8 minute read 27 Feb. 2023
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Accelerating the ESG agenda

EY Oceania
By EY Oceania

Multidisciplinary professional services organization

Contributors

Roberto Garcia,

 

Patrick Miller,  

Karen Mealmaker,  

Samantha Thomas,  

Andi Csontos
8 minute read 27 Feb. 2023
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The Environment, Health & Safety (EHS) and Environmental, Social and Governance (ESG) agendas share a desire to transform organisations and to create long-term value through the effective management of non-financial risk and by optimising business processes. Both strive to engage and inspire people in the workplace to act for the greater good, to think about what we do every day, why we do it, and how we can continually improve.

The role of EHS in progressing the ESG agenda is obvious to most — the “E” is self-explanatory, and the majority are now making the link between occupational health and safety and the social agenda (after all, the only “S” metrics many organisations publicly disclose are health and safety metrics). There is, however, a higher-level contribution that the EHS profession can and should make.

As a profession, we have a lot to contribute from our experience. We bring a wealth of relevant knowledge and transferrable skills to the table, as well as lessons learned over many decades of pursuing EHS maturity and performance. As leaders and stewards of organisational change, EHS professionals have an important role, and an ethical responsibility, to contribute to the ESG conversation. We should do so proactively, and with confidence.

EHS professionals need to understand broader ESG issues, and take the opportunity to leverage the current attention ESG is attracting in the board room and at the executive table, to elevate the visibility of health and safety in organisations.

What is ESG?

ESG encompasses a comprehensive set of factors for defining and measuring organisations’ non-financial risks and impacts on sustainability — essential for evaluating and benchmarking sustainability performance. These factors include:

  • Environmental: Climate risk, carbon emissions, energy efficiency, biodiversity, use of natural resources, waste, pollution
  • Social: Occupational health and safety, human capital, employee development and labour practices, diversity, equity, inclusion, community, human rights including First Nations peoples’ rights
  • Governance: Board diversity, corruption, fraud, bribery, business ethics, compensation policies, general risk tolerance

There is an increasing demand from investors for greater transparency of organisations’ sustainability and ESG performance.

Interest in ESG has grown to historically high levels, partly thanks to the expectations of a new generation of investors who are calling for action on ESG to secure long-term value.

According to EY 2021 Institutional Investor Survey, 78% of investors believe companies should invest in improvements relating to ESG matters, even if it dents short-term profits, but only 55% of business leaders hold the same view.

Demystifying ESG reporting

A plethora of ESG frameworks and indices have emerged globally to provide organisations with guidance on capturing the complexity of non-financial disclosures in a meaningful way.

However, there is now a recognition of the need for international consensus regarding ESG reporting — increased collaboration on requirements and metrics will enhance ESG reporting overall and make performance data more relevant. In fact, 89% of investors surveyed in the EY 2021 Institutional Investor Survey responded saying that they would like to see ESG performance reporting set against globally consistent, mandatory standards .

The launch of the International Sustainability Standards Board is a significant development in this regard. It is poised to bring much needed consolidation, consistency and comparability to ESG reporting, developing a global baseline of sustainability disclosure standards.

The growing harmonisation of standards comes at a critical time given the lack of relevant, decision-useful information to allow market participants to assess risk and encourage investment in adaptation and mitigation efforts – increasingly seen as a barrier in the transition to a green economy.

How do EHS professionals meaningfully contribute?

Momentum is building around the ESG movement, and much work is needed. Among the top challenges faced by organisations as they implement their ESG programs are activating leadership support, establishing governance structures, engaging stakeholders, assessing materiality and risk exposures, facilitating culture change, investing in systems for better measurement and tracking of data and demonstrating improvement.

EHS professionals will immediately recognise the above program challenges – they are similar to (if not the same as) those faced by EHS. While the technical aspects of ESG may differ significantly from EHS, the need for program design, leadership, implementation, change management and review are common, and familiar. By drawing on our knowledge and experience, we can help ESG avoid the pitfalls of the past and fast-track its maturation.

EHS professionals possess several transferable skills and knowledge expertise relevant to the ESG agenda. We are well-versed in the topics of reputational risk and ethics, and are comfortable discussing these in the boardroom or on the factory floor. EHS professionals approach of assessing risk and prioritising based on risk, our ability to collate, analyse and draw insights from data and our capability to problem solve with leaders and workers are all relevant. We know that leadership, management systems and incentives will influence behaviour and we have gained insight into what works… and does not work.

Where do we start?

When helping to progress the ESG agenda, EHS professionals can start by informing themselves of the emerging challenges and opportunities of the ESG agenda — ask better questions, listen and reflect on where EHS professionals can have an impact. The seven levers of the EY HSW Transformation model can assist with structuring our thoughts. Use the thought prompters and questions below to start a conversation with your sustainability colleagues today.

