First and foremost, we need to understand that the relationship between ESG and ISO standards is not mandatory, and both concepts can exist separately without any issues. However, when we better understand what each of them proposes, it becomes inevitable to see how they complement and facilitate each other.
In today’s article, we will talk a bit about these two concepts and how they intertwine. We will see that, often, ISO standards can be the answer to some issues in the ESG approach. By the end of this article, I hope to demonstrate that, despite being independent, ESG and ISO standards are much more interconnected than they may seem!
Before discussing the connection between the two, let’s better understand what each of them means. Here we go:
What is ESG (Environmental, Social, Governance)?
We can say that ESG is an approach that aims to understand a company’s performance in three specific factors. The acronym stands for Environmental, Social, Governance.
In a nutshell, we can say that:
- “E” refers to practices related to the environment and the organization’s impact on biodiversity.
- “G” deals with governance structure and how the company is managed (including ethical principles, integrity, transparency, managerial accountability, responsible decision-making, etc.).
- “S” addresses social issues related to the company and its stakeholders (including human rights protection, diversity and inclusion, workplace safety and health, community relations, and various other social factors).
ESG is widely used to assess the health of a company. This way, investors, shareholders, customers, regulators, and other stakeholders can evaluate vital and necessary information about the organization according to their specific interests.
What are ISO standards?
Standards such as “ISO 14001” or “ISO 45001,” for example, are management standards developed and published by the International Organization for Standardization (ISO). They contain standards and best practices that help companies organize and manage their resources and people more effectively.
ISO standards are organized and identified by numeric codes (ISO “9001” or ISO “14001”) and are periodically revised by the organization that created them. They cover various areas and aspects of business management. For example:
- ISO 9001:2015, a standard that establishes requirements for quality management.
- ISO 14001:2015, which defines requirements for an effective environmental management system.
- ISO 45001:2018, a standard that provides requirements for establishing an occupational health and safety management system.
In total, there are more than 80 published ISO standards covering various areas of business management.
For the purpose of this text, it is sufficient to understand that ISO standards help companies manage certain organizational aspects better. And at this point, the relationship between ESG and ISO standards starts to become more evident.
ISO standards directly related to ESG aspects
Now that we understand both terms, we can establish a more direct relationship between Environmental, Social, and Governance and ISO standards that directly address each concept.
ISO standards cover a wide range of areas, including environmental management (ISO 14001), social responsibility (ISO 26000), and occupational health and safety management systems (ISO 45001), for example.
We can also mention ISO 9001 itself, which provides better quality management and can impact customer satisfaction and company reputation. Likewise, ISO 50001 helps with efficient energy management, encouraging consumption reduction and transitioning to renewable sources.
There is no shortage of examples of connections between ISO standards and ESG concepts. As these standards provide guidelines and frameworks for companies that want to establish effective management systems in specific areas, we can say that all the demands of an ESG-focused company can be met by ISO standards.
The relationship between ESG and ISO standards: a path to compliance and excellence
In conclusion, we can say that, by themselves, ISO standards and ESG concepts have an indirect relationship. However, while ESG is broader and seeks to understand a company’s overall performance, ISO standards focus on specific points (such as quality or the environment).
Therefore, when seeking a more comprehensive systemic overview, a company can adopt various ISO standards that will generally organize the company within the ESG concepts. These standards are useful in providing best practices and improving the ESG performance of companies. In summary, ISO standards can provide specific guidelines and requirements for environmental, social, and corporate governance management.
Therefore, even though adopting ISO standards is not mandatory for either ESG or business management, they can greatly facilitate meeting requirements in these areas and help the company become more efficient, effective, and focused on meaningful results for all stakeholders.
