ESG stands for Environmental, Social and Governance. These are key criteria when measuring the sustainability impact of an organization.
Investors, clients and society expect organizations to build resilience to climate change and reduce their negative impacts on the environment and people.
An improved Environmental, Social and Governance (ESG) strategy and disclosure that fits with your organization’s purpose means that you can respond to these expectations, adapt to changes and challenges while taking advantage of opportunities. More importantly, your ability to evaluate and demonstrate your positive contribution can enhance the competences that lead to a more sustainable future.
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What is ESG?
ESG uses standard criteria to evaluate and demonstrate the sustainability performance and success of an organization. Stakeholders expect organizations to not only deliver financial performance but also to make a positive contribution to society:
- Environmental criteria consider how an organization performs as a steward of nature
- Social criteria address how an organization manages social relationships with employees, suppliers, customers and the communities where it operates
- Governance deals with an organization’s leadership, executive pay, audits, internal controls and shareholder rights
Why is ESG important?
As demand for ethical and sustainable practices increases among investors, clients, and the wide society, the need for improved, transparent ESG performance has also grown. Demonstrating your ESG credentials through requirements set out by international bodies, local authorities and regulations can result in added benefits, including:
- Engage customers by putting environmental and social issues at the forefront
- Optimize investment performance, capital cost, and an organization's valuation
- Improve ESG data quality and management for better evaluation and quantification of the impact of social and environmental responsibility efforts
- Empowers organizations to communicate the current state and outline future initiatives
- Identify relevant impacts and opportunities to reduce risk exposure
- Relieve regulatory and legal pressures
- Increases efficiencies by conserving resources, reducing costs, and enhancing productivity
- Provide more positive results through the value chain
- Develop trust with governing parties for smoother entry into new markets
ESG services for all organizations, whatever level of maturity, industry focus or need
Leveraging our expertise in compliance, verification and training, we can help you get to where you need to be in your ESG journey. See our Frequently Asked Questions for more details.
We are a leader, not only in the provision of ESG services for over 30 years but also as an active participant in demonstrating best practices.
ESG experts from SGS actively contribute to the development of international standards, frameworks, schemes and regulations such as the United Nations Sustainable Development Goals (SDGs), the United Nations Principles for Responsible Banking (PRB) Assurance, and the EU Corporate Sustainability Reporting Directive (CSRD).
We also lead by example. Our sustainability leadership has been recognized internationally. SGS was rated PRIME by ISS ESG Corporate Rating and received an AAA rating in the MSCI ESG Ratings assessment. Our practices in ESG are further reinforced by SGS Sustainability Ambitions 2030, which set ambitious targets across our whole value chain and foster a culture of sustainability at SGS.
With expertise in all major industries, we understand each sector’s pain points and have the technical expertise and logistical capabilities across the globe to ensure realistic sustainability outcomes.
- White Paper: The Rise and Challenges of ESG – Your Journey to Enhanced Sustainability, Brand and Investor Potential
- Webinar: Understanding the impact and demand for ESG risk management and disclosure
- Webinar: Understanding the impact of ESG and how to improve the quality of ESG information
- Webinar: ESG - what it means for you and how you can make a difference
- Webinar: Activating SDGs into Business Operations – Why is Sustainability Important?
- Webinar: Sustainability linked loans: Two years after the principles - where to next?
- Webinar: Achieving SDGs through ISO and Sustainability Standards
ESG Frequently Asked Questions (FAQ)
More and more customers are looking not only at the quality of products and services, but also how an organization governs itself to contribute to the wider environment and society. Similarly, investors are no longer only interested in the financial performance of an organization but also its ESG metrics and targets. Disclosing and reporting ESG performance is becoming more popular, particularly for listed companies and organizations looking for green finance.
Environmental criteria consider how an organization approaches reversing climate change, enhancing resource efficiency, and reducing pollution and waste.
