ESG explained
Put simply, ESG, or Environmental, Social and Governance, is a framework used by organisations to assess their sustainability. It is a framework that is all too often reduced to ‘green measures’, but by paying close attention to the Social and Governance side of ESG, decision makers will be creating an ethos of fairness, inclusion, diversity, and good governance within their organisations.
Some examples of ESG in the housing sector:
Environmental
- Reducing carbon emission through use of electric vehicles
- Ensuring operative routes are optimised to reduce travel time
- Choosing suppliers based on green credentials
Social
- Customer satisfaction through first time fix rates
- Gender and ethnicity pay gap reporting
- Eliminating unconscious bias in the hiring process
Governance
- Diversity of board members
- Reviewing executive compensation
- Ethical decision making
Why ESG?
By implementing a robust ESG framework, organisations should see improvements in many areas. Research by S&P Global Market Intelligence shows that companies with more women in C-suite positions have improved financial performance compared to less diverse companies. In a similar vein, organisations with a diverse ethnic makeup are more likely to broaden the talent pool and foster innovation.
By embracing environmental sustainability, organisations align themselves to public expectations. With green credentials high on the agenda for the public in general, the manner in which organisations conduct themselves in this area is of high importance both reputationally and financially.
With a reputation for sustainability, companies will attract a bigger pool of talent; Generation Z employees in particular, place high priority on employers who put sustainability at the forefront. Green credentials are also an attractive proposition for investors and stakeholders.
In the UK housing sector, a well thought out ESG strategy will bring a positive experience to the customer. For those in social housing, efficiency of maintenance and repairs will bring higher levels of customer satisfaction and forge better relationships between housing associations and their customers.
Implementing ESG
In the first instance, a materiality assessment should be carried out. This will involve identifying stakeholders who will be affected by, or have an interest in, your ESG policy. Clear lines of communication should be set up so that stakeholders can raise their expectations and concerns. At this point, the scope and purpose of the assessment must be clearly defined.
You will then need to compile a list of potential ESG issues. Which areas of the organisation would most benefit from ESG improvements, on a practical, reputational, and financial level? You can create surveys, set up interviews, and hold focus groups to evaluate company-wide buy-in, and begin to gather qualitative data for assessment.
The final stage involves brining your defined ESG measures into your overall strategy and reporting. This may mean tweaking existing plans and implementing new measures. You can then allocate the necessary resources in terms of priority, and introduce KPIs to measure performance. Finally, you will need to utilise a digital platform with inbuilt compliance for reporting to stakeholders and potential investors.
