Final Exam - ESG Flashcards
whats ESG
a set of practices and metrics used to evaluate a company’s impact in 3 areas
E
energy use
greenhouse gases
water use
pollution
waste
materials
S
labour practices
human rights
employee health and well being
diversity
equity/inclusion
impact on community and customers
G
companys management and decision making processes
internal controls/audits
board gov. oversight
executive pay
shareholder rights
transparency
ESG impact on businesses
- allows businesses to be evaluated on factors other than just financial performance
- incorporates financial and non financial issues involved in managing business more holistically, comprehensively, long term
- acknowledges that business relies on society and environment
whos evaluating business ESg
external - investors/lenders/financial market, employees, government, suppliers, customers
internal - management
planetary boundaries
limits within which humanity can safely operate to avoid environmental collapse
science based targets
emissions goals backed by climate science
just transition
a fair shift to sustainable energy, protecting jobs and communities
sustainability
meeting todays needs without compromising future generations
sustainable development
economic growth that also protects the environment and social well being
green financing
investment in environmentally beneficial projects
grey financing
investments in projects harmful to the environment (ex. fossil fuels)
greenwashing
misleading claims that make something appear more ecofriendly than it is
greenhushing
intentionally hiding or downplaying sustainability efforts to avoid critisism
carbon neutral
any co2 released into the atmosphere from a company’s activities is balanced by an equivalent amount being removed
net zero carbon emissions (net zero)
activity that releases no carbon emissions into the atmosphere
nature positive
actions that restore and regenerate ecosystems beyond reducing harm
decarbonization
reducing carbon emissions across operations and value chains
adaptation
adjusting to the effects of climate change
mitigation
actions to reduce or prevent climate change (ex. using renewable energy)
When considering adaptation and mitigation strategies, a useful analogy is to think of adaptation as ____________ and mitigation as ____________.
defense, offense.
key takeaways of ESG movement
theres been a shift from treating esg as a csr to treating it as a essential core business strategy
pre 1750s: indigenous ppls practiced sustainability through natural law and stewardship
1760s-1940s: industrialization embraces ‘take-make-waste’ and ignored ecological limits
1980s: UN and world bank integrated sustainable development into global strategies
1990s: global climate coorperation emerged
2000s-2010s: esg terminology formalized, financial markets began measuring sustainability
2020s: covid, racial justice, climate events accelerated esg as mainstream priority
we went from an empty world with an abundance of resources to a full world with increasing scarcity of resources. Identify and describe three (3) contributors to this shift.
Technology advances used in industrial revolution were dependent on fossil fuels and other raw materials
Massive production and consumption
Economic and population growth
Identify and describe the high-level shift in management thinking
- shift from pre to post industrial revolution
- from assuming limitless resources to acknowledging planetary boundaries
- from optional csr to core strategies and risk management
Identify and describe how the role of Indigenous Peoples has changed
- indigenous knowledge understood that human systems are part of and must remain in balance with ecosystems
- their practices were ignored during industrial development
- now being recognized as essential
how can a company move forward in its esg goals
- build esg into their strategy, not just marketing or csr
- measure progress with transparent, standardized metrics
- engage with stakeholders including employees, communities and indigenous ppls
- lead with purpose, act on issues that align with values
whats True ESG strategy
how a company makes its money, not what it does with it
4 principles managers need to use
commit - take bold, long term stances
commercialize - make esg part of core value proposition
get uncomfortable - challenge status quo, take responsability
cooperate - work across sectors, gov., cultures
impact social issues have
impact customer trust and loyalty
investor confidence
employee satusfaction
why people work
traditional: pay cheques, benefits, security
current: belonging, meaning, purpose, self actualization
why the shift (why people work)
- loyalty increased on both sides
- employee burnout
- pandemic increased loneliness
where poeple work
- most poeple prefer hybrid
- managers prefer hybrid
why the shift (where people work)
- internet
- pandemic
- managers want hybrid
how people work
traditional: mon-fri, 9-5, no contact during work hours
current: always ‘on’, work with ai, no ‘one size fits all’
why the shift (how people work)
- pandemic
- demographic shift
- technology
how can companies make progress in DEI (diversity, equity, inclusion)
they must go beyond quotas, create cultures of inclusion
4 freedoms of workers flourishing
- freedom to be: authenticity to be (ex. inclusive dress codes)
- freedom to become: growth opportunities (ex. mentorship, training)
- freedom to fail: safe to make mistakes and learn (ex. psychological safety)
- freedom to fade: avoid burnout (ex. quiet spaces, rest)
impact of governance issues
ineffective governance leads to breaches in a companies ability to meet e and s
governance factors
Business ethics
Board composition
Corporate leadership
Risk and crisis management
Resource allocation
Incentive structures
Political responsibility
Transparency
Anti-corruption and integrity
Tax strategy
Fair competitive practices
Stakeholder engagement
Supply/value chain management
business ethics
Purpose, values, culture
Integrity beyond compliance
ESG integration
Pursuit of and reporting on KPIs
board composition
Who’s on the board — are they diverse and skilled
Competencies
Diversity
Structure, committees
Oversight capacity
Independence
corporate leadership
Tone, knowledge, experience
Power allocation, compensation
Decision-making processes
Independence and empowerment of compliance function
risk and crisis management
Preparedness, mitigation, past performance
Regulatory compliance
Segregation of duties
Audit independence
Shareholder rights
Information governance
Cybersecurity
resource allocation
how a company decides to use its money, people, and time.
incentive structures
Compensation and promotion
Reporting structures
Defined prohibited misconduct
Disciplinary measures
political responsability
Are they honest about lobbying or donations
Lobbying
Amicus briefs
Campaign finance
Political contributions
transparency
Are they open about how they run things
Ownership, subsidiaries/holdings
Open contracting
Lobbying
Charitable donations
Countries of operation
Verifiability of disclosures
anti corruption and integrity
making sure the company is honest, ethical, and doesn’t do shady stuff.
Training and communications
Whistle-blower protocols
Due diligence
Risk assessments
Government relations
Gifts and entertainment
Conflicts of interest
Remuneration and payment procedures
Record-keeping
Financial controls
Reporting and accounting
Contractual obligations
Public commitments
Past incidents
Internal investigation and remediation
tax strategy
Are they paying taxes fairly or finding sneaky loopholes
Tax compliance
Anti-tax avoidance
Tax disclosures
stakeholder engagement
Do they listen to people affected by their decisions
supply/value chain management
ESG integration, transparency, contractual obligations, countries of operation
