Environmental Social Governance (ESG) and Corporate Social Responsibility (CSR)

1. Introduction

Many of the issues covered under a business’ “Environmental Social Governance (ESG)” stance are in fact legal requirements, whereas some may be merely ethical, and others may be a combination. Clearly whilst all businesses must comply with the law of the land, there is obviously scope for there to be major differences in approach when it comes to other more ethical or moral issues. What is clear is that matters which would come under the heading of ESG are increasingly important to businesses, their staff, and their customers. This factsheet looks at these areas in a bit more detail.
You may be more familiar with the term Corporate Social Responsibility (CSR) and wonder what is the difference between this and ESG. You would be right to think this, as clearly there is ultimately a huge overlap between the two concepts. ESG is a term used to refer to the decisions and behaviour of an organisation in relation to ESG matters. It is increasingly used instead of the more traditional terms like (CSR). The scope of ESG is wider, and reflects increased interest in and awareness of issues not just relating to how a company is managed, directed and controlled, but also how it manages its environmental, as well as social, aims and responsibilities.

2. Environmental

Clearly there are numerous environmental laws that all businesses need to be aware of and comply with, in various pieces of legislation. These include, but are not limited to laws regarding:
• Waste disposal
• Pollution
• Fly-tipping
• Low-emission zones
• Nuisance
• Public health
In addition, businesses may of course have their own ethos regarding environmental issues. A business may, for example, pride itself on its approach to the environment, indeed this may even be their unique selling point (USP). We all know certain brands for whom this is the case, and others who are continually trying to demonstrate how seriously they take this issue.
A business may well wish to have an Environmental Policy, and an example of one of these is available in our suite of documents. Although not an exhaustive list, such a policy may deal with some or all of the following issues:
• Waste management (including how much waste is generated, can it be reduced, how is it disposed of etc)
• Office supplies (how environmentally friendly are these, are they recycled or recyclable?)

. Your product (what materials do you use? Are they recyclable? Is your product?)
• Packaging (what materials do you use? Are they recyclable? Is your product?)
• Monitoring and improving (does your business keep things under review, with a view to becoming more environmentally friendly wherever possible)
• Maintenance and cleaning (what materials are used, can these be altered etc)
• Energy (how environmentally friendly is this? Can this be reduced? What about insulation?)
• Staff (how do they travel to and from work? Could more environmentally friendly methods be incentivised?)
• Water (e.g. what is done to reduce wastage?)
• Chemicals and hazardous substances (what is used? How are these disposed of? Are there alternatives?)
• Transportation (how does the business travel to and from work, and whilst at work?)
• Supply chain (how environmentally friendly are they required to be? How far away are they and what is the impact of this on the environment?)
• Carbon footprint (does the business try to reduce this? Does it look at the environmental impact caused by what they or their suppliers do or make? Does the business do anything to try to offset their carbon usage?)
Most of the above are ultimately entirely optional, but may be of great importance to you, your business, your staff, and your customers. Its increasing important to demonstrate how seriously you take this issue.

See our factsheet on Carbon Neutrality (Net Zero)

3. Social

The social element of ESG generally focusses on the business’ relationships it has and fosters with its staff, its customers, and the community both locally and globally. Again, as with environmental principles, some are optional, whilst others are legal obligations. A business’ legal obligations which fall under the “social” heading include but are not limited to:
• Workplace Discrimination (See our factsheet on Unlawful Discrimination)
• Discrimination in the provision of services (see our factsheet on Compliance with the Equality Act 2010)
• Modern slavery (we have a factsheet on The Modern Slavery Act 2015 together with a precedent Modern Slavery Statement)
• Nuisance
• Planning
• Health and Safety

There are other issues whereby a business may choose to have specific policies, or to emphasise the importance of within their ethos:
• Human rights
• Modern slavery (insofar as it is not a legal obligation as above)
• Diversity and Inclusion (on top of any legal obligations referred to above. We have an Equal Opportunities Policy and an Equal Opportunities Monitoring Form)
• Equal pay (on top of any legal obligations referred to above)
• Community engagement (e.g. what does the business do within its community? Does it give to or support charities, locally, nationally, or internationally? Does it sponsor anything or anyone? etc)

4. Governance

Again, as with the other aspects of ESG, this is an area that combines legal obligations as well as ethical/moral considerations. Clearly it’s important for staff, clients and the general public to know that your business is one with strong values, ethics and governance. Some examples of the legal obligations which would fall under this category are:
• Company/Partnership law
• HMRC obligations
• Employment law
• Anti-bribery/corruption (we have a precedent Anti-Bribery Policy)
• Anti-money laundering (we have a factsheet on Money Laundering together with a Money Laundering Policy)
A business may wish to demonstrate its approach to governance by joining an organisation such as those below:
• A trade association (for example Federation of Small Businesses, Federation of Master Builders etc)

• An accreditation/standards body (for example Investors in People, certain voluntary ombudsman schemes, ISO etc)

A business may also wish to have all manner of additional policies which demonstrate good governance, including (but not limited to):
• Financial management
• IT security
• Executive pay and bonusses
• Board independence, diversity and structure
• Business continuity/Disaster recovery
• Training (for example CPD) to its staff
• Complaints (we have a precedent Complaints Procedure)
• Conflicts of interest