News / Blog / 06.07.2024

The Importance of ESG

The Importance of ESG - Image

Considering ESG criteria can help companies improve their operations and reduce risks. Companies that prioritize ESG are more likely to be good corporate citizens and contribute to the well-being of their communities and the planet. This can lead to cost savings, improved internal processes, employee retention, customer retention, and a better reputation. Shapiro believes that understanding the importance of ESG and its role can help companies improve their sustainability and success.

What is ESG?

Environmental, social, and governance (ESG) is a term that refers to the three central factors in measuring the sustainability and societal impact of an investment in a company. It comes from the triple bottom line concept, which was introduced in the 1990s and focuses on profit, place, and people rather than just profit. The triple bottom line forms the foundation for doing business sustainably and responsibly.

The three core factors of ESG are people, place, and profit. The Environmental element of ESG looks at how a company contributes to and performs on environmental issues such as waste, pollution, and climate. The Sociaaspectnt examines how a company treats its people, focusing on human capital management, diversity, health, safety, and values. Finally, the Governance element focuses on managing a company, including factors such as diversity, inclusion, and infrastructure.

Based on the idea that companies are more likely to achieve and deliver strong returns while also considering the environment and society as a whole, ESG analysis focuses on how companies serve society and how this impacts their current and future performance. It’s not just about what a company is doing today but the importance of the future and how a focus on ESG factors can significantly impact a company’s future profitability and even its survival.

Why is ESG Important?

The rigorous application of ESG practices can significantly improve a company’s returns. Diligent implementation of ESG profiles can lead to cost reduction, improved internal processes, employee retention, customer retention, and improvements in ESG factors, which are all likely to increase a company’s potential to outperform its competitors. Identifying and measuring ESG risks and opportunities can also deliver environmental and social benefits at the same time. The result is a more holistic integration better positioned to mitigate risk and maximize returns.

ESG criteria are an increasingly popular way investors evaluate companies for investments. Mutual funds, brokerage firms, and advisors offer products that employ ESG criteria, which helps investors avoid companies that pose a financial risk due to their environmental practices. Some investors believe that ESG criteria have a practical purpose beyond any ethical concerns, as following ESG criteria can help companies avoid exposing themselves to public scrutiny.

Not all companies care about the same ESG metrics, and investors and boards are turning to third-party organizations for some level of consistency and financial materiality within a given industry. However, the most important thing is that boards have the right information at their fingertips. Visibility into sustainability and ESG issues is the greatest dissatisfier for governance professionals, who need a strong vision and goals, strong data availability, and a reputable company to work with. Shapiro helps businesses reach their ESG goals and increase carbon neutrality.

There are three main reasons for ESG investing: the world as we know it is changing, the next generation of investors is changing the way investment works, and data and analytics have evolved to provide more information than ever. Studies have shown that companies with strong ESG practices have lower costs of capital, lower volatility, fewer cases of bribery, fraud, and corruption, and more scalable businesses.

Overall, the importance of ESG lies in the fact that it helps to create a more sustainable and responsible business world that benefits everyone. 

How can Shapiro help?

Shapiro offers managed services to support manufacturers in achieving their ESG goals. From metal and nonmetal recycling to fluid recovery, Shapiro’s team of sustainability experts can help companies implement a comprehensive sustainability strategy and measure and report on the data to demonstrate the impact of the program. Through plant analysis with Shapiro’s sustainability experts, companies can take the next step towards a more sustainable future for their businesses and the community. Interested manufacturers can connect with a Shapiro representative online to start the conversation.

What is ESG?

Video Transcript:

