ESG criteria: what you need to know
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What exactly do ESG criteria involve, and how do they impact businesses? Let’s take a closer look.
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ESG Certification: Does it Really Exist?
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As the push for sustainability continues to kick into full-drive, companies around the world are looking to acquire whichever certifications or credentials they can in order to demonstrate their commitment to environmental reform – but what about an ESG certification?
An ESG certification can help to demonstrate your commitment to environmental, social, and governance criteria – but does it really exist?
In this article, we’ll provide an overview of ESG, if an ESG certificate is worth acquiring, and which ESG certification may be right for your company.
What is an ESG certification?
An ESG certification provides companies with ample knowledge on how to manage ESG funds and other business activities related to environmental, social, and governance factors.
💡 Acquiring an ESG certification can help your company to gain a competitive edge in the midst of a global push for sustainability, improve communication with your stakeholders, help to better manage your suppliers, and more.
“ ESG has become one of the most important identifiers for businesses today as it remains a key indicator for how well a company works to comply with stakeholder expectations, comply with environmental regulations, navigate risk management, and employ long-term sustainability efforts. ”
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Here’s a breakdown of ESG factors:
- Environmental – This aspect of ESG refers to how a companies business activities may negatively impact the planet, such as how they affect air pollution, their water usage, and efforts to employ energy efficiency or renewable energy.
- Social – The component of ESG refers to how a company employs human rights, fair labor practices, and engages the surrounding community.
- Governance – This part of ESG refers to how a company is managed, their efforts to take accountability and exhibit transparency, their ethical behavior, and ability to comply with environmental regulations.
👉 As it can be challenging to validate all of this criteria across multiple certifications, many companies will seek an ESG certification to demonstrate their commitment to ESG values across the board.
Is an ESG certification worth it?
An ESG certification is worth it for any businesses looking to demonstrate their long-term commitment to sustainability alongside a goal to improve their profit and overall brand recognition, as acquiring an ESG certification can help to attract new talent, customers, and business partnerships.
💡 Any company looking to improve their sustainability, risk management, or ESG investments is likely to benefit from an ESG certification – making the at times tedious process worthwhile.
“ It is important to note that committing to an ESG certification will require a long-term commitment to employing sustainable practices across your organization, in addition to being willing to adjust them accordingly to ensure compliance with your ESG certification. ”
Here are just a few of the things a company may learn while undergoing the process to acquire an ESG certification:
- Learning new approaches to utilize ESG investments
- Tools to uncover underlying issues within your business related to ESG
- Gain tools to better understand global sustainability initiatives
- Improved understanding of the current ESG market
- Expertise in how to address material impacts
- Conduct improved ESG analysis and assessments
- Analyze ESG factors and adjust them accordingly to improve business performance
👉 Ultimately, seeking an ESG certification can help your business to become better equipped to handle a wide variety of issues while also helping to expand your company’s success long-term.
Is there a universal ESG certification?
While there are various ESG certifications available, there is no universal ESG certification – such as how there is a universal standard for setting emission reduction targets with the SBTi.
💡Although there is no universal ESG certification, there are several options for your company to pursue – such as acquiring an ESG certification with SGS or taking part in an ESG leadership program with Oxford.
Since there is no standardized framework for ESG, organizations who offer ESG certifications will develop their own guidelines based on various criteria – such as by following the criteria depicted in the United Nations Sustainable Development Goals or the Corporate Sustainability Reporting Directive (CSRD).
“ Ultimately, an ESG certification should validate a company’s efforts to rectify their current activities related to environmental, social, and governance. ”
👉 As there is no single ESG certification, many companies will often opt to acquire more than one ESG-based certification, such as via the GRI, SASB, CDP, ISO 14001, B Corp, and additional certifications depending on their sector and main goal when looking to become ESG certified.
The table below will compare and contrast current ESG certifications on the market:
| Certification | Focus | Pros | Cons | Best Suited For |
|---|---|---|---|---|
| Global Reporting Initiative (GRI) Certification | Sustainability reporting and ESG integration |
- Global recognition - Enhances transparency in ESG disclosures - Widely used framework |
- Can be complex and time-consuming to implement - Mostly reporting-based, less focused on actionable investments |
Sustainability professionals, CSR managers, compliance officers |
| CFA Institute Certificate in ESG Investing | Integration of ESG factors into investment decisions |
- Tailored for financial professionals - Highly reputable within the finance industry - Practical focus on ESG in investments |
- Limited to financial sector focus - Requires prior knowledge in finance |
Investment managers, portfolio analysts, financial professionals |
| Sustainalytics ESG Fundamentals Certification | ESG analysis and sustainable finance |
- In-depth training in ESG - Broad application for finance professionals - High demand for professionals with these skills |
- Primarily finance-focused - Requires ongoing updates with new ESG regulations |
Investment professionals, analysts, and ESG risk managers |
| Sustainability Accounting Standards Board (SASB) Fundamentals | Incorporating ESG into financial reporting |
- Industry-specific ESG standards - Focused on the financial impact of sustainability |
- Limited to financial and accounting roles - Less focus on broader sustainability goals |
Accountants, financial analysts, corporate financial officers |
| PRI Academy ESG Integration Course | Incorporating ESG factors into sustainable investments |
- Comprehensive ESG integration training - Shorter duration compared to other courses - Practical application |
- Lacks certification recognition - Mainly for beginner to intermediate professionals |
Investment professionals, fund managers, sustainability analysts |
| EFFAS Certified ESG Analyst (CESGA) | ESG valuation and integration into investment analysis |
- Europe-wide recognition - Focus on ESG metrics and valuation - Highly relevant for finance professionals |
- Primarily focused on the European market - Requires understanding of ESG financial tools |
Financial analysts, ESG risk evaluators, European investors |
| CDP Climate Change Course | Climate-related risks and environmental disclosure |
- Focuses on climate risks - Highly relevant for environmental disclosure and sustainability |
- Limited focus on social and governance aspects - Primarily environmental-centric |
Executives, sustainability professionals, risk managers |
What are the pros and cons of an ESG certification?
