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The case for ESG certification for companies

An ESG (Environmental, Social, Governance) certification is a 3rd party verification system used to accurately show your company has completed key sustainability initiatives, and has become a sustainable business.

ESG at its core is both a corporate governance framework and an investment framework. Companies that adopt ESG principles will define a vision, mission, strategy, tactics and values that consider, measure, and report the environmental, social, and governance aspects of their business. Under the ESG model, the social responsibility and environmental impact of a company are tracked – just like other functional areas of a company’s performance. The results of a program are then often reported using frameworks like SASB, GRI, TCFD, CDP, and SFDR. Currently these reports are not verified and act as a convenient way to disclose sustainability commitments and results.

There are several 3rd party certifications however that can be used to both show your results and prove they are verified. This article will focus on those ESG certifications and seals.

Note: The terms ESG and sustainability have become synonymous in the industry. Some companies refer to their focus on environmental and social responsibility as their sustainability program. Other companies call this their ESG program.

The benefits of ESG sustainability certification

The benefits of a sustainable business certification go well beyond a seal or certificate of proof. The process itself becomes a journey with the aim of creating a more sustainable organization.

To start, you’d run an assessment to dictate how sustainable your business currently is and how well your company does across the E-environmental, S-Social and G-Governance dimensions of ESG. An ESG program then engages employees and helps create a culture committed to environmentalism and social responsibility.

The final official certification demonstrates your commitment to employees, customers, and partners. It’s important for leaders, managers, and workers to provide insights into the best practices and benefits of business sustainability certification.

ESG sustainability certification for companies

Businesses today need more than good products and services to succeed – they need purpose. Whether that be the way they’re supporting their local community or a larger initiative they’re launching to support the world as a whole, smart business leaders understand the importance of making a difference in the world. One impactful way to do this is to formally commit to sustainability certification for your business.

Why ESG certification for business really matters

Sustainability certification for business is more than just a stamp of approval. It’s a commitment to making business changes that really make an impact. These ESG programs include both green and social initiatives that aren’t just one-off tactics. They can build upon each other and help ensure eco-friendly and socially-responsible programs are ingrained into each part of the company. Sustainability certification can also do more than just provide a new talking point for business owners. Sustainability can save businesses money, boost sales and provide a new way to go up against your competition. In fact, 48% of U.S. consumers would change buying habits to reduce their environmental impact, and 86% of US consumers expect companies to act on social and environmental issues.

3rd party ESG certifications that focus on the environment

Most ESG business certifications focus on the environmental aspects of ESG, as is the case with LEED and ISO 14001. Both are verified by a 3rd party and available from many organizations.

LEED

U.S. Green Building Council (USGBC), Leadership in Energy and Environmental Design (LEED) is the most well-known and prolific green building certification system in the United States. Buildings that are LEED certified have been designed and built using strategies aimed at improving performance in energy efficiency, water efficiency, CO2 emission reduction, improved indoor air quality and resource stewardship.

LEED is an excellent certification for sustainable building design, but that’s it. It does not cover all the other dimensions of being a sustainable business including waste management, pollution, recycling, reuse, plastics, vehicles, commuting, delivery, manufacturing, etc. In other words, LEED is useful for ensuring your physical offices and buildings are environmentally friendly but misses all the other important elements of being sustainable. Consider LEED as a secondary certification.

ISO 14001

ISO-International Organization for Standardization has developed over 18,500 International Standards on a variety of subjects. Of particular relevance is the ISO 14001 (environmental management systems). ISO 14001 maps out a framework that a company or organization can follow to set up an effective environmental management system. The ISO 14000 family of standards are developed by ISO Technical Committee ISO/TC 207 and its various subcommittees. For a full list of published standards in the series see their standards catalogue.

An ISO 14001 certification is well respected and understood in the industry, but it’s a major undertaking. The budget, time and resources required are significant and hence ISO certifications are typically only taken on by large, mature, and well-funded organizations.

3rd party ESG certifications for environmental and social responsibility

Both B Corp and the Green Business Bureau have expanded their certification to include both environmental and social responsibility. The B-Corp Certification also includes Governance.

Here’s a short overview of both.

B Corp

B Corp Certification is an international certification that verifies companies meet the highest standards of overall social and environmental performance, public transparency and legal accountability. The scope includes 5 major areas: Governance, Workers, Community, Environment, and Customers. Adherence to the requirements are assessed and verified by B Lab, a non-profit corporation that certifies B Corporations.

B Corporation certification establishes very high standards of social and environmental performance, public transparency, and legal accountability that may be difficult for some businesses to meet. Companies applying must undergo a rigorous certification process and meet a long list of significant conditions. The B Corp certification looks at operations, which covers a company’s day-to-day activities and business models, which must be designed to create an additional positive impact. Unfortunately, not every company has the resources and budget to meet the standards, verify compliance and complete the audits required. Companies considering B Corp certification can complete the assessment as a first step to see if they qualify and to better understand their compliance gap. They may discover that their governance procedures, customer processes and sustainability practices fall short. But the assessment would not be wasted as it would enable a company to set future goals and establish a roadmap to compliance.

Green Business Bureau

The Green Business Bureau (GBB) program is robust and helps companies become more sustainable. GBB includes online EcoAssessment and EcoPlanner tools and green business certification, which house over 400 green and social initiatives to consider and choose from.

The GBB certification is the most automated and guided certification available. The process is entirely online and initiative based, so a company will receive points for each and every activity it has completed. Initiatives are very granular and well-defined, and the library is designed to capture your completed initiatives and give you full credit for all your accomplishments. This includes initiatives completed before joining the program. As more initiatives are fulfilled over time, your score increases, granting an opportunity to reach Silver, Gold and Platinum certification levels.

