ESG rattings reffers to three key factors in process of assessment and measuring os sustainability impact of an investment in a company or business. These factors are: environmental concerns, social concerns and corporate governance concerns. Typical environmental element includes: use of natural resources, energy efficiency, water and air emissions, waste generation, carbon emissions, sustainability initiatives. Some of relevant social elements are: employees healt&safety, human rights, privacy/data security, employee training, diversity/opportunity policies, community programms. Governance elements covered by this type of assessment are: business ethics, shareholders rights, stakeholders communication, management commitment.
ESG audit process help to better determine future financial performance of company, including related risks.
ESG audit includes the following activities:
· Review of submitted documentation by the client
· Preparation of on-site Audit and development of the Audit plan
· On-site Audit consisting of discussions with management and part of employees, site visits, on-site review of documentation
· Summarizing on-site results and sharing information with the client
· Review of all evidences and formation of findings
· Issuance of the final Audit report
Benefits for organization of ESG audits and ratings:
· build corporate reputation with customers
· comply with law regulation
· explain business strategy more clear
· demonstrate proper risk management
· respond to investors and customers requests
· demonstrated cost saving
· respond to competetive pressure.
Expectation of main interestied parties from companies which have in place realized ESG audits:
· Investors want to invest in companies that are active on sustainability aspects, as they perceive them as safer in the long term
· Employees want to work for companies that have a high impact on society, an ethical behavior and that facilitate work-life balance
· Clients prefer seek environmentally-friendly products and services and transparency in the supply chain