to report each and every one of the elements outlined in the standard, unless there is a particular topic in the so-called Standards of Sector that require a mandatory disclosure of the subject. For a general understanding of the aspects included in the standards regarding economic, environmental and social performance, the graph Overview of GRI standards is presented.
Although the GRI standards are an important means of communication for the company with its different stakeholders to strengthen a relationship of trust and reputation around its commercial activity, over time they have become a way of expressing the commitment of the company. organization with a basic principle of institutional governance: transparency, the key element of any modern accountability system that allows social scrutiny and the adjustment of projects and programs to suit the needs and expectations of all stakeholders in the good performance of the company.
By sectors and industries
To offer exclusively what is being done in terms of sustainability or ESG information to the investing public, which every day feels a greater need for this type of content to decide whether or not to participate through a financial instrument, there are SASB (Accounting Standard Board). These standards were developed to be a market standard for the disclosure of information. ESG by sectors and industries, since the companies that interact in a specific sector or industry have participated in its preparation, providing specific knowledge on a subset of material aspects likely to have an impact on the financial performance of the company, as well as becoming aware of latent risks and opportunities.
To date, this set of information revolves around 26 sustainability topics for 77 selected industries and is grouped into five large dimensions that classify general sustainability problems by category in different sectors or industries to form a comprehensive materiality map that locates specific standards. by area, facilitating an expedited comparison process between companies. The dimensions are:
- Environment.
- Capital social.
- Human capital.
- Business model.
- Innovation, leadership and governance.
With a specific purpose
Additionally, it is important to highlight initiatives such as that of the working group called Task Force on ClimateRelated Financial Disclosures (TFCD). In 2017, this group created in 2015 released a series of recommendations that would become an effective financial disclosure framework for companies wishing to attract investors interested in developing projects on climate change. Currently, the TFCD standards are designed under a structure of four thematic areas:
- Governance. It involves the governance of the organization around risks and opportunities related to the environment.
- Strategy. It involves the present and potential evaluation of risks and opportunities in the business model, strategies and financial planning.
- Risk management. Organizational process used to identify, evaluate and manage risks related to the environmental aspect.
- Metrics and objectives. It comprises the group of indicators and objectives used to assess and manage relevant risks and opportunities in environmental matters.
By comprehensively analyzing these four areas, it is feasible to promptly evaluate the commitment of the company issuing this information in favor of actions to mitigate the deterioration of the environment incorporated into its daily operating base, as well as in its financial decisions. According to the sources consulted, it is feasible to suggest that the adoption of the TFCD voluntary disclosure standards has been widely accepted, to such a degree that currently around 1,500 companies with operations and subsidiaries in several countries, and almost 60% of the 100 of the world’s largest publicly traded companies have included them in their sustainability reports; at the same time, more than 110 government agencies and governments such as Japan, Sweden, the United Kingdom and Canada, among others, support its adoption.
Does not matter the size
As we can see, ESG information disclosure models favor a responsible and sustainable management of companies that adopt these methodologies by having a Corporate Governance that gives rise to a solid organizational governance, both in its structure and in its business culture, for the sake of to achieve greater competitiveness.
However, it is very important to clarify that we should not assume that the ESG information methodologies presented are capable of being applied exclusively in large companies or corporations with vast financial, material and human resources; Rather, on the contrary, it is an invitation to delve into the study of these formidable guidelines that can lead micro, medium and small companies that intend to take their first steps on the path of sustainability, along paths already trodden.
* Lili Domínguez is president of the National Council of IMEF Groups.
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