What is ESG?
ESG stands for Environmental, Social, and Governance. The term encompasses the main aspects of sustainability, social responsibility, and corporate governance.
The theme became of global interest in 2020 when Larry Fink, founder and CEO of BlackRock, one of the world’s largest investment fund managers, published a letter to the CEOs of organizations receiving investments from the company:
When we believe that companies and boards are not producing effective sustainability disclosures or implementing frameworks to manage these issues, we will hold board members accountable. Given the groundwork we have already laid on disclosure, and the increasing investment risks around sustainability, we will be increasingly inclined to vote against management and directors when companies are not making sufficient progress on sustainability-related disclosures and the underlying business practices and plans.
What does BlackRock’s statement imply?
ESG has been positioned as an investment criterion, as companies that do not care about governance, environmental, and social issues are more at risk of being involved in scandals, legal problems, and business continuity.
What is ISO?
ISO stands for the International Organization for Standardization, an independent entity that develops and publishes international standards. It includes representatives from over 160 countries, making it widely accepted and adaptable for companies around the world.
As mentioned earlier, ISO publishes what we call Standards, which cover subjects seen as having a growing need for standardization, such as ISO 9001 (quality), ISO 14001 (environmental), ISO 37001 (anti-bribery), ISO/IEC 27001 (information security).
The standards have a basic structure, called Annex SL, which acts like a summary so that all the requirements have the same order, making it easier to integrate two or more standards.
Another important point is that there are ISO standards that establish rules and others that serve only as guidelines. The rule-based ISO standards are known as requirement standards and are certifiable. On the other hand, the guideline standards, such as ISO 31000, which provides tips for good risk management, are not certifiable.
Is There an ISO Standard for ESG?
As demonstrated in this article, interest in ESG is growing, leading to the question: Does ISO have a standard for ESG? Currently, there is no standard dedicated 100% to ESG. What exist are various standards with different themes that, when integrated, can encompass various aspects of ESG. The main ones are:
- ISO 14001 – Environmental Management System: addresses aspects of waste reduction and full product life cycle thinking, aiding in the ‘E’ of ESG.
- ISO 45001 – Occupational Health and Safety Management System: focused on the ‘S’, it works on the safety and physical and mental integrity of the organization’s employees.
- ISO 37301 – Compliance Management System: this standard assists the company in the ‘G’, governance. ISO 37301 seeks organizational compliance and a culture of compliance, guided by top management.
It’s notable that the standards assist in ESG, but do not cover all points, as it is a very broad theme. In addition to those mentioned, there are many other standards that can be grouped under the concept of ESG.
We hope this has been helpful!
