Corporate sustainability is like a jigsaw puzzle. It incorporates several different elements, all of which work together seamlessly to ensure that your organization operates responsibly. For a truly successful strategy that supports people and the planet, you will need to consider both EHS and ESG within your sustainability strategy.
In simple terms, Environment, Health, and Safety (EHS) forms part of a focus on the safety of employees and the environment, while Environmental, Social and Governance (ESG) issues address your organization’s responsibility towards the planet and the resources it provides.
Despite the similarities, these two important jigsaw pieces differ in intent and scope. Unlike EHS, which is a familiar driver for most organizations, there is still some confusion about what ESG entails and how it differs from EHS.
That’s why, in this article, we’ll explore how ESG and EHS relate to each other, how they differ, and how to best to integrate them into your organization, ensuring that you have the data you need to complete the sustainability puzzle and see the bigger picture.
what is EHS?
The field of Environment, Health, and Safety encompasses a range of laws, regulations, programs, professions, and workplace initiatives that are designed to ensure the health and safety of employees and the public, while also protecting the environment from business-related hazards.
To this end, the Environment aspect of EHS involves complying with environmental regulations related to matters like:
- Carbon emissions
- Ambient air quality
- Energy conservation
- Wastewater
- Ambient water quality
- Water conservation
- Waste management
- Noise pollution
- Contaminated land
The Health element of EHS concerns itself with preventing harm to people through the development of procedures, best practices, and monitoring activities that are safe and environmentally friendly. It can include topics like:
- Community water quality and availability
- Disease prevention
- Hazardous materials management
Finally, the Safety component of EHS focuses on identifying workplace hazards and reducing accidents and exposure to harmful situations and substances by creating organized procedures for:
- Employee training
- Accident prevention and response
- Emergency readiness
- Proper use of protective clothing and equipment
- Fire safety
- Traffic safety
- General facility design and operation
what is ESG?
Now, let’s consider the Environmental, Social, and Governance issues which help corporations measure and report on their impacts.
The Environmental aspect of ESG covers impacts related to an organization’s operations including concerns like:
- Climate change
- Energy consumption
- Water stewardship
- Waste management
- Air quality
- Biodiversity
- Deforestation
The Social element involves your business’ impacts on people including topics such as:
- Gender inclusivity
- Diversity
- Hiring practices
- Customer satisfaction
- Data protection
- Human rights
- Labor standards
Finally, the Governance component concerns itself with how an organization is being run including matters like:
- Board composition and membership selection
- Executive compensation
- Shareholder rights
- Accounting and auditing procedures
- Ethics, bribery, and corruption policies
- Lobbying
- Political contributions
how are ESG and EHS related?
As you can see, ESG and EHS can overlap in some areas, particularly on environmental aspects and in fact, there are several ways in which they are broadly related:
- They both deal with the effect of business activities on the environment and society.
- They both help businesses in identifying, mitigating, and managing risks in their operations.
- They both provide guidance on best practices for a business’s operations.
For these reasons, both ESG and EHS are important for all companies to consider in order to operate sustainably and responsibly.
how do ESG and EHS differ?
Despite having some similarities, however, ESG and EHS are fundamentally different. Unlike EHS, which is primarily focused on compliance with environmental and employee health and safety regulations, ESG encompasses a broader range of sustainability topics and issues. The two can be differentiated by their intent, scope, and impact, which vary considerably.
intent
The primary focus of an EHS program is protecting the environment and maintaining health and safety in the workplace. It is driven by compliance with local regulations, whether that’s the US Environment Protection Agency’s (EPA) Clean Air Act, regulations such as the UK’s Control of Substances Hazardous to Health directive, Canada Labour Code’s Occupational Health and Safety Regulations, or the European Framework Directive on Safety and Health at Work.
An ESG program on the other hand has a broader focus. Developed in response to investor concerns, it’s a financial concept that was initially intended to protect investors, drive better business evaluations, and quantify sustainability impacts. Today, however, governments around the world are proposing disclosure regulations on ESG performance such as the US SEC climate disclosure rules and the EU’s Corporate Sustainability Reporting Directive (CSRD).
scope
While both EHS and ESG address the environment, ESG’s reach is more expansive than EHS, going beyond a company’s workplace or local community to encompass societal and global considerations including climate impact and corporate ethics.