ESG CHALLENGE RELEVANT EHS EXPERIENCE QUESTIONS

Setting ESG Goals

Embracing ESG has fast become a strategic business imperative and board priority. However, ‘greenwashing’ and ESG marketing ploys threaten the development of meaningful and measurable ESG goals and transition plans.

Plan and strategy

Leading EHS professionals are familiar with the gap between lofty ‘Zero Harm’ goals, corporate slogans and the reality of near-term action plans and credible improvement ambitions. We have finely tuned radars for detecting superficial platitudes and discerning what is important. Action planning is the backbone of EHS success and a core element of EHS management.

Ask:

  • How do we better integrate EHS and ESG initiatives and outcomes?
  • How can EHS help operationalise ESG?

Communication and collaboration

In order to gain better visibility of ESG factors, organisations need to collaborate with their stakeholders and establish open communication and two-way sharing of information about ESG factors.

People engagement

Leading EHS professionals are in a unique position to draw diverse teams together to consider ESG factors, collaborate and problem solve. We are adept at engaging across organisational structures and silos and facilitating cross-functional conversations. We navigate complex industrial landscapes and have sensitive dialogues with board and c-suite stakeholders, regulators, unions and the workforce.

Ask:

  • How can EHS leverage existing relationships to encourage collaboration?
  • Where do opportunities exist for ESG and EHS to consolidate and collaborate?

Walking the talk

ESG requires commitment, visible leadership and investment to achieve its goals. Executives, employees, customers and stakeholders need to understand what the organisation stands for and why sustainability is vital.

Governance and leadership

Leading EHS professionals have been directly involved in designing and implementing initiatives and development programs to empower people with the necessary understanding, capability and confidence to lead EHS. Our experience has taught how to gain sponsorship, build EHS leadership capacity and support people in operations / outside the EHS functions.

Ask:

  • What is EHS’s role in leading the ESG agenda?
  • How can EHS leadership programs help build ESG leadership capacity and sponsorship?

ESG disclosure

As ESG reporting standards are consolidated and more organisations start to disclose sustainability performance, ESG systems and data will come under increased assurance scrutiny.

Assurance and reporting

Leading EHS professionals can offer insights into developing effective lead indicators, collating accurate, high-quality data, designing meaningful reports and establishing appropriate, independent assurance programs.

Ask:

  • How can ESG leverage existing EHS data collation, reporting and assurance processes?
  • Is there more meaningful EHS data we should be leveraging to give a more fulsome view of ESG performance?
     

Materiality assessments

Establishing a sound materiality filter is key to identifying, assessing and prioritising the ESG factors that matter most to an organisation.

Risk and opportunity

Leading EHS professionals bring a different perspective and deep understanding of risk management, probability and consequence to materiality discussions; we can meaningfully contribute to the prioritisation of ESG factors, ensuring a robust and complete outcome. Further, EHS professionals can offer our experience in specific “S” issues such as labour standards, human rights management in an operational context and psychosocial risks associated with cultural diversity.

Ask:

  • How do we consider ESG impacts and opportunities in a holistic way?
  • Where might EHS insight alleviate bias or inform blind spots?

Accessing information

ESG systems are in their infancy and many organisations rely on amalgamating sometimes dubious information across disparate systems and structures to inform their ESG program.

Systems and structures

In contrast, EHS systems thinking has evolved from the heavily prescriptive, compliance focus of the past to a more streamlined, risk-based approach. Effective EHS systems are integrated, simple, focused and agile. We have learned that removing complexity post implementation is much harder and more costly than investing in well-designed, user-centric and outcomes focused systems from the get-go.

Ask:

  • What are lessons learned from the evolution of EHS systems that inform ESG systems design and implementation?
  • How can EHS professionals help facilitate better ESG system design?

Technology enablement

Advanced technology will be needed to bring together ESG solutions and enable organisation to better monitor issues such as child labour, conflict minerals and human rights standards.

Digital technology

EHS was a late comer to the digital revolution and to using technology to monitor, simplify and improve. However, we have become quick adopters with experience in building the business case, deploying and measuring the benefits. Wearable technology to monitor driver fatigue is one example. Another is autonomous vehicles and equipment to remove operators from high-risk environments.

Ask:

  • How can we help ESG embed and integrate non-financial digital systems in business-as -usual activities?
  • Where can shared technology help solve ESG and EHS challenges?

Contact EY

The EY Climate Change and Sustainability Services team includes EHS and ESG professionals, working closely every day. Together, we are working to advance ESG and EHS, to the betterment of our organisations, our communities and our planet.

To discuss how we can help, please contact your EY HSW advisor.

Summary

EHS professionals can leverage their expertise to support the broader ESG agenda, bringing a wealth of relevant knowledge and transferrable skills to the table, as well as lessons learned over many decades of pursuing EHS maturity and performance.

About this article

EY Oceania
By EY Oceania

Multidisciplinary professional services organization

Contributors

Roberto Garcia,

 

Patrick Miller,  

Karen Mealmaker,  

Samantha Thomas,  

Andi Csontos
Upvote