While interest in environment, social, and governance (ESG) has grown over the past few years, so has confusion around the term. It’s often used interchangeably with other business frameworks like sustainability, (corporate social responsibility (CSR), and environment, health, and safety (EHS). Maybe it’s the shared “E,” but ESG and EHS seem to be the most commonly, but incorrectly, conflated. These two disciplines may share some similarities, but they are actually quite different. Let’s take a closer look at both and what they mean for businesses.
EHS Focuses on Employee Safety and Complying with Regulations
EHS is a well-established practice that’s primary purpose is to ensure the health and safety of employees and the public, while also protecting the environment from business-related hazards in the context of complying with regulations like the EPA’s Clean Air Act and Clean Water Act or the Occupational Safety and Health Administration’s (OSHA’s) Occupational Safety and Health (OSH) Act.
Many companies in process industries (think manufacturing, mining, oil, and gas) already have experienced EHS teams that ensure their workplace is complying with all necessary regulations and requirements. Governments and regulatory bodies around the world have synced on common standards and fines for components of EHS.
ESG Focuses on Stakeholder Concerns and Sustainability
Despite its recent growth, ESG is still a relatively new discipline that’s primary purpose is to provide a means to objectively grade organizations on their sustainability efforts. ESG originated as a financial concept intended to protect investors, address stakeholder sustainability concerns, and quantify sustainability impacts and risks.
Considerations for each of the three categories of ESG can vary widely depending on what’s material to an organization, but information on energy consumption, waste management, employee diversity, data protection, executive compensation, lobbying and political contributions, and much more, all fit under the ESG umbrella. While originally driven by investor and stakeholder concerns, more governments including the United States, Canada, and the EU are proposing regulations in an effort to standardize ESG disclosure to something akin to current financial reporting.
Compared with EHS, ESG is an evolving discipline, and organizations are still developing metrics and best practices to deliver on ESG’s ambitious goals. Organizations like CDP, TCFD, and many more have developed ESG frameworks and standards to help guide companies on their ESG journeys.
As described, ESG also has a very broad scope outside of the ‘E’ that includes topics that are not currently regulated but are still concerns to stakeholders, including diversity, equity, and inclusion (DEI), corporate philanthropy, board composition and compensation, hiring practices, and more.
How Can EHS and ESG Work Together
While some areas of EHS and ESG overlap, specifically regarding greenhouse gas emissions and pollution, ESG’s scope is far broader than a traditional EHS program. In order to take full advantage of the benefits of both concepts, it’s best to think of the two initiatives as complementary, with EHS nested within ESG, which extends beyond compliance and regulation.
EHS data can contribute to some elements of an ESG reporting program but is not comprehensive. Although in some instances, health and safety measures from EHS may have implications for ESG, it is often misperceived that initiatives in one area can substitute for the other. For example, an ergonomics initiative that improves office safety might overlap with workplace satisfaction but should not be assumed to translate into improvements on the ESG side. Similarly, regulatory compliance within EHS does not necessarily mean good corporate governance according to ESG standards.
Rather than simply rebranding EHS and relabeling it as ESG, it’s important to make sure the two are distinct. Treat your EHS program as a foundation for building an effective ESG program — one that meets your organization’s specific needs. Considering what’s important to your stakeholders and core business strategy will help you create a successful and efficient ESG program that improves impacts and reduces risk.
Importance of ESG and EHS in Today’s World
ESG and EHS both play a critical role for businesses around the world by helping them operate in a safer, sustainable, socially responsible, and environmentally friendly way. They also help businesses identify, mitigate, and manage risks in their operations, while also helping improve long-term financial outcomes.
For example, by complying with EHS regulations on wastewater discharge, companies can avoid fines from regulatory bodies on the EHS front, while also improving their reputation in the communities where they operate on the ESG side of things.
Benefits of Integrating ESG and EHS
Integrating ESG and EHS factors into business operations has many benefits. First, it can help companies reduce their environmental impact and improve their sustainability performance. Additionally, it can help companies build trust with their stakeholders, improve their social license to operate, and boost their reputation. These are important for companies to consider in order to operate sustainably and responsibly.
Companies that embrace and incorporate EHS and ESG into their business operations and strategy can reap these benefits and many more.
FigBytes helps companies and governments plan, track, and fulfill goals along their environmental, social, governance (ESG) journey with an ESG program that helps integrate strategy, align data, and report on progress while engaging stakeholders. Visit https://figbytes.com/ for more information.