Social criteria address how an organization manages social relationships with employees, suppliers, customers, and the communities where it operates. Concerns include diversity, human rights and employee welfare.
Governance deals with an organization's leadership, transparency and accountability. It examines how an organization transparently addresses stakeholders’ concerns and interests.
ESG criteria are being rapidly developed surrounding international best practices such as the UN Sustainable Development Goals (SDGs) and the Science Based Targets initiative (SBTi). Developing your ESG strategies based on these and on relevant local initiatives will facilitate your sustainability journey.
You can attend an ESG training course offered by SGS Academy to get some fundamental knowledge from our ESG experts. ESG training courses can be customized to suit your needs.
Getting started can sometimes be the most challenging part of any journey. No matter your company size or type, our ESG Health Check can help kick-start your journey to implementing your ESG strategy. It gives you an objective snapshot of the current status of ESG management and risks, to help you move forwards on ESG effectively.
Yes, if they agree to do so. With our global expertise and network, you can ensure your ESG strategies are implemented effectively along your supply chain.
The ESG Health Check is designed to efficiently measure your current ESG status. Regardless of the size of your organization, an ESG Gap Analysis is the process of conducting a materiality assessment of your ESG issues and then a performance assessment of how you are managing those issues. The ESG Gap Analysis also gives you full findings, recommendations and a road map for your ESG strategies.
If you would like to be publicly listed or engage in green finances, sustainability-linked products, mergers or acquisitions, you will need to demonstrate that your ESG metrics and targets are verified and assured by an independent third-party, like SGS. These are usually mandatory processes in due diligence, risk evaluation, risk management, Second Party Opinion (SPO) and Equator Principles.
The guidance from the regulatory authority usually details how your ESG performance should be disclosed and reported. Validating your ESG claims is not only for compliance purposes but also to avoid greenwashing, which can impact your investment portfolio and future business opportunities.
Absolutely. SGS is a world leader in testing, providing a broad range of testing services to clients around the globe. The testing services against your products, services, materials, ingredients or premises can be part of the ESG services.
It depends on how your report is used. Generally, the Global Reporting Initiative (GRI) Standards, AA1000 AccountAbility Principles and Sustainability Accounting Standards Board (SASB) Standards are the dominant reporting standards. Our ESG experts will be able to offer services against other reporting standards according to your local and organizational needs.
SGS follows the requirements and guidelines set by relevant organizations. Generally, the International Standard on Assurance Engagements 3000 (ISAE 3000) and AA1000 Assurance Standard are the dominant assurance standards. Furthermore, our ESG experts will be able to offer services against other assurance standards according to your local and organizational needs.
You need to check the criteria with relevant financial institutions. You may also need a third-party statement from SGS to validate your ESG claims.
SGS ESG certification is a certification scheme developed by SGS to assess the management of environmental, social and governance issues in an organization. ESG-related ISO certification is a certification after satisfactory audits against a relevant standard published by the International Organization for Standardization (ISO).
SGS Academy offers various ESG training courses in different levels and topics that will meet your needs. Our ESG Disclosures & Sustainability Report Assurance service can also help demonstrate your ESG accountability, accurately and consistently.
Materiality refers to an organization's significant economic, environmental and social impacts, or to issues that substantively influence the assessments and decisions of stakeholders. In recent years, a concept of “double materiality” was proposed by the European Commission. It provides criteria to determine whether a sustainability matter or information has to be included in a sustainability report from an impact perspective, a financial perspective, or both.
We are a leader, not only in providing ESG services for over 30 years, but also as an active participant in demonstrating best practices. Our ESG experts actively contribute to developing international standards, frameworks, schemes and regulations, such as the UN Sustainable Development Goals (SDGs), UN Principles for Responsible Banking (PRB) Assurance and EU Corporate Sustainability Reporting Directive (CSRD). With extensive expertise and experience in all major industries, we understand each sector’s pain points and have the technical expertise and logistical capabilities across the globe to ensure realistic sustainability outcomes.