ESG (Environmental, Social, and Governance)

ESG (Environmental, Social, and Governance)

ESG (Environmental, Social, and Governance)

Introduction:

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.

Categories:

    • Economic: Economic performance, Procurement practices, Anti-corruption.
    • Environmental: Materials, Energy, Emissions.
    • 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:

  1. No Poverty
  2. KPI: Percentage decrease in population living below the national poverty line.
  1. Zero Hunger
  2. KPI: Percentage reduction in the number of malnourished individuals.
  1. Good Health and Well-being
  2. KPI: Reduction in the mortality rate for children under 5 years of age.
  1. Quality Education
  2. KPI: Increase in the literacy rate of 15-24 year-olds.
  1. Gender Equality
  2. KPI: Percentage reduction in reported gender-based violence incidents.
  1. Clean Water and Sanitation
  2. KPI: Percentage of population with access to safe and clean drinking water.
  1. Affordable and Clean Energy
  2. KPI: Increase in the percentage of population with access to reliable and renewable energy sources.
  1. Decent Work and Economic Growth
  2. KPI: Percentage reduction in the youth unemployment rate.
  1. Industry, Innovation, and Infrastructure
  2. KPI: Increase in the percentage of population with access to reliable internet services.
  1. Reduced Inequalities
  2. KPI: Reduction in the income disparity ratio between the richest and poorest 10%.
  1. Sustainable Cities and Communities
  2. KPI: Percentage increase in urban population with access to safe and affordable housing.
  1. Responsible Consumption and Production
  2. KPI: Reduction in the total material footprint per capita.
  1. Climate Action
  2. KPI: Percentage reduction in national carbon emissions compared to the previous year.
  1. Life Below Water
  2. KPI: Percentage increase in marine protected areas.
  1. Life on Land
  2. KPI: Increase in the area of forests under sustainable management.
  1. Peace, Justice, and Strong Institutions
  2. KPI: Reduction in the number of reported corruption incidents.
  1. Partnerships for the Goals
  2. KPI: Increase in the number of international cooperation initiatives on sustainable development projects.

Dive deeper, conquer those exams, and truly make your mark by grabbing your spot in our ACCA online course today at www.globalapc.com – let’s crush this together!

Categories: : Advanced Performance Management (APM)

© 2024 Globalapc