The act of becoming more sustainable is largely down to organisations’ abilities to measure, disclose, and act upon key environmental, social and governance (ESG) metrics by reputable means. With a variable pool of knowledge across industries and largely subjective definitions of what sustainability really means, companies have long been in need of methods to understand and determine whether they truly meet the promises they chose to make.
This responsibility does simply lie in the hands of businesses, but also their employees. The landscape is changing to allow personnel to express their expertise in sustainability through ESG accreditation—a means of certifying an individual for their knowledge and application of ESG compliance—also referred to as ‘ESG certification’. While this can apply to all industries, there are also variables that impact how different professions look at ESG based on the nuances of their particular sectors.
Some of the key points to be considered when considering ESG accreditation that apply to all areas of business include financial materiality, understanding social factors as well as environmental impacts, and the specific challenges that will arise among different professions. This report will also consider the types of accreditation and their suitability for universal applications versus those more specific positions.
Some key terminology to confirm before delving into this topic:
ESG - The focus on three specific pillars of sustainability. The environmental, social and governance factors are investor- and analyst-driven to attract more sustainability focus among corporations.
Sustainability - A much broader, umbrella topic that is comprehensive of general environmental and social wellbeing. This can also include economic stability, community engagement, and other ethical practices of business.
Why become accredited for ESG proficiency?
ESG accreditation is more than simply a tick-box exercise. For professionals and businesses, it’s a chance to showcase proficiency in the key sustainability pillars that impact global market trends, therefore opening up new methods of building trust and aligning with partners and key stakeholders. Also, as investors begin to pay closer attention to ESG, accreditation is one of the ways to showcase clear proficiency to a set standard or framework.
Aside from stakeholder engagement, organisations can shift the mindset of their employees through education and documentation of key climate targets and metrics to boost the importance of ESG among teams.
ESG compliance can be measured by a few different accreditation frameworks, however, this is not exhaustive—organisations are encouraged to go above and beyond their requirements and consistently challenge their positions to incorporate new innovative sustainability efforts into their strategies.
Key ESG accreditation and frameworks
Navigating the different ESG certifications and requirements can be challenging for businesses undergoing this process for the first time. There are a number of accreditations in the market today and lots of information to decipher.
Many of the frameworks out there today are there to provide professionals with the ability to successfully report on their ESG credentials in a way that is presentable to a number of business applications.
Strategic approach to ethical investment
It’s important to understand the reasons for accreditation and build a roadmap based on what financial institutions are looking for, but also choose a means of certification that will serve the business beyond the confines of the financial agenda.
Organisations like BlackRock and Vanguard have gone public about their efforts to direct investments towards ESG-compliant businesses that uphold specific sustainability standards. Both of these organisations expressed their requirements for SASB and TCFD as benchmarks of sustainable investment opportunities.
The TCFD fosters a consistent ESG reporting standard which is adhered to by organisations globally and makes data and disclosures much more comparable when the approach is aligned by one specific set of guidelines. This was addressed in Vanguard’s ‘Report on Climate-related Impacts 2021’, where CEO Tim Buckley explained “sharing a common approach to climate disclosure will be increasingly important as societies, governments, companies, and investors transition to lower-carbon futures.”
Financial institutions have a strategic role to play in influencing the sustainability agenda. In a powerful position to regulate funding based on specific criteria, ESG accreditation is one of the evolving credentials that organisations can adopt to meet the needs of investors. Without sustainable practices, companies won’t qualify for funding. Lack of funding can limit the opportunities offered to companies, which will ultimately influence them to build sustainability into their strategies for growth.
At the core of growth are the people, making them a key touch point for generating more sustainable company-wide principles. As financial firms like Vanguard recognise the importance of their roles, they are likely to influence the need for ESG accreditation, but also encourage companies to align with their chosen standards.