There are several pros and cons to acquiring an ESG certification, such as the ability to improve risk management, attract ESG-focused investors, or to gain a competitive advantage – but pursuing an ESG certification could be costly and boost potential skepticism of greenwashing.
Pros of an ESG Certification
Here are some of the pros of acquiring an ESG certification:
- Greater Trust & Accountability – An ESG certification can help to demonstrate your company’s commitment to sustainability, which can curate greater trust with your stakeholders, employees, and allow businesses to take accountability for their actions.
- New Investment Opportunities – Companies with an ESG certification are likely to attract ESG-focused investors, which can allow for new funding opportunities to expand your business.
- Improved Risk Management – ESG certifications can help to modify environmental and governance practices, which in turn can help to improve risk management – helping companies to better prepare in the event of a natural disaster.
- Regulatory Compliance – An ESG certification can guide companies to comply with current and future regulatory requirements, as many of the standards depicted in various ESG certifications will be one-step-ahead.
Cons of an ESG Certification
- Expensive & Time Consuming – Obtaining an ESG certification can be costly and take up time as it requires auditing and ongoing monitoring. Therefore, a smaller company may struggle to acquire an ESG certification.
- Lack of Universal ESG Certification – Since there isn’t a global standard for ESG, companies may need to comply with multiple frameworks, such as the GRI or SASB – especially if their business operates worldwide.
- Potential Greenwashing – As there is no universal ESG certification, it’s possible that customers and stakeholders will critique the ESG certification your company has acquired – which could lead to your company being accused of greenwashing.
- Cost-Benefit Ratio – While an ESG certification could prove valuable for companies that work in energy or manufacturing, it may prove less worthwhile for smaller businesses that aren’t as highly associated with the global push for sustainability.
👉 Since an ESG certification can prove time consuming and costly, it is important for your company to find the most suitable ESG certification for your business to reap all of the possible benefits.
How do I find the right ESG certification for my company?
As there is no universal ESG certification, it is important for each company to choose the ESG certification that will prove worth their time, money, and effort.
💡 For instance, a banking company may want to work towards an ESG certification specifically for ESG funding and investments to demonstrate how ESG can be applied to their industry-specific business.
Here are some of the key points to remember when searching for an ESG certification:
Diversify Your ESG Certifications & Frameworks
Since there are several organizations and frameworks that offer ESG-related certifications or assessments, it is important to acquire the certifications most applicable to your business.
- Global Reporting Initiative (GRI) – This standard helps companies with ESG reporting by offering a viable framework, but does not serve as certification.
- Sustainability Accounting Standards Board (SASB) – This standard provides help for various sustainability reporting, but like the Global Reporting Initiative, cannot serve as a certification by itself.
- CDP (Carbon Disclosure Project) – The CDP can help companies to understand their carbon emissions and provide a score accordingly.
- ISO 14001 – Known as a hallmark ISO certification, this ESG certification can help companies to improve upon their overall environmental practices by improving their Environmental Management System (EMS).
- B Corp Certification – B Corp demonstrates a company’s all-around performance in sustainability, in addition to illustrating accountability for their negative impacts.
Best ESG Certifications to Adhere to Social & Fair Employment Issues
If adhering to the ‘S’ in “ESG” is most important to your organization, such as with fashion or cosmetic companies, your company may want to consider the following ESG certifications:
- Fair Trade – Fair Trade ensures that fair wages and ethical working conditions, especially in developing countries, were implemented during production.
- SA8000 – This ESG certification focuses on ensuring fair working conditions were employed throughout the industrial process for your product or service.
Best ESG Certifications for the Financial Sector
If your company values sustainable finance, these ESG certifications may be right for your business:
- CFA Institute Certificate – This ESG certification is well-known for financial professionals as it can help investment managers and financial analysts to ensure their sustainable investments are up-to-date with ESG standards.
- EFFAS Certification (CESGA) – This European based ESG certification is also beneficial for financial professionals for improved decision making in regards to ESG.
- PRI Certification – Also offering a certification course in ESG, the Principles for Responsible Investment (PRI) offers a 3-hour self-guided course to allow financial professional to gain new knowledge regarding ESG investments.
Overall, it is important to remember that while there isn’t one, universal ESG certification – there are a wide variety of ESG-related certification available for your company to validate its effort towards reform for environmental, social, and governance.
💡 Ultimately, many businesses will opt to certify themselves for several of these ESG certifications – but it can be confusing trying to understand which certification is worth your company’s time, money, and effort.
Luckily, we’re here to help guide you through all of the requirements when applying to be certified for almost any ESG certification: from the CSRD, SBTi, and more.
What About Greenly?
If reading this article on ESG certification and an ESG certification really exists has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!
Deciding which ESG certification to choose and apply for can be overwhelming, but don’t worry – Greenly is here to help. Click here to schedule a demo to see how Greenly can help you find ways to improve energy efficiency and decrease the dependency on fossil fuels in your own company.
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
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