Are you familiar with the acronym "ESG"?
It stands for Environmental, Social, and Corporate Governance (ESG), which is an approach to evaluating the extent to which a corporation works on behalf of social goals that go beyond the role of a corporation to maximize shareholder profits.
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The three criteria commonly break down as follows: environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change. Social criteria examine how the organization and its teams manage relationships with employees, suppliers, customers, and the communities where it operates. Finally, governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
These criteria are increasingly used by investors to screen their investments and to encourage companies to act responsibly. This was made very clear at the recent ARC Industry Forum in Orlando FL, which focused on the theme of "Accelerating Industrial Digital Transformation and Sustainability." During his keynote address, Michael Guilfoyle of ARC explained that energy transition and industrial sustainability are the largest disruptors of our lifetime, and that ESG risk portfolios—those which prioritize optimal ESG factors or outcomes—are currently where investment capital is flowing. He added that these investments are expected to reach $41 trillion by end of 2022, or 1 of every 3 dollars managed.
ESG policies are presenting new challenges to companies across all functional groups, from the C-suite and finance office to operations and security. Perhaps chief among these is ensuring that the company is doing what it says it is doing, and then backing those statements up with relevant data. After all, the pathway to ESG can be quite vague; each organization is unique, and there may not be much guidance available on actions that organizations can take to improve both environmental performance, for example, and business net-positive results. This year's ARC Industry Forum went a long way toward building cross-industry connections and knowledge sharing.
ESG criteria also are being used by hiring teams to attract the best candidates, and by job seekers to determine for whom they would like to work and for how long. The U.S. unemployment rate in June was just 3.6%, and was even lower in manufacturing (3.0%) and in mining, quarrying, and oil & gas (1.6%). It's a tough hiring market in maintenance and reliability, so consider ESG an opportunity to help your company stand out from the crowd.
For more information on ESG be sure to check out our new infographic, built from a survey jointly conducted by Plant Services and Augury that explores the degree to which ESG policy is being executed at the plant floor level, and follow that with Managing Editor Anna Townshend's industrial workforce cover story.
This story originally appeared in the July 2022 issue of Plant Services. Subscribe to Plant Services here.
This article is part of our monthly From the Editor column. Read more from Thomas Wilk.
