What is ESG?
ESG covers three broad areas of interest for the new breed of stakeholders — those we call “socially responsible.” They consider it essential that organizations incorporate good values and practices into their operations rather than simply chasing the bottom line.
This leads investors, stockholders, and potential business partners to take a more holistic approach to investing. They want to see if the organization’s values are reflected accordingly in their dealings, rather than just considering the potential profitability of the investment opportunity.
For each country, there are slight differences as to what programs need to be addressed. Each ESG category needs to tackle specific concerns for companies in the Philippines, which we will discuss in-depth later.
Is ESG the Same as Corporate Social Responsibility?
Corporate social responsibility (CSR) is somewhat related to ESG — but it does not cover the same things. CSR is a business framework that helps organizations develop and implement programs that positively impact both the organization and its communities. ESG, on the other hand, is how an organization’s efforts and initiatives are measured with regard to being “socially responsible”.
In short, companies in the Philippines use ESG to measure the results of their social commitments, while CSR is used to create their sustainability and corporate responsibility plan.
In other words, CSR is a company’s framework of sustainability plans and responsible cultural influence, whereas ESG is the assessable outcome concerning a company’s overall sustainability performance.
What are the ESG Criteria?
Investors are becoming increasingly concerned with putting their money where their values are. As such, investors and stakeholders in the Philippines use ESG criteria to screen organizations and ascertain whether they act responsibly in the following ways:
Environmental criteria for ESG in the Philippines include practices regarding energy use, waste management, natural environment and resource conservation, and ethical treatment of animals. Depending on the industry, these criteria may also include direct and direct greenhouse gas emissions, correct disposal of toxic waste, and strict compliance with environmental laws and regulations.
Social criteria for ESG in the Philippines look at the organization’s relationships with its current stakeholders. It evaluates whether they hold their suppliers, vendors, and other business partners to their ESG standards. It also considers if the organization gives back to its community through donations, volunteer work, outreach programs, and the like. Finally, it evaluates if the organization has high regard for its internal stakeholders — namely, if their health, safety, and general wellbeing are promoted through fair pay, employee benefits, and other company perks.
Governance criteria for ESG in the Philippines are concerned with how the organization is run. It shows whether it uses accurate and transparent accounting methods, pursues integrity, competence, and diversity when selecting its leaders, and holds itself accountable to its shareholders for any missteps.
Depending on the industry, some ESG practices may require an organization to avoid conflicts of interest when selecting its board members and executives. Likewise, it may require them to avoid political contributions and relationships to obtain preferential treatment.
What are ESG Risks?
To meet these criteria, organizations in the Philippines look at their ESG risks. This includes assessing their current sustainability initiatives, shareholders’ interests, and their operations as a whole. After identifying any significant sustainability risks and challenges, they can use it as a guide when implementing and monitoring their ESG strategies.
Environmental risks for ESG in the Philippines are a vital part of the evaluation process, as our country is one of the most vulnerable to the impacts of climate change.
These risks include any pollution, excess waste, emissions, and other negative impacts that the organization has on the air, land, water, and other ecosystems around them. Addressing these risks means avoiding or minimizing such environmental liabilities, thus lowering costs, avoiding legal risk, and increasing profitability through energy and other operational efficiencies.
Social risks for ESG in the Philippines refer to any concerns with human rights, labor-management relations, product safety, stakeholder welfare, and any other problems related to health and safety. Addressing these risks can help improve the organization’s reputation, productivity, employee morale, and customer brand loyalty.
Governance risks for ESG in the Philippines concern how the organization is run. These risks include corporate risk management, excessive compensation, accountability of board members and executives, transparency of financial reports and activities, and any other operation that could affect the shareholders, their rights, and their investment in the organization. These risks, if left unchecked, could lead to unpleasant legal and financial setbacks.
Yield Best Results with Aboitiz — the Leader of ESG in the Philippines
It is more than just a buzzword for socially responsible investors and businesses in the Philippines — ESG is a sound strategy for driving sustainable growth and yielding valuable results.
At Aboitiz Sustainability, we go beyond the typical bottom line. Our ESG programs help us seek ways to integrate our business growth with societal good, transparent and fair governance, and environmental preservation. Thus, we build a successful enterprise that can provide for our stakeholders in the long term.
Contact us today to learn more about our ethical and sustainable programs and how we put them into practice.