L4M8- LO4- Application of ESG principles Flashcards
What is due dilligence?
The process of ensuring a prospective supplier is who they claim to be and is capable of delivering the services the the standard required.
Includes:
Financial checks
References
Legal set up
What is ESG?
Environment Social Governance
A measurable sustainability assessment. It refers to the principles, procedures and activities that can impact on people and/or the wider natural environment as well as the governance that determines the organisations values and behaviours.
Need to consider not only your own organisation but also those that you will be working with
What are the key ESG considerations?
Bribery
Corruption
Fraud
Cartels
Child Labour
Modern Slavery
Sustainability (Triple bottom line)
Environment
ED&I
Values
Human Rights
What is bribery?
Offer of a gift or financial gain to persuade, influence or incentivise a decision
What is corruption?
Dishonest conduct often by senior members within an organisation. Can include bribery
What is fraud?
Financial deception
What is a cartel?
A group of organisations that work together to prevent competition, raise prices and gain control of a market
Think about milk pricing across major grocers where they agreed to raise the price of milk impacting consumers and ultimately fined £116m
Why is ESG important to each sector?
Private sector- Policy is scrutinised by investors and consumers so failure to consider ESG could result in reputation damage, reduced investment and reduced sales
Public sector- media and public scrutiny may result in unjustifiable use of public money
Tertiary- exist to promote social, environmental or cultural objectives and failure to adhere to ESg ultimately contradicts their purpose
What is sustainability?
Holistically considers the governance of an organisations environmental, social and economic viability to ensure they exist for the long term whilst meeting the needs of the present
Often encompassed by the triple bottom line or 3Ps- People, profit, planet
what is ED&I?
Equality Diversity & Inclusion
Defined as equality ensuring that every individual has fair and equal treatment in opportunities regardless of their background, identity or experience.
What are human rights?
Principles based on shared values that are accepted as belonging to all individuals, regardless of background
How can the 3 dimensions of the triple bottom line be measured?
Profit: Amount of money made, organisations net worth
E.g. a vegetable packing operation generates enough money to expand and increase its number of employees
People: Social value, perception in the community/globally
e.g. A large call center donates its end of life computers to a local youth club
Planet: Impact on environment, policies on recycling/sustainability
e.g. A driving instructor uses a hybrid car to reduce emissions
What is a social impact and give factors that measure it
This is the effect an organisation can have on the community and its stakeholders. Overall, organisations should strive to make a positive social impact and can be formed of many elements.
Impact investing-Impact investing involves making investments to help create beneficial social or environmental effects while also generating financial gains.
Health
Social entrepreneurship- a person who pursues novel applications that have the potential to solve community-based problems
Human and civil rights
Education
Public sector and public policy
Corporate social impact
International development
Environmental sustainability
Non profit and social enterprise
EXAMPLE: Ocado have a policy called ‘Planet Together’ which is focusses on net zero by 2040, making healthy eating easier, supporting food charities, responsible packaging and future proofing of the supply chain
An organisations social impact is made up of what?
Ethical behaviour
Environmental behaviour
Sustainable behaviour
Political and legal behaviour
Economic
Cultural
Technological
Donations
All sectors should have a positive social impact
What is social value?
The output from a contract that benefits society at large rather than the purchaser or end user
How does Ethical behaviour contribute to social value?
Good ethical conduct, compliance with a code of ethics, international standards and any regulations will result in an organisation behaving in an appropriate way, resulting in good for the society
Good ethics results in lower staff turnover as it will be considered a better place to work
If you have a bad reputation you will find it hard to recruit and maintain a workforce. For a charity it may also affect donations
How does environmental behaviour contribute to social value?
Society expects organisations to take responsibility for its waste
Environmental behaviour is demonstrated through its approach to pollution, how it deals with waste and its recycling policy
If you create pollution then it will have a negative social impact on the local or even global community.
If products are in non recyclable packaging they may not be purchased- EXAMPLE- think about packets of crisps on the floor
Many third sector organisations exist with the purpose of tackling environmental issues
What is a third sector organisation and what is a tertiary sector?
Third sector organizations (TSOs) are non-governmental, non-profit organizations that are not part of the public or private sectors. They are also known as the voluntary and community sector, civil society, or charities.
Tertiary sector organizations are businesses that provide services to consumers and businesses. The tertiary sector is also known as the service sector, and it is the third sector of the economy.
How does sustainable behaviour contribute to social value?
Relates to the triple bottom line.
If being sustainable the organisation shows the community that it is actively replenishing the resources and will have a favourable impact on society
Those removing or damaging natural resources will likely have a negative impact and therefore a damaging reputation
How does economic behaviour contribute to social value?
Economic behaviour includes pricing and inflation/interest rates
In the private sector the aim of an organisation is to make a profit but should be competitive (EXAMPLE- think about price matching).
If prices are perceived to increased for unjustifiable reasons then it would have a negative impact on consumers (EXAMPLE- think about profiteering)
If you charge unfair prices you often see negative media coverage (EXAMPLE- think about exploitation of farmers)
How does political and legal behaviour contribute to social value?
Politicians influence or create legislation which organisations must adhere to. These include taxes, salary, working hours, trade regulations, quality standards
If an organisation is not paying its taxes it is likely going to get a bad reputation. EXAMPLE in 2013 Global firms such as Starbucks, Google and Amazon have come under fire for avoiding paying tax on their British sales.
If organisations are associated with political parties there could also be a culture of negative social value as people may feel forced or unable to purchase
How does cultural behaviour contribute to social value?
The way an organisations culture is portrayed is through 6 elements.
if these elements are deemed to be unacceptable within the community then the impact would be a negative one
If there is support for workers, training knowledge, offering apprenticeships, sponsoring positive events then it can demonstrate they care about current and future employees
What are the 6 elements of culture? SPORCS
Symbols (logo)
Power structures (who has power)
Organisation structure (e.g. finance tends to be hierarchical)
Control systems (how are staff rewarded and governed)
Rituals and routines (When is the lunch hour, national behaviours e.g. in spain a siesta is normal)
Stories (history, background, legacy)
How does technological behaviour contribute to social value?
Organisations are often under pressure to keep up with the numerous technological advances which can be seen as a positive social impact as it could create jobs in technology
However, technology can also result in a lack of requirement for human input so jobs could be lost (example- self scan checkouts)
How does donating/giving behaviours contribute to social value?
This is not just down to the third sector. Actively working in the community and being involved in projects and events that contribute towards a positive social impact
EXAMPLE ocado supporting community shop
What is the result of poor social value?
Reduced brand loyalty
Difficulty in recruiting
Negative media coverage
Reduced sales/profit
Reputational damage
What is the result of good social value?
High employment
Fair wages
Low pollution
Sustainability of resources
Engagement and involvement with local people and organisations
With good social value results it is likely that you will keep a good customer base and maintain a good reputation. Third sector can continue to get donations and public sector will receive less public scrutiny/bad media coverage
