3 ways to improve your ESG score: Governance

What does ESG mean?

ESG - environmental, social and governance criteria are a set of socially conscious standards used by businesses. Reporting on these standards helps companies get closer to being value-led and contributing to real-world change.In this three-part article series, we’ll be taking a look at the ways in which you can improve on your ESG scores - in this particular article we’ll be looking specifically at the governance element. Despite an increased buzz around ESG scores, there seems to be a distinct disconnect between awareness and action - the perceived importance of an approach rooted in ESG doesn’t add up to how many UK businesses are actually putting these in place. In order to make the most difference, social purpose must be baked into the very structure of your business. With that in mind, there’s no better time to start building on the foundations of your governance strategy.

How are governance scores ranked?

Governance scores are measured on transparency, corporate social responsibility, and stakeholder engagement. They also take into account the opportunities held by employees, like gender, diversity and equality, ensuring the company is run responsibly.

What are the main issues we now face?

Human rights failuresDespite eco-labels like Fairtrade becoming a fixture on supermarket shelves, there remains a lack of regulation requiring companies to proactively map and address human rights risks within supply chains. For example, it’s all too common for brands to profess ignorance of the working and living conditions of people who play an important role in their manufacturing process.Non-inclusive working conditionsMarginalised groups such as those with disabilities continue to face challenges within the workplace, alongside the ageing population and people from ethnic minorities. Many discrimination cases go unreported, resulting in inaccurate government figures and, in turn, a domino effect that goes from perceived lack of importance to loss of awareness, to more crimes slipping under the radar. Wasteful business practicesWhen it comes to building climate resilience, huge shifts are needed from government and legislators, and the private sector tooWilliam Skeaping urges, "Look internally at your structure and business model - you need to do more than just employ a sustainability manager. Make every business decision through the lens of the climate and ecological crisis, and engage everyone in the value chain." Budget cutsThis year, the government decided to reduce the foreign aid budget to 0.5% of national income (down from 0.7% since 2015)3, increasing the pressure on charities to provide aid. Without practical support from brands and the private sector, charity services will be stretched beyond their tensility and left unable to cope.

How to improve your ESG Score - Governance

Scrutinise your supply chain

Firstly, ensure your own business models aren’t contributing to issues that exacerbate the challenges faced by vulnerable communities, such as human rights abuse and climate challenges. Tackle your biggest area of impact first and make a plan to tackle that immediately. A few ways you can do this are:

• Ensure your operations are in line with the UN Guiding Principles on Business and Human Rights
• Commit to a 1.5C science-based-target
• Conduct a water audit so you can see where you can limit water waste and reuse excess water
• Make sure your pension doesn’t invest in funds that contribute to deforestation or other harmful practices.

So, who’s doing it well? Diageo has invested in WASH (water, sanitation and hygiene) to protect its workforce with a pilot project with WaterAid to bolster the business case for WASH. At a structural level, Diageo continues to champion the role of WASH within corporate sustainability strategies.

Provide long-term support

When businesses support a cause, it’s important to carefully consider the ultimate goal and what is needed to get there as it’s challenging for charities to make any long-term plans when funding is uncertain. Businesses need to work hard to protect pots of money set aside for causes and become more proactive than reactive (i.e not just when disaster hits). B&Q partners with Shelter to improve the lives of people through practical DIY and home improvement. Connected by the belief that everyone has the right to a safe home, B&Q fund Shelter’s DIY Skills Advice service which provides practical advice to Shelter’s clients, helping them feel happier and safer in their own homes.

Improve access to opportunities

One great way to break the poverty cycle is to get disadvantaged groups into businesses. Businesses should also look at employment regimes and commit to diversity and inclusion initiatives. Deloitte promotes opportunities by funding a Scope programme called ‘Career Pathways’, which is about supporting young disabled people to get into work and find the right career. The programme ensures a host of mentoring opportunities, and the chance to have open and honest conversations.

Download the Get Fit for Purpose report

Free to download, the Get Fit for Purpose report features the advice from a ‘dream team’ of over 20 experts from charities, NGO and advocacy groups such as WWF, Stop Hate UK and Amnesty International. It's packed to the brim with everything they can teach us about honing social purpose through 2022.

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