What is ESG certification and what is it for? Let’s go into detail to see what it is, why it is important and the requirements needed to obtain it.
Acronym for Environmental, Social and Governance, the ESG certification is used to evaluate the sustainability of a business. It is therefore not just a simple certificate, but rather helps demonstrate the actual commitment to social, environmental and economic responsibility.
Framed in the field of sustainable finance, it refers to an innovative yardstick for evaluating businesses and organizations. But who issues this type of certification and how to obtain it? Let’s see everything there is to know about it.
What is ESG certification
Pollution is undoubtedly one of the worst plagues of our society. Precisely for this reason it is essential that each of us contributes to safeguarding the environment. It is precisely in this context that the ESG certification fits in, which evaluates the sustainability of a company. In particular, it allows to demonstrate the ability of a business to respect certain fundamental requirements for sustainable development from an economic and environmental point of view.
But not only that, also from a social and corporate governance point of view. All this taking into account a series of operational standards that should be considered as a source of inspiration for corporate strategies. It is basically a tool that allows to demonstrate the commitment of a company to operate according to transparency and responsibility criteria, in order to significantly reduce the environmental impact. Going into detail, it is a formal recognition that is based on international standards such as the ISO 9001 or ISO 37001, ISO 14001 and SA8000 standards, i.e. the criteria for quality, anti-corruption, the environment and social responsibility.
What is ESG certification and why is it important
ESG certification is considered synonymous with quality and reliability, thus helping to improve the company’s reputation with third parties, such as potential investors and customers. It therefore represents an important added value for a company, as it certifies compliance with ESG criteria, based on certain internationally recognized standards. In fact, ESG certification helps to improve the company’s image.
But not only that, it allows you to access green financing more easily and attract the interest of investors who are attentive to sustainability. At the same time, it helps to improve company management, as it allows you to prevent possible environmental or social problems, as well as avoid possible damage to the company’s reputation or legal sanctions. If all this were not enough, it allows you to reduce energy costs and therefore increase efficiency and savings.
Who issues ESG certification
ESG certification is issued by various independent organizations that are specialized in the evaluation of environmental, social and governance criteria. There are various agencies that operate internationally and offer this service, each with its own methodologies and standards. It should be noted that not all of them issue certifications. Many only deal with helping companies develop and improve their ESG performance.
Among the best known are the Global Reporting Initiative, the Carbon Disclosure Project, but also the B Corporation and some independent rating agencies, such as Moody’s, S&P Global and MSCI. These agencies apply ad hoc metrics to assign a score or evaluation to the company taking into account its commitment and performance in the ESG field.
The requirements needed to obtain ESG certification
As already mentioned, each agency has its own methodologies and accreditation standards. For this reason, the requirements may be slightly different depending on the agency of reference. In any case, however, the access requirements are aimed at demonstrating a company’s commitment to environmental, social and governance sustainability. Among the main requirements is the implementation of strategies that are consistent with ESG objectives. In particular, the company must demonstrate that it has a sustainable management system and what the impact of its activity is on the environment, suppliers and its employees.
But not only that, it is necessary to constantly monitor its ESG performance and make public the data relating to the results obtained. It is essential to involve stakeholders in the implementation of ESG strategies. The company must demonstrate that it has a transparent dialogue with its stakeholders, have effective mechanisms to obtain feedback and above all respond to any concerns.
The watchword is collaborate with suppliers and third parties to ensure that its activity does not damage the environment and human rights are respected. Meeting all the requirements to obtain ESG certification can be very time-consuming and resource-intensive. However, it is an important step to establish your commitment to sustainability and to facilitate access to new financing opportunities.
How to obtain ESG certification
To obtain ESG certification, you must first understand the ESG criteria and standards required by the agencies. The latter, in fact, provide guidelines on the key areas of sustainability and on how to measure company performance in these contexts. Once the standards have been identified, an internal assessment must be carried out. This way, it is possible to establish the current state of the company’s ESG performance. This assessment concerns the analysis of financial data, the identification of any environmental and social risks, in addition to the effectiveness of governance policies and the analysis of the impact of company activities on the areas of interest.
Taking into account the results obtained, it is possible to establish an ESG strategy, thanks to which it is possible to define ad hoc objectives and interventions to improve the company’s performance in terms of the environment, society and governance. A clear example of this is the implementation of policies aimed at reducing carbon emissions, but also practices for responsible management of the supply chain. It is essential that a system is also implemented that allows the results obtained over time to be collected data and monitored in this way. Once significant results have been achieved in terms of ESG performance, it is possible to start the certification process.
As anticipated, there are various organizations that deal with certification, each with its own requirements and evaluation criteria. It is therefore essential to select a reliable certification that is in line with the standards and expectations of the sector. Once the ESG certification has been obtained, the results must be communicated in a clear and transparent manner to stakeholders. To this end, a sustainability report can be published or awareness initiatives on the topic can be participated in.
Original article published on Money.it Italy. Original title: Certificazione ESG, cos’è, a cosa serve e come ottenerla
