ESG (Environmental, Social, and Governance) is a business framework that integrates environmental and social considerations within the context of corporate governance. It aims to align an organization's strategy with the needs of all stakeholders and generate value for them, including employees, customers, suppliers, and financiers.
2.1 Environmental Concerns (CARE BMW):
2.1.1. Climate Change:
KPI: Reduction in carbon emissions per unit of production (Carbon Emission Intensity).
Calculation: [(This year carbon emissions/This year production units) - (Last year carbon emissions/Last year production units)] and then convert this into a percentage (This year – Last year/ Last year)
KPI: Percentage of electric vehicles out of total vehicles sold (Electric Vehicle Market Penetration).
KPI: Share of renewable energy in total energy consumption (.Shift to Renewable Energy Consumption).
Calculation: (Number of electric vehicles sold / Total vehicles sold in the year) x 100
Calculation: Renewable energy consumed / Total energy consumed x 100
2.1.2. Against Greenhouse Gas:
KPI: Total carbon emissions reduced.
Calculation: Previous year's emissions - Current year's emissions
KPI: Percentage of net-zero operations.
Calculation: (Number of net-zero operations / Total operations) x 100
KPI: Carbon offset purchased.
Calculation: Total metric tons of carbon offset purchased in a year.
2.1.3. Reforestation and Deforestation Reduction:
KPI: Total number of trees planted.
Calculation: Total trees planted in a year.
KPI: Percentage of 'zero deforestation' products.
Calculation: (Number of zero deforestation products / Total products) x 100
KPI: Area of land conserved or protected.
Calculation: Total hectares of land protected in a year.
2.1.4. Emphasizing Energy Efficiency:
KPI: Percentage reduction in energy consumption.
Calculation: (Previous year energy consumption - Current year energy consumption) / Previous year energy consumption x 100
KPI: Energy saved due to efficiency measures.
Calculation: Previous year energy consumption - Current year energy consumption after efficiency measures
KPI: Ratio of renewable to non-renewable energy used.
Calculation: Renewable energy used / Non-renewable energy used
2.1.5. Biodiversity Loss:
KPI: Number of biodiversity conservation projects.
Calculation: Total number of biodiversity conservation projects undertaken in a year.
KPI: Percentage of products sourced ethically.
Calculation: (Number of ethically sourced products / Total products) x 100
KPI: Increase in local ecosystem diversity.
Calculation: Diversity index of current year - Diversity index of previous year
2.1.6. Mitigate Pollution:
KPI: Reduction in waste produced.
Calculation: (Previous year's waste - Current year's waste) / Previous year's waste x 100
KPI: Percentage of products made from recycled materials.
Calculation: (Number of products made from recycled materials / Total products) x 100
KPI: Total pollutants removed.
Calculation: Total metric tons of pollutants removed or treated in a year.
2.1.7. Water Watchdogs:
KPI: Total water saved.
Calculation: Previous year's water consumption - Current year's water consumption
KPI: Percentage reduction in water usage.
Calculation: (Previous year's water consumption - Current year's water consumption) / Previous year's water consumption x 100
KPI: Ratio of freshwater use to recycled water use.
Calculation: Freshwater used / Recycled water used
2.2 Social Concerns (SERVE):
2.2.1. Safety:
KPI: Reduction in safety incidents.
Calculation: (Previous year's safety incidents - Current year's safety incidents) / Previous year's safety incidents x 100
KPI: Number of safety training sessions held.
Calculation: Total safety training sessions in a year.
KPI: Percentage of employees certified in safety protocols.
Calculation: (Number of certified employees / Total employees) x 100
2.2.2. Equity:
KPI: Gender pay gap.
Calculation: (Average male salary - Average female salary) / Average male salary x 100
KPI: Number of pay equity assessments conducted.
Calculation: Total pay equity assessments in a year.
KPI: Percentage of positions with equitable pay.
Calculation: (Number of positions with equitable pay / Total positions) x 100
2.2.3. Respect for Diversity:
KPI: Percentage of employees from diverse backgrounds.
Calculation: (Number of employees from diverse backgrounds / Total employees) x 100
KPI: Number of diversity-focused programs or initiatives.
Calculation: Total diversity-focused programs or initiatives in a year.
KPI: Increase in diverse hires.
Calculation: Diverse hires in current year - Diverse hires in previous year
2.2.4. Valiant during Crises:
KPI: Total funds allocated for disaster relief.
Calculation: Total monetary contributions for disaster relief in a year.
KPI: Number of relief operations participated in.
Calculation: Total relief operations the company participated in a year.
KPI: Quantity of supplies provided for disaster relief.
Calculation: Total metric tons or units of supplies provided for relief operations in a year.
