What is ESG?

A Plain English Guide

Learn what ESG is, why it’s important to your business, how it’s
different from sustainability, and more.
Table of Contents

Introduction 3

What is ESG? 3

Why is ESG important? 4

What are the 3 pillars of ESG? 4

What are some examples of ESG issues? 4

How is ESG different from sustainability? 6

Who regulates ESG? 6

What is ESG reporting, and how do you get started? 7

Where is ESG headed in the future? 8

What role does ESG software play in ESG performance? 9

About Perillon 10

Final thoughts 10
Introduction
If you’re an EHS professional, executive, or decision-
maker, you’ve probably been hearing a lot about ESG.
While you might have a general sense of what ESG is all
about, it’s a little harder to know what’s involved in
implementing ESG into your organization and how it
differs from your existing sustainability efforts. There’s a
lot of industry jargon thrown around, and ESG can look
incredibly different from one organization to the next.
What is ESG?
ESG stands for environmental, social, and
governance. It refers to a set of non-financial
factors used to measure a company’s impact
on its employees, customers, and the
community.
ESG includes everything from air quality and waste
management, to employee health and safety, to diversity
and inclusion, to customer privacy and data security, to
business ethics and competitive behavior.
ESG is not new, but it is the new normal. Today, more
companies are talking about ESG in their boardrooms,
during earning calls, and on their websites and social
media channels.
We’re also seeing more companies taking steps like
linking executive pay to ESG performance — a sign
that they are integrating ESG into their overall business
strategy. And for good reason: ESG has become a
primary concern among employees, customers,
investors, and regulators.
Why is ESG important?
Focusing on ESG is important to meet the demands of
investors and other stakeholders, who want to know that
the companies they’re supporting are operating
sustainably and managing their risks and opportunities.
It can also help companies lower costs, meet compliance
obligations, and deliver better financial outcomes.
Some of the main benefits of ESG include:
• Streamlined regulatory compliance
• Reduced operating costs
• Better shareholder returns
• Stronger customer loyalty
• Higher employee engagement
What are the 3 pillars of ESG?
The three pillars of ESG are environmental, social, and
governance.
• The environmental dimension is what most of us
automatically think of when we think of ESG. It is
focused on improving the environmental
performance of a company.
• The social dimension is focused on a business’
impact on its employees, customers, and the
community.
• The governance dimension is focused on a
business’ leadership and structure.
Now, let’s look at some examples of ESG issues for each
of these dimensions.
What are some examples of ESG
issues?

Environmental

• Reducing GHG emissions

• Improving resource efficiency
• Recycling
• Emergency preparedness
• Managing climate related
risks and opportunities

Social

• Working conditions
• Health & safety
• Human rights
• Customer satisfaction
• Data and privacy

