Environmental, Social, and (Corporate) Governance, also known as ESG, are the three pillars that define standards and practices, that together, indicate an organization’s dedication to operating sustainably. ESG reporting can be a powerful tool for companies to set goals and metrics, measure performance, and manage change in order to make their operations more sustainable and align with the values of their stakeholders. Through sustainability reporting, organizations can understand and communicate the risks and opportunities they face from their corporate activities.
Automotive industry Original Equipment Manufacturers (OEMs) have issued guidance that suppliers must undergo a self-assessment questionnaire pertaining to the corporate social responsibility of their organization. What does this mean for automotive suppliers? What are the next steps? In this article, we will take a deeper dive on the benefits and return on investment for ESG and how the adoption is impacting strategy in the boardroom.
Sustainability and ESG
A tipping point has been reached in the world of sustainability, and never has the focus on it been so prevalent across all parts of society, as well as in boardroom discussions. The trend towards ESG awareness and doing business the right way has been embraced by many organizations around the world and perhaps driving the greatest change of all is the automotive sector. Early adoption by the Original Equipment Manufacturers (OEMs) has led to the development of standardized questionnaires for the entire supply chain. These questionnaires are forcing suppliers to revisit and rethink what components of the risk portfolio are of material to them and their stakeholders. There is mounting pressure on many fronts for the automotive industry to engage quickly including demands from investors, expectations of consumers and lastly from their workforce.
What is ESG?
Environmental, Social, and (Corporate) Governance are the three pillars that define standards and practices and indicate an organization’s dedication to operating sustainably. ESG reporting allows organizations to understand and communicate the risks and opportunities they face from their corporate activities. ESG performance is typically measured via numerical values to assess levels of maturity with environmental impacts, compliance with health and safety requirements, business conduct as it applies to corruption and bribery, business ethics and policies on critical areas such as modern slavery and human trafficking.