ESG ratings refers to three key factors in process of assessment and measuring ossustainability impact of an investment in a company or business. These factorsare environmental concerns, social concerns, and corporate governance concerns.Typical environmental element includes use of natural resources, energyefficiency, water and air emissions, waste generation, carbon emissions,sustainability initiatives. Some of relevant social elements are employee’shealth&safety, human rights, privacy/data security, employee training,diversity/opportunity policies, community programs. Governance elements coveredby this type of assessment are business ethics, shareholders rights,stakeholder’s communication, management commitment.
ESGaudit process helps to better determine future financial performance ofcompany, including related risks.
ESGaudit includes the following activities:
- Reviewof submitted documentation by the client
- Preparationof on-site Audit and development of the Audit plan
- On-siteAudit consisting of discussions with management and part of employees, sitevisits, on-site review of documentation
- Summarizingon-site results and sharing information with the client
- Reviewof all evidence and formation of findings
- Issuanceof the final Audit report
Benefits for organization of ESGaudits and ratings:
- build corporate reputation with customers
- comply with law regulation
- explain business strategy more clear
- demonstrate proper risk management
- respond to investors and customers requests
- demonstrated cost saving
- respond to competitive pressure.
Expectation of main interestedparties from companies which have in place realized ESG audits:
- Investors want toinvest in companies that are active on sustainability aspects, as they perceivethem as safer in the long term
- Employees want to workfor companies that have a high impact on society, an ethical behavior and thatfacilitate work-life balance
- Clients prefer toseek environmentally friendly products and services and transparency in thesupply chain