ESG, its impact within socially conscious customers & investors, common use case and solution in SN

[Raghuveer Moort]

What is ESG ?

ESG is an acronym for Environmental, Social, and Governance.

The most effective way to describe ESG is as a framework that enables stakeholders to comprehend how an organisation is addressing environmental, social, and governance criteria in order to manage risks and opportunities.

Although the concept of ESG (Environmental, Social, and Governance) is commonly associated with investment, it encompasses a broader range of stakeholders beyond the investment community. These stakeholders include customers, suppliers, and employees, all of whom are displaying a growing interest in the sustainability of an organisation's operations.

Typical considerations for ESG include

Environmental - Potential climate risk, extraction and use of raw materials, effect on biodiversity  due to humans

Social - Importance to human rights, Protection to personal data, policy on POSH/ misconduct, workplace safety

Governance - Diversity, corporate transparency, anti-bribery and corruption policies

ESG norms primarily aim to promote responsible business conduct. Business enterprises play a critical role in society and are accountable not only to their shareholders in terms of revenue and profitability but also to the broader society as stakeholders. Therefore, it is equally important for companies to prioritise responsible business practices that encompass ESG aspects, alongside their financial and operational performance. Compliance with ESG norms entails holding businesses accountable for their responsibilities towards the environment, as well as the individuals comprising the entire ecosystem, including employees, customers, and other stakeholders.

What is changing to influence the importance of ESG in Corporate Business ?

In the past decade, there has been a global shift in the mindset of regulators and corporations, recognising the importance of assessing businesses based on more than just traditional economic indicators like shareholder return. There is now a growing emphasis on measuring businesses' environmental impact, dedication to social issues, and the effectiveness of their corporate governance in safeguarding shareholder rights.

The rise of ESG regulation in India (a recent news):

India has taken steps to enhance ESG regulations and disclosure requirements for companies. The Securities and Exchange Board of India (SEBI), the country's market regulator, has introduced various initiatives to promote ESG practices. The key features of ESG regulations in India include:

1. Mandated ESG Disclosures: The SEBI has mandated certain companies to disclose ESG-related information through the Business Responsibility and Sustainability Reporting (BRSR) framework. This requires the submission of an annual Business Responsibility Report (BRR) starting 2022-23 by the top 1,000 listed companies based on market capitalization.
2. Carbon Footprint Disclosure: SEBI has required the top 1,000 listed companies to disclose their carbon footprint and adopt measures for climate change mitigation. This aims to address environmental concerns and promote sustainability practices.
3. Stewardship Code:  The code emphasizes the role of institutional investors in considering ESG factors and promoting responsible investment practices.
4. Corporate Governance Reforms: India has implemented various corporate governance reforms to enhance transparency, board independence, and shareholder rights. These reforms include separating the roles of Chairman and CEO, improving board effectiveness, and strengthening audit committees.
5. Reporting Frameworks: Various reporting frameworks, such as the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB), are widely used in India to guide companies in disclosing their ESG performance. These frameworks provide standardised guidelines for reporting on environmental, social, and governance factors.
6. Investor Focus: ESG regulations in India have a strong focus on investor interests, encouraging companies to prioritise sustainable practices and long-term value creation.

So, what is the Problem now ?

As all major Organisations have accepted the importance of ESG Management to comply from Government Regulatory requirements (to avoid penalties) and increase the Business through customers & investors who see ESG as an indication of low-risk.

The ESG strategic goals established by top management may appear disconnected from the employees and other stakeholders, such as partners and vendors. This disconnection often arises from a lack of transparency and awareness regarding the organisation's goals. Employees may not have a clear understanding of the ESG objectives set by their organisation, resulting in limited motivation to actively contribute or engage in decision-making processes. Additionally, the absence of a rewards and recognition program tailored to acknowledge contributions towards ESG goals further aggravate this issue, leaving employees without a sense of encouragement or incentive to actively work towards these objectives or participate in socially responsible initiatives.

Solutions in ServiceNow:

Using the Better-together approach, the following ServiceNow products provide a platform to the employees to increase the awareness of the company's ESG goals and reward their contribution towards them.

1. ServiceNow ESG Management application helps to manage Environmental, Social, and Governance (ESG) initiatives

      The key components of the ESG Management application are as follows:

• Material topics: Themes that employees want to work on.
• Goals: Objectives that employees want to reach based on your topics.
• Targets: Set targets to track and measure the progress of the goals.
• Emission activities and factors: Activities that lead to emissions.
• Disclosures: Reports generated to show the company's progress on the chosen material topic.

2. Gamification - Encourage users to participate and contribute content by providing incentives in the form of points, achievement levels, and badges.

3. Workplace Service Delivery - Efficiently supervise every single location of your organization by using the ServiceNow Workplace Space Management application. This will help to track the vehicle usage of the employees, promote usage of electric vehicle parking with charging facility. Thereby, efficiently monitor and improve the overall carbon footprint in your organisation.

4. HR Service Delivery - A one-stop-shop for any service an employee needs related to different HR activities such as Employee Relations (Discrimination, Misconduct etc.,), Payroll, Performance, Learning etc., This helps to maintain social responsibilities related to Employee well-being and safety.