(Melissa):
“Today, I’m going to talk about ESG. I’m going to explain what that means and what it means to you. And I get to do that from my favorite place on earth, Forest Park in St. Louis, Missouri. It’s a really great representation of why I do what I do every day. I’m Melissa Today I’m going to talk about ESG. I’m going to explain what that means and what it means to you. And I get to do that from my favorite place on earth Forest Park in St. Louis, Missouri. It’s a really great representation of why I do what I do every day. I’m Melissa with Shapiro and my job every day is to work with manufacturing facilities to manage their waste streams in an environmentally friendly way. environment, social governance, or ESG, in its simplest form, is a way of evaluating, monitoring and measuring the impact of humans on the planet. In 2016, all 191 member states of the United Nations agreed unanimously to 17, sustainable development goals. These included everything from access to clean water for all access to reusable, renewable energy for all to eradicating racism, and poverty. So let’s think of a company that produces washing machines and their manufacturing facility, they’re going to have waste streams that come out of there, they’re unrelated to the product. So for example, they have parts that come into the facility that they used to make the washing machine, it enters the facility, on a wooden pallet, in a cardboard box, with a plastic strap securing it to the pallet. So the worst thing that could happen to those materials is that they end up in the trash and ultimately a landfill. better alternatives are reusing the pallets, recycling the cardboard and the plastic. This is not only good for the environment, this can be a revenue stream for the company, for example, they can sell this scrap metal to a scrap metal processor, who then prepares it for a foundry or a mill to recycle. This is all part of ESG because he being the environment, we are recycling or reusing things rather than sending them to the landfill. Companies are going to be responsible for and are already thinking about now as they design their products is what happens to the product once it’s out in the market. And what happens to the product once it is at its end of life. So if I’m manufacturing the washing machine, I need to be thinking about what happens when that washing machine no longer works, what is the customer going to do with the washing machine. That’s called extended producer responsibility. And we’re going to cover that in detail in another video. S is social. And this is all about people and communities. So if you think of it from a company perspective, we’re talking about the employees has the company leadership set up structures, rules, regulations, to make sure that the people that work together and that work for this company are protected physically and emotionally in the role that they have within their companies. The other part of that for a company is its role in the community companies are expected to be corporate citizens, they’re expected to make contributions to not for profit organizations within the community, be on not for profit boards and help in any way that can improve the sustainability for the environment, as well as for the people that live in the communities where they conduct business. So that’s the s that’s social, D is governance. And that is the rules and regulations that a company uses to ensure that they are making decisions that are environmentally sustainable, that protect their people, and the communities they live in. So when you think about all three of those together, you can see how they can work toward that vision that the United Nations had when they developed those 17 Sustainable Development Goals. We are now measuring ESG with an ESG score. This score helps the company represent to their shareholders, how they’re performing and taking care of the environment and their people and the communities that they work in while producing their products in a profitable way. If you liked this content, subscribe to our channel with Shapiro, and my job every day is to work with manufacturing facilities to manage their waste streams in an environmentally friendly way. Environmental, social, and governance, or ESG, in its simplest form, is a way of evaluating, monitoring and measuring the impact of humans on the planet. In 2016, all 191 member states of the United Nations agreed unanimously to 17 sustainable development goals. These included everything from access to clean water for all to reusable, renewable energy for all, to eradicating racism and poverty. So let’s think of a company that produces washing machines and their manufacturing facility, they’re going to have waste streams that come out of there. They’re unrelated to the product. So for example, they have parts that come into the facility that they used to make the washing machine. It enters the facility, on a wooden pallet, in a cardboard box with a plastic strap securing it to the pallet. So the worst thing that could happen to those materials is that they end up in the trash and ultimately a landfill. Better alternatives are reusing the pallets, recycling the cardboard and the plastic. This is not only good for the environment, this can be a revenue stream for the company. For example, they can sell this scrap metal to a scrap metal processor, who then prepares it for a foundry or a mill to recycle. This is all part of ESG because “E”- being the environment- we are recycling or reusing things rather than sending them to the landfill. Companies are going to be responsible for, and are already thinking about as they design their products, is what happens to the product once it’s out in the market and what happens to the product once it is at its end of life. So if I’m manufacturing the washing machine, I need to be thinking about what happens when that washing machine no longer works. What is the customer going to do with the washing machine? That’s called extended producer responsibility. We’re going to cover that in detail in another video. “S” is social. This is all about people and communities. So if you think of it from a company perspective, we’re talking about the employees. As the company leadership set up structures, rules, regulations, to make sure that the people that work together and that work for this company are protected physically and emotionally in the role that they have within their companies. The other part of that for a company is its role in the community. Companies are expected to be corporate citizens. They’re expected to make contributions to not for profit organizations within the community, be on not for profit boards, and help in any way that can improve the sustainability for the environment, as well as for the people that live in the communities where they conduct business. So that’s the “S”. That’s social. “G” is governance. That is the rules and regulations that a company uses to ensure that they are making decisions that are environmentally sustainable, that protect their people, and the communities they live in. So when you think about all three of those together, you can see how they can work toward that vision that the United Nations had when they developed those 17 Sustainable Development Goals. We are now measuring ESG with an ESG score. This score helps the company represent to their shareholders, how they’re performing and taking care of the environment, their people, and the communities that they work in while producing their products in a profitable way. If you liked this content, subscribe to our channel.”