Understanding Environmental, Social and Governance (ESG)

ESG strategies can help companies achieve long-term sustainability, drive economic vibrancy and deliver long-term value through effective engagement with all stakeholders.

Maura Hodge

Maura Hodge

Audit Partner, National ESG Assurance Leader, KPMG US

 

What is Environment, Social, Governance (ESG)?
 

ESG refers to a framework to integrate environmental, social and governance risks and opportunities into a firm’s strategy to build long-term financial sustainability and value creation. In other words, ESG strategies can help companies achieve long-term sustainability, drive economic vibrancy and  deliver long-term value through effective engagement with all stakeholders.

 

Why is ESG important?

 
There is an increased emphasis on the management of ESG related policies  and practices from stakeholders such  as investors, employees and customers.

 

There is an increased emphasis on the management of ESG related policies  and practices from stakeholders such  as investors, employees and customers.

 

Investors wanting companies to be transparent about their ESG policies and to be held accountable

 

Investors wanting companies to be transparent about their ESG policies and to be held accountable

 

COVID-19 has increased awareness  on a company’s response to ESG risks.

 

COVID-19 has increased awareness  on a company’s response to ESG risks.

 

 

 

Increased focus by investors on ESG when making investing decisions.

 

Increased focus by investors on ESG when making investing decisions.

ESG critical components

 
Environmental considers how a company acts in its role as a steward of nature, such as energy use, recycling practices, pollution, and natural resource conversation. The criteria can also be used to assess environmental risks and how the company is managing them.


Environmental 

Considers how a company acts in its role as a steward of nature, such as energy use, recycling practices, pollution, and natural resource conversation. The criteria can also be used to assess environmental risks and how the company is managing them.

 

 

Social examines how well a company manages relationships with employees, suppliers, customers, and the community.


Social

Examines how well a company manages relationships with employees, suppliers, customers, and the community.

 

 

Governance is concerned with a company’s leadership, internal controls, executive pay, audits, and shareholder rights.


Governance

Is concerned with a company’s leadership, internal controls, executive pay, audits, and shareholder rights.

 

 

 

The KPMG approach

The KPMG approach is collaborative, engaging your team of cross-functional professionals and leaders to align and own ESG goals.
 
  • PHASE 1 - Level-setting and understanding

  • PHASE 2 - Strategy development and gap analysis

  • PHASE 3 - Implementation

  • PHASE 4 - Measurement and reporting

  • PHASE 5 - Assurance


Maura Hodge

Maura Hodge

Audit Partner, National ESG Assurance Leader, KPMG US

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