Initiatives are organized by the business area they impact, such as building, cafeteria, transportation or office materials, and are further marked by the effort, cost and greening impact. This simple but flexible structure ensures a company can easily target and implement the efforts that best suit the company’s needs and opportunities.

The GBB seal is well-recognized so member businesses get positive recognition of their commitment to sustainability and the environment. GBB provides a collection of tools and opportunities for member companies to share, differentiate, and be recognized for their greening achievements with customers, prospects, partners, regulators, and communities alike. A ‘clickable’ web seal takes customers and employees to a personal sustainability webpage that shows a business’s certification level, total points, sustainability mission, and accomplishments.

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ESG reporting vs. ESG certifications

When choosing your company’s sustainability framework, it’s important to understand what your stakeholders (customers, partners, investors) require. In some cases, they’re looking for a detailed report describing your commitments, accomplishments and carbon footprint. Your focus here is more on “reporting”, i.e. how to provide and share the details of your sustainability program with your stakeholders as opposed to obtaining a formal certification.

Formal certification is audited and verified by a 3rd party, setting this apart from reporting, although the line between the two terms is becoming more blurry as certification begins to embrace reporting standards. Eventually, official sustainability accounting standards will emerge similar to the financial accounting standards we have today that are highly regulated.

ESG and sustainability reporting

We’re not likely to have one single reporting framework that everyone uses anytime soon. With that in mind, below are some of the most popular sustainability reporting standards available. They’re typically used by large public corporations that require the public disclosure of any information that can impact their business.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is an independent, international organization that helps businesses and other organizations take responsibility for their impacts by providing them with the global common language to communicate those impacts. They are the world’s most widely used standards for sustainability reporting – commonly referred to as the GRI Standards.

Sustainability Accounting Standards Board (SASB)

The Sustainability Accounting Standards Board (SASB) has developed a complete set of 77 industry standards. SASB is ideal for public corporations requiring complete disclosure of their sustainability efforts and results. In November 2018, SASB published these standards to be globally applicable and industry-specific. These standards identify the minimal set of financially material sustainability topics and their associated metrics for a typical company in the industry in question. These standards are explained graphically through a Materiality Map and are available for individual sector download.

Task Force on Climate-Related Financial Disclosures (TCFD)

The Task Force on Climate-Related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. It’s designed to help companies provide better information to support informed capital allocation. Their disclosure recommendations are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets.

TCFD reporting is very detailed and in many cases requires a 3rd party expert firm like CDP to create the reports. CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. CDP focuses on complete disclosure based on the regulatory guidelines and policies for your industry. CDP’s climate questionnaires are fully aligned with the TCFD recommendations.

How ESG certification forces companies to improve

A program focused on ESG may seem overwhelming at times. CEOs and business owners might want their companies to become more green, or tell customers that they’re environmentally and socially responsible, but may be unsure of how to effectively accomplish this. That’s where ESG certification programs for companies can help. These types of programs take the guesswork out of sustainability for businesses and hone in on the specific areas where their companies will be able to not only make a difference to the world but also save money and earn more customers.

Certification drives executive and employee involvement and alignment

Successful sustainability and greening efforts require executive leadership and expert guidance. Across the board, companies that have executed an effective sustainability program cite two key factors that drive their success: Executive leadership and utilizing a sound business case framework.

According to a recent MIT Innovation Report, companies with C-level executives driving their sustainability efforts are far more likely to profitably implement their efforts. In addition, companies utilizing a clear implementation framework that starts with a business case are three times more likely to report success than those that don’t.

A certification program is a great way to engage the executive team and ensure commitment to the process. In a final report of an eight-year study of how corporations address sustainability from MIT Sloan Management Review, researchers found that 90% of executives see sustainability as important, but only 60% of companies have a sustainability strategy and have taken real action beyond a few stand-alone initiatives.

ESG sustainability certification drives profit for companies

Starting the certification process early in your sustainable business journey often leads to implementing environmentally sustainable business practices that drive innovation and profitability. There are many tangible business benefits that certification programs uncover. The tremendous upside of greening often offsets the cost of investing in green initiatives.

In a 2019 publication by Accenture, titled UNGC – Accenture Strategy CEO Study on Sustainability (2019), it’s stated that 99% of large company CEOs agreed that “sustainability issues are important to the future success of their businesses”. Being a sustainable company elevates your brand and appeals to a larger audience including a new audience of buyers who prefer to buy from “good” companies. Another similar Accenture study of 6000 consumers found that while consumers remain primarily focused on quality and price, 83% believe it’s important or extremely important for companies to design products that are meant to be reused or recycled.

Executives and managers have also seen significant cost savings and waste reduction from new sustainability initiatives uncovered in the certification process. Furthermore, despite the commonly held belief that green is solely a long-term strategy, research shows there are tangible and short-term improvements in operations and profit. Oxford University and Arabesque Partners conducted a meta-study entitled “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance” based on a detailed analysis of more than 200 different sources. This study found that 88% of companies with solid sustainability practices had a better operational performance.

Get Started on Your Company’s ESG & Sustainability Certification Journey

If you’re ready to begin or continue your sustainability journey, we’d love to be your partner along the way. Getting started on certification with Green Business Bureau is an easy and affordable way to show your customers and community that you care about ESG and sustainability.

To learn more or become a member, check out GreenBusinesBureau.com today.

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