Governance

• Social
• Working conditions
• Health & safety
• Human rights
• Customer satisfaction
• Data and privacy
How is ESG different from
sustainability?
ESG is often compared to sustainability, but they are not
the same thing. ESG provides a specific set of criteria —
namely, environmental, social, and governance — that
companies can measure and report against.
Sustainability, on the other hand, is more of an umbrella
term for a company’s efforts to “do good”.
While there is a significant difference between
sustainability and ESG, they are closely related. In fact,
many of the key concepts of ESG are rooted in the
sustainability movement, which began in the 1980s.
Sustainability sought to preserve natural and physical
resources in order to ensure their long-term availability.
In the decades that followed, many companies took
steps to become more sustainable, like reducing their
energy consumption and launching recycling programs.
However, the word “sustainability” was so overused that
it eventually became a cliché. With no clear criteria to
measure sustainability, some companies resorted to
greenwashing practices that made their businesses
sound more sustainable than they really were.
This, along with pressure from investors and regulators,
led to the evolution of ESG as a way to measure the
sustainability and societal impact of a company.
Who regulates ESG?
Government agencies are responsible for 90% of ESG
regulations, according to research by MSCI. Financial
regulators, central banks, industry and statutory bodies
also play a role.
ESG regulations vary from country to country, and
different countries have different practices when it
comes to regulating ESG. In the European Union (EU),
regulations like the green taxonomy and the Non-
Financial Reporting Directive (NFRD) govern how
companies address and report on ESG issues. In the US,
on the other hand, there are currently no mandatory
ESG disclosure regulations at the federal level. However,
that could all change with the announcement of new
SEC climate disclosure rules.
What is ESG reporting, and how do
you get started?
ESG reporting is the process of collecting data about a
company’s environmental, social, and governance
performance and presenting the information in an
organized format that is usually aligned with a reporting
framework.
Some of the most common ESG reporting frameworks
include:
• CDP
• CDSB
• GRI
• IIRC
• SASB
These frameworks can help simplify reporting by
outlining which issues your organization should disclose,
what metrics to track, and even how to structure your
sustainability reports. In addition, it can be helpful to
look at ESG report examples from other companies to
get a feel for what yours should look like.
While these frameworks and examples can help
eliminate some of the confusion around reporting,
companies still face many ESG reporting challenges as
they consider integrating ESG into their organization.
ESG reporting tips
• Engage with stakeholders to determine which
information is material to your company’s
environmental, social, and governance
reporting
• Build a multidisciplinary ESG team and foster
collaboration between departments such as
human resources, operations, product
development, procurement, and marketing
• Gather operational data such as risk
observations, near misses, and environmental
measurements
• Engage frontline employees in your data
collection efforts
• Align your reporting to global and regulatory
frameworks
Where is ESG headed in the future?
While there is still a lot of uncertainty about what
information companies should be reporting and how
regulations will shape up in the future, it’s clear that ESG
is here to stay. Statistics show that as of 2020, 88% of
publicly traded companies, 79% of venture and private
equity-backed companies, and 67% of privately-owned
companies had ESG initiatives in place — and those
numbers will only continue to grow as new ESG
regulations emerge.
Today, companies are moving toward a more holistic
approach to ESG. Holistic ESG is about looking at the
whole business’ impacts on the world around it. In other
words, businesses are moving beyond “going green” and
addressing the full range of environmental, social, and
corporate governance factors. This includes everything
from carbon emissions and climate risk, to workplace
safety and human rights, to board compensation and
anti-bribery and corruption.
We are also seeing a movement toward more unified
ESG reporting standards. For example, the International
Financial Reporting Standards Foundation (IFRS) recently
consolidated with the Value Reporting Foundation (VRF)
and the Climate Disclosure Standards Board (CDSB) to
form the first ever International Sustainability
Standards Board (ISSB). The goal of the ISSB is to create
a set of global ESG disclosure standards. These
standards would give businesses a standardized way to
measure and report non-financial performance, and
provide investors with consistent information to help
them make informed decisions.
With the growing demand for ESG disclosure comes a
need for more reliable and timely data. This explains
why we are seeing a trend toward companies moving
toward managing ESG at the asset level. Asset-level
management refers to the practice of using software and
sensors to capture data at the source. For example,
asset-level management could mean collecting
information about energy usage for each piece of
equipment. This yields more detailed information than
looking at utility bills for the whole facility. Not only does
this lead to more prompt and accurate reporting, it can
also help you make more informed decisions about how
to improve your company’s ESG performance.
What role does ESG software play in
ESG performance?
ESG software refers to software that serves to centralize
your ESG activities and data. Many companies can use
ESG software to track, manage, and report on their ESG
performance, such as:

Environmental data

ESG software allows you to measure energy usage,

waste, water, and carbon emissions at the asset level.
From there, you can set goals, analyze trends in Compliance
performance, and make sustainable changes to your
enterprise. ESG software brings together your compliance actions,
tasks, data, assessments, and reporting. This gives you a
Health & safety streamlined way to track your compliance
responsibilities and ensure accountability.
With ESG software, you can increase visibility and reduce
health and safety risks across your organization.
Everything from near miss reporting to incident
investigations and corrective/preventive actions live
under one roof.
Final thoughts
More than ever, investors, customers, and employees
want answers about how businesses are managing their
impact on the world around them. This means that a
strong ESG strategy, along with the software to support
it, is more than just a "nice-to-have".
About Perillon
Responsible Together™
Perillon provides integrated EHS Management
software solutions committed to customer
experience and service as its top priority.
Perillon is now part of Lisam, a global leader
in SDS/Chemical Management software,
serving more than 1,700 customers from 24
worldwide locations.
Perillon and Lisam provide the most intuitive
and the easiest-to-implement cloud platform
for industrial corporations, setting a new
norm with corporate leaders for how to
efficiently meet new Environmental, Social
and Governance (ESG) goals. Our
comprehensive and modernized set of EHS
applications help employees at all levels in the
organization by inspiring a higher global
standard for sustainable business.
Learn more and request your free demo at
www.perillon.com.