unit 5 | environment, social, & governance (ESG)

Question 1

Corporate Social Responsibility

Answer 1

A concept that considers all stakeholders when making decisions & goes beyond just making profit while complying with laws & regulations
- Give back to communities in which they operate
- Consider social & environmental issues while doing business

Question 2

Triple Bottom Line

Answer 2

A model outlining that companies should commit to focusing as much on social & environmental concerns as they do on profits & instead of one bottom line (profit/net income)
- Profit, people & planet
- Measures a company’s level of commitment to CSR & its environmental impact

Question 3

Environment, Social, & Governance

Answer 3

The three key factors when measuring the sustainability & ethical impact of business
- Sustainability is measured through quantifiable metrics that can be monitored overtime

Question 4

Why is ESG relevant?

Answer 4

Important topic for business to respond to climate change to build sustainable operations to achieve or maintain a competitive advantage

Question 5

Climate Change

Answer 5

A long-term shift in global or regional climate patterns
- Rise in global temperatures from mid-20th century to now

Question 6

Net Zero

Answer 6

A state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere

Question 7

To ‘go net zero’

Answer 7

To reduce greenhouse gas emissions and/or to ensure that any ongoing emissions are balanced by equal amounts of emission removals from the atmosphere

Question 8

The Paris Agreement

Answer 8

• An international treaty on climate change (to minimize long-term temperature increases)
• Many governments established a goal to reach net-zero in their nation by 2050

Question 9

Greenwashing

Answer 9

When a company spends resources to market themselves as environmentally friendly rather than actually minimizing their environmental impact (misleading)

Question 10

Discounting Provisions & Contingent Liabilities

Answer 10

Estimated to occur in near future → do not discount the amount

Estimated to be incurred in the future → discount the amount to consider TVM

Question 11

Provision

Answer 11

A liability with uncertainty about the timing of amount of future expenditure required

Reliable estimate → recognized as liabilities

Question 12

Provision conditions

Answer 12

1. An entity has a present obligation as a result of a past event
2. It is probable that an outflow of resources (cash) will be required to settle the obligation
3. A reliable estimate can be made to understand the amount of obligation
   - If conditions not met → contingent liability

Question 13

Contingent Liabilities

Answer 13

A possible obligation that arises from past events & whose existence will be confirmed by the occurrence or non-occurence of uncertain future events → outside of management’s control
- Disclosed in the notes to the FS, not recognized as liability

Question 14

Decommissioning Provision

Answer 14

The present value of future cash outflows that will be incurred to close mines at the end of their useful life & restore the environment to its original condition before mining operation commenced
- Common among oil & mining companies

Question 15

What does S in ESG focus on?

Answer 15

Social:
- Developing good & high-quality relationships with stakeholders is extremely important in business
- Can make or break businesses as modern-day society has big expectations from businesses

Question 16

Organizational Culture

Answer 16

• The collection of values, expectations, & practices that guide & inform the actions of all team members
• Key factor to differentiate from competitors

Question 17

Mental Health in the corporate world

Answer 17

Crucial for companies to support employees through mental health issues & encourage a work environment that listens to, understands, & support team members going through difficult times

Question 18

Importance of Governance

Answer 18

• To help a company successfully adopt environmental & social best practices
• Tone from the top → Board members, CEO, & top executive members lead, company follow
• Simply doing business VS Doing business ethically while protecting the planet

Question 19

Sustainability Reporting

Answer 19

Thorough, transparent, & accurate sustainability reporting
- Expected by public company, but not yet mandatory

Question 20

Global Reporting Initiative (GRI)

Answer 20

• An independent, international organization that helps businesses & other organizations take responsibility
• Provides the world’s most widely used standards for sustainability reporting
  > GRI standards

Question 21

Value Reporting Foundation

Answer 21

A global nonprofit organization that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value—how it is created, preserved & eroded

Question 22

What did the Value Reporting Foundation do?

Answer 22

Consolidated the International Integrated Reporting Council (IIRC) & the Sustainability Accounting Standards Board (SASB)

Question 23

Climate Disclosure Standards Board (CDSB)

Answer 23

An international consortium of business & environmental non-governmental organizations

Question 24

What does CDSB do?

Answer 24

CDSB is committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital by offering companies a framework for reporting environmental information with the same rigour as financial information