How Effective Waste Management Supports ESG Ratings.
ESG is no longer a ‘nice to have’ tactic, it is now seen as a major focus area for boards and managers. There is a broad consensus that companies which manage, measure, and monitor their ESG matters proactively, are more likely to deliver sustainable growth. The following article provides a framework for understanding how effective waste management supports ESG ratings.
Our resilience and adaptability has been put to the test more than ever over the last 18 to 24 months. One of the lessons the past period has reinforced is the need for a longer-term, more sustainable approach to business. This has given rise to a stronger focus on environmental, social, and governance (ESG) principles and ratings. These standards are central to assisting in measuring the ethical impact and sustainability of investment in a company. There is also an upward global trend in investing in companies with high ESG ratings as well as opportunities to access ESG funds and bonds.
The approach to ESG issues has shifted from being viewed by some as a public relations tactic to being seen by many as a major focus area for boards and management teams. There is a broad consensus that companies which manage, measure, and monitor their ESG matters proactively are more likely to deliver sustainable growth.
Some of the main objectives and benefits of ESG analysis and reporting include the provision of valuable insights on non-financial elements which could have significant impacts on financial metrics, hence enabling more informed investment decisions. The broader range of information captured under ESG elements contributes to highlighting potential risks as well as future opportunities to develop a competitive advantage. ESG information also enables people to invest in and support companies that align with their values and that are creating a positive impact on the world.
The ESG framework is a widely accepted framework to measure impact and companies should try not to be all things to all people. Identifying three to five ESG criteria that align with your strategy and business sector is a good base on which to build your ESG framework. Even though the measurements may vary across platforms and industries, these are some of the common areas monitored within the three pillars of environmental, social, and governance factors.
The Environmental pillar evaluates a company’s impact on our natural resources including biodiversity, eco-systems, and climate and these measures are a critical consideration for a more resilient future and of course, align strongly with incoming legislation that business needs to abide by. Common measurements include:
- Natural resources: raw material sourcing, land use, water, and energy consumption are some key focus areas. What policies are in place to drive safe and sustainable practices concerning natural resources? Does the company use renewable energy sources?
- Climate change: what risk does the business pose to people and the planet as well as what risks could the business be exposed to from climate change factors such as drought, flooding etc? Carbon emission tracking and de-carbonisation strategies typically fall under this measure.
- Pollution and waste: how does a company manage its waste? Does it have a waste management strategy in place including waste avoidance, minimisation, re-use, and recycling strategies? How is it mitigating pollution?
Social elements of ESG focus on a company’s relationship with its workers, customers, local communities, and society as a whole. Categories commonly covered include labour standards, product safety, corporate social responsibility programmes, diversity, and employment equity.
The governance pillar covers corporate governance and corporate behaviour. Elements considered include board structures, independent directors, remuneration ratios, ethics, transparency, policies, audits, conflict of interests etc.
The Role of Waste Management on ESG
Waste is a universal issue that presents much broader challenges which not only affect human health and livelihood but the environment and ultimately, the economy.
As a result, effective waste management can have a profound effect from an economic point of view as it not only makes a massive difference in reducing the impact on our biodiversity and ecosystems but when done correctly, can have a critical impact on the long-term sustainability of wildlife, our oceans as well as our economic resilience. And today, more than ever, the effective management of waste has a fundamental role to play in the larger ESG mix from an environmental point of view where we are seeing more and more companies focus on this at a much deeper level.
As businesses start thinking towards a ‘Circular Economy’ model, we will see more and more compliance and higher ratings. Why? The circular economy is a relatively new concept, however, as a reformative system, it offers significant opportunities to deliver on more inclusive economic growth, which includes job opportunities and positive environmental practices that are needed for sustainability in countries around the world–not just South Africa. The premise is that by stripping out all unnecessary waste materials, reducing the consumption of energy and raw materials, and allowing these materials, energy, and resources to be ‘fed’ back into the cycle there is an opportunity for businesses to optimise their own waste streams for use in other industries. This in turn creates not only an opportunity for cost savings or revenue generation but also–very critically–protects and restores the environment. And ultimately, delivering on all three of the ESG pillars.
As such, with over 90% of waste today merely being discarded, or burned, especially in low-income countries, it becomes crucial to examine ways to introduce innovative and sustainable solutions where rapid growth and resilience are at the forefront of these decisions. Therefore, promoting ‘circular economy’ thinking–which aims to challenge the status quo in waste management–will be the key to encouraging the ‘nothing wasted’ mindset.
We know of course, that the zero waste to landfill goal, which needs to be reached by 2030, looks at diverting 90% of waste from landfills using a ‘whole system’ through recycling, reuse, recovery, beneficiation technologies,as well as value-adding opportunities which have the potential to create numerous environmental, social, and economic opportunities for South Africa.
If a zero-waste sustainable country is to be realised, then ‘at the source waste’ needs to be managed far more effectively to drive successful waste management, innovative solutions, a working recycling system, and the creation of a culture of responsible consumption.
By adopting a circular economy mindset and proactive approach to managing waste, companies will not only be enhancing the Environmental element of their ESG rating but also contributing to the Social, Governance, and Economic performance of their business.