This distinction is important because it means that ESG considerations can have a much broader impact on a company’s operations and bottom line. Furthermore, in recent years, investors have become increasingly interested in ESG factors when assessing a company’s long-term prospects, which has led to a growing demand for sustainability data and more involved reporting.
impact
Another way in which ESG and EHS differ is in the impacts of each program for an organization and its stakeholders. EHS, for example, focuses on the immediate health and safety of a company’s employees and workplace as well as its direct impacts on the environment like pollution and waste.
ESG, however, focuses on a broader range of impacts which overlap with EHS, such as tracking greenhouse gas (GHG) emissions, but it goes further to evaluate an organization’s impacts on areas like materials lifecycles, water usage and reuse, economic impacts on communities, community relations, ethical guidelines for employees, and more.
benefits of addressing ESG
Although the risks of overlooking EHS issues are often more apparent, there are some key advantages to incorporating ESG into your strategy for a more sustainable and socially responsible world. Here are a few of the benefits for your organization:
address the climate crisis
As climate change intensifies – resulting in extreme weather events, loss of biodiversity, and water scarcity – more governments, investors, businesses, and individuals are recognizing the role ESG can play in mitigating these global impacts. ESG reporting can help businesses start to track and reduce their carbon emissions to address the climate crisis and create positive change.
mitigate risk
ESG is also used to manage risk and a strong ESG program can help organizations identify vulnerabilities and minimize exposure to:
- Transition Risks related to the transition to a lower-carbon economy such as increased emissions reporting requirements, stakeholder concern, and exposure to lawsuits.
- Physical Risks related to the physical impacts of climate change such as the frequency and severity of extreme weather events.
- Supply Chain Risks connected to procurement and suppliers such as human rights and labor standards.
Not only can ESG reporting assist you to predict and prepare for these risks, it can also help identify opportunities for improvement. Ultimately, this helps to future-proof your business and increase sustainability by reducing environmental impacts and protecting workforces.
appeal to investors
A comprehensive ESG reporting program shows potential investors that your company is an equitable workplace, committed to environmental responsibility, with transparent decision-making from the top down.
This is attractive to investors because it can help to identify companies that are well-managed and have a long-term focus on sustainability. These organizations are more likely to have a positive impact on society and the environment, which can lead to better financial performance over the long term, not to mention aligning with investor values and beliefs.
engage stakeholders
Finally, organizations that utilize ESG are also more appealing to other stakeholder groups like employees. When staff feel that their company is aligned with their values and committed to making a positive difference, they are more motivated in their work. Strong ESG practices therefore help to attract and retain top talent.
For communities at large, ESG also promotes sustainable and ethical business practices that benefit both the environment and society. This tends to result in better long-term financial performance, increased job security and economic growth in the surrounding community as well as reducing pollution and improving overall quality of life.
integrating ESG into your organization
Incorporating environmental, social and governance reporting into your organizational strategy can be a great way to ensure a structured approach to sustainability. As a first step, you’ll need to identify reporting requirements from relevant ESG frameworks and mandatory disclosures.
ESG frameworks and standards, such as CDP, TCFD, or SASB, provide useful guidance on what to include in your ESG and sustainability reports. Utilizing the right frameworks and standards for your industry helps take the guesswork out of your reporting and can underpin a comprehensive sustainability program.
Conducting an ESG materiality assessment also provides a strong starting point for organizations as it helps to determine which ESG topics your stakeholders value most and which factors are most relevant to your business.
data collection and strategy
The next step to initiating an effective ESG reporting program is to understand and identify where ESG data resides within your organization, including people, systems, and offline sources.
A technology solution like the AMCS Sustainability Platform can support this process, transforming complex ESG information into actionable insights by capturing data in a central, secure, cloud-based platform.
Finally, you’ll want to use the data, reporting framework guidance, and materiality assessment results to develop an ESG strategy aligned with both corporate and sustainability goals. This will ensure your new ESG program meets reporting requirements, as well as addressing material issues and stakeholder concerns. By taking this kind of comprehensive and structured approach to sustainability, your company can become more resilient and better positioned to thrive in a rapidly changing business environment.
If you’re currently building an ESG program, you need support to boost your EHS capabilities, or your company is looking to integrate ESG within your sustainability strategy, connect with an AMCS advisor to see how you can do more with your data.