2.2.5. Employee Health:
KPI: Percentage of employees participating in health programs.
Calculation: (Number of employees in health programs / Total employees) x 100
KPI: Reduction in employee sick days.
Calculation: (Previous year's sick days - Current year's sick days) / Previous year's sick days x 100
KPI: Number of mental health support sessions provided.
Calculation: Total mental health support sessions or counseling provided in a year.
2.3 Governance (EXPECT):
2.3.1. Executive Compensation:
KPI: Percentage of executive compensation tied to ESG (Environmental, Social, Governance) goals.
Calculation: (Compensation tied to ESG goals / Total executive compensation) x 100
KPI: Ratio of CEO compensation to median employee compensation.
Calculation: CEO Compensation / Median Employee Compensation
KPI: Increase in executive compensation tied to social goals.
Calculation: Compensation tied to social goals in current year - Compensation tied to social goals in previous year
2.3.2. Preventing Bribery and Corruption:
KPI: Number of anti-corruption training sessions conducted.
Calculation: Total anti-corruption training sessions in a year.
KPI: Reduction in reported incidents of bribery and corruption.
Calculation: (Previous year's reported incidents - Current year's reported incidents) / Previous year's reported incidents x 100
KPI: Percentage of employees trained in anti-corruption protocols.
Calculation: (Number of trained employees / Total employees) x 100
2.3.3. Employee Relations:
KPI: Employee turnover rate.
Calculation: (Number of employees who left / Average number of employees) x 100
KPI: Employee satisfaction rate.
Calculation: (Number of satisfied survey responses / Total survey responses) x 100
KPI: Number of employee engagement programs.
Calculation: Total employee engagement programs or initiatives in a year.
2.3.4. Cybersecurity and Privacy Practices:
KPI: Number of data breaches.
Calculation: Total data breaches in a year.
KPI: Percentage of data secured with encryption.
Calculation: (Data secured with encryption / Total data) x 100
KPI: Number of cybersecurity training sessions conducted.
Calculation: Total cybersecurity training sessions in a year.
2.3.5. Transparency in Management Structure:
KPI: Number of management transparency initiatives.
Calculation: Total management transparency initiatives or programs in a year.
KPI: Employee trust in management score.
Calculation: Average score from a trust in management survey.
KPI: Number of external audits conducted.
Calculation: Total external audits conducted in a year.
2.4 The role of management accountant in sustainability:
Management accountants are central to sustainability efforts.
They design sustainable strategies that avoid short-termism and inefficient resource use.
Such strategies are centered around value creation and risk mitigation.
It's crucial for management accountants to allocate resources for ESG issues both in their teams and across the organization.
2.5 Reporting framework:
2.5.1. GRI Standards Summary:
The GRI standards guide best practices for reporting on economic, environmental, and social impacts. GRI standards are voluntary.
Social: Diversity and equality policies, Human rights assessment, Customer privacy.
2.5.2. United Nations Sustainable Development Goals (UN SDGs)
The UN SDGs are a collaborative framework introduced by the United Nations.
Their aim is to encourage nations to integrate sustainability into their primary performance metrics.
These goals are both broad and aspirational.
Goals and KPIs:
No Poverty
KPI: Percentage decrease in population living below the national poverty line.
Zero Hunger
KPI: Percentage reduction in the number of malnourished individuals.
Good Health and Well-being
KPI: Reduction in the mortality rate for children under 5 years of age.
Quality Education
KPI: Increase in the literacy rate of 15-24 year-olds.
Gender Equality
KPI: Percentage reduction in reported gender-based violence incidents.
Clean Water and Sanitation
KPI: Percentage of population with access to safe and clean drinking water.
Affordable and Clean Energy
KPI: Increase in the percentage of population with access to reliable and renewable energy sources.
Decent Work and Economic Growth
KPI: Percentage reduction in the youth unemployment rate.
Industry, Innovation, and Infrastructure
KPI: Increase in the percentage of population with access to reliable internet services.
Reduced Inequalities
KPI: Reduction in the income disparity ratio between the richest and poorest 10%.
Sustainable Cities and Communities
KPI: Percentage increase in urban population with access to safe and affordable housing.
Responsible Consumption and Production
KPI: Reduction in the total material footprint per capita.
Climate Action
KPI: Percentage reduction in national carbon emissions compared to the previous year.
Life Below Water
KPI: Percentage increase in marine protected areas.
Life on Land
KPI: Increase in the area of forests under sustainable management.
Peace, Justice, and Strong Institutions
KPI: Reduction in the number of reported corruption incidents.
Partnerships for the Goals
KPI: Increase in the number of international cooperation initiatives on sustainable development projects.
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