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4 Important Things to Know About ESG Scores

Businesses across the globe are turning their attention towards projects, partnerships, and investments that put Social Impact at the front of the conversation with Return on Investment and profitability objectives.

As corporate social responsibility (CSR), and commitment to solving global issues joins the front seat, more is being asked of businesses to demonstrate their involvement in making the world a better place.

In order to understand what this means for your businesses, knowing how your organization’s Environmental, Social and Governance (ESG) performance scores are calculated, why they matter more now than ever before, and how you can improve them, is the first step.

1. What Are ESG Scores?

An ESG score is a way to measure how a business is perceived to be performing on a wide range of environmental, social and governance (ESG) topics. The key word here is “perceived,” which means there can often be a gap between reality and the actual performance of a company. Even if a business is working on increasing their sustainability, if the information is not something that is made available to the public, their ESG scores do not improve.

This can hinder investments and make winning business more challenging, due to this gap between internal corporate reality and external perception. It’s important for your company to have both quantifiable data and the resources available to accurately share your good work with the public.

2. How is an ESG Score Calculated?

There are a variety of third party ESG rating organizations, and each of them take a slightly different approach to calculating ESG scores. MSCI, Bloomberg ESG Data Service, Sustainalytics, RepRisk, and new entrant Institutional Shareholder Services (ISS), are some of the current leaders in the space.

Factors like a qualitative analysis on the company’s handling of ESG issues, analyzing a company’s ESG performance with environmental, social and governance scores compared to their peers, and an overview of any potential ESG controversies, are all considered.

There is a move towards standardizing how ESG scores are calculated, but for now, know that there may be variances between each of them.

3. Why Should Your Businesses Care About ESG Scores?

Having good ESG scores can demonstrate to investors and potential customers that your company is better equipped to navigate potential future risks and opportunities related to sustainability and Social Impact, allowing investors to make decisions about where to expand their portfolios.

Government agencies are beginning to use ESG scores to grant businesses permission for land, water, electricity, and a variety of crucial resources, based on how ethical and responsible their ESG scores indicate.

Businesses that make strides towards creating quantifiable Social Impact see an increase in sales and overall investment. Consumers are demanding high standards of sustainability and quality of employment from businesses, and are spending accordingly. Each of these factors are important to keep in mind when determining your ESG strategy.

4. How Can Your Businesses Improve it’s ESG Scores?

The first step to improving your ESG scores is identifying the key issues related to ESG that your company, employees, and investors care about. Begin engaging with ESG ratings agencies, to identify the relevant gaps in your ESG strategy.

Once you have these in mind, begin aligning with the goals and create a concrete strategy where they’re prioritized. Utilizing part of your existing resources on catering ESG focuses on goals related to your company’s industry, is more cost effective and impactful than generally focused ESG projects.

Givewith’s SaaS software delivers a unique sales differentiator in the form of curated Social Impact programs – helping our customers strategically win business. By staying strategically focused on Social Impact and ESG compliant projects tailored for your business, your organization can support these Social Impact programs, and bolster your ESG scores.

It’s Time to Prioritize ESG

Staying knowledgeable and focused about your company’s ESG score is critical to developing future business growth and expanding brand loyalty, as well as optimizing for a more sustainably focused future.

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