Recap: ESG Ratings
As we mentioned in the last blog post, the phrase ESG Reporting was coined in 2005 to refer to how companies adhere to modern environmental, social and governance standards. According to the Harvard Business Review, “’Environmental’ disclosures include greenhouse gas emissions, water usage, waste disposal, and more. ‘Social’ disclosures include diversity, labor relations, product safety, employee health and safety, community development, and more.” ESG scores provide valuable information about companies for their customers, investors and communities, and paying attention to them is a great way to establish trust and loyalty while becoming good global citizens.
What would you consider your current social environment right now?
Is it a little (or a lot) of Instagram swiping with a healthy dose of some YouTube research? How about a happy hour with friends, via Zoom? We know you don’t take the time to log out of your work account, and quite frankly, that’s probably the best part.
Speaking of Zoom, is the highlight of your sociability actually your conference meetings? You know the ones where you spend time actually getting to know one another? #teambonding However it breaks down to you, the level of being social is at an all-time high, and considering all of the reasons we should strive to be more socially aware, the social part of the ESG score could be the most important part, depending on who you ask.
All of this seems to fall under (what I am considering) this year’s current theme – “The new norm,” but let’s be honest, being socially conscious is OUR thing. We’ve been doing this since beginning of time, so shout out to Adam, Eve, those brothers, etc. we see you. It’s no surprise that an investor who is socially conscious will find a company attractive based off of the social criteria of their ESG score.
Understanding what is social
Social criteria examine how companies manage relationships with employees, suppliers, customers, and the communities where it operates. So, it makes sense that ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing.
When it comes to the social operations of a company, albeit acceptable to solely think of public facing parts of the company like social media, press releases (or any official statements), testimonials and more, there is an internal community that also needs to be evaluated. I mean who watches the watchmen right? #watchmen
Now that the company culture, from the hiring process to daily interactions, has been established, the criteria addresses the relationships your company has and the reputation it fosters with people and institutions in the communities where you do business. It includes labor relations and diversity and inclusion. Every company operates within a broader, diverse society.
It is this understanding that increases a company’s value, and where anyone affiliated with the company can benefit from the values that are upheld – especially investors.
Big shoes to fill
When it comes to running a company, isn’t fair to say just being in the building brings plenty of expected and unexpected challenges? Creating a space for hundreds and thousands of minds to come together and have the courage to provide a reason to trade money for a product or service sure does elevate our society. But man is it difficult, and risky. The reasons for this are clearer than crystal.
There is calculated risk in everything we do. And over time, we have realized what generally makes a “good” company’s reaction to adversity. Just like we understand certain values in general life, whether it is “to turn the other cheek” or “Treat others as you want to be treated,” things that tug on our moral code strings are not only pleasant when successful – they’re necessary.
For instance, there has been an influx of social media posts revolving around Karens and Kevins, most of them not good for business. What has followed has been a number of companies retracting certain labels, logos, insignias and titles that have been deemed wrong and insensitive to many subcultures. The Washington Redskins, Aunt Jemima pancake mix/syrup, and Uncle Ben’s rice, just to name a few, have all made headlines, and under the current temperature in our country, it seems like it’s equally risky to publicly say anything on either side.
But what happens after the released statement? The risk of standing up for people that have been diminished for decades could come with some “shut and dribble” backlash. But ultimately, if you’re like Trader Joe’s and how they handled a recent petition, your company wins. It gives people insight on how employees and management are treated. It helps bridge the gap between stock prices and the leadership really feels about situations. In a small but huge way, it makes us all feel connected.
Something to be proud of
Just as ESG is an inextricable part of how you do business, its individual elements are themselves intertwined. It reminds me of why our Verb for Humanity mission statement is what it is:
To validate the existence and experience of every human and make space for them at the table. To listen and grow, even when the things we hear are uncomfortable. To change the trajectory of social attitudes, conversations and actions by providing education, supporting outreach initiatives and spreading kindness.
Making space at the table and being inclusive of staff and leadership alike isn’t a numbers-boosting game. It’s probably the biggest reason (known and unknown) why we support the companies we support. This is the backbone to building a brand, and over time when everything is aligned, it is the reason why good income and wealth can be generated. The best thing that is generated when your company is socially invested in one another though, is a since of pride and appreciation that it is created together.