ESG Part 3 | A Good Example of Environmental Measurement
Published on by Robert Ramsay in Assurance, Consulting, Industries
In part one of our Environment, Social, Governance (ESG) measure blog series, we gave a general overview of what ESG is and why it matters. In part two, we dug into how investors and analysts are thinking about ESG measures, and how to choose the ones that matter for your organization. Today we’re going to dig a little deeper into environmental measures and take a look at ESG’s impact on recruiting and retention.
Environment is relatively simple to understand – it’s what you think it is: natural resources, waste management, water usage, material usage, pollution, greenhouse gas emissions, etc. Greenhouse gas is especially difficult to measure as the statutory mathematics are complex, but the others are often pretty straightforward.
ESG and smart contracts
So how do ESG measures work? Smart contract platform Data Gumbo’s founder Andrew Bruce shared an example from the oil and gas industry that’s a great illustration. When you buy gas at the pump, you’re entering into a smart contract between your bank and the gas station’s bank, saying that you’re going to pay for the gas you’re pumping, and you’re agreeing that the pump measures are accurate and the price is correct, and you’re not signing any more agreements based on this interaction.
Now let’s look at how this might work for an ESG environmental measure, like wastewater management.
A truck arrives at a given location to haul away wastewater using the location’s pump. The two parties agree on that pump’s accuracy and accept the measure of quantity dispensed as one data point, and the amount of water offloaded from the truck at its destination is another data point. When the two data points are compared and there’s a match within the accepted variance, the smart contract is fulfilled, the customer pays the wastewater company without additional paperwork, and there’s a significant saving in process and efficiency.
ESG matters for recruiting and retention
Attracting and retaining top talent isn’t getting any easier, and ESG measures offer a competitive advantage. Millennials now make up 35% of the US labor force, and studies by FMI Capital Advisors, The New York Times, and Pew Research show 49% of this demographic say they would quit a job that did not align with their values. 61% preferred companies that take a stand. There’s a lot of momentum here, and virtually every company is looking for an advantage in the talent wars. ESG can be a big boost.
In future posts, we’ll delve deeper into the social and governance aspects of ESG. In the meantime, if you’d like to talk about ESG and how to plan for its impact on the future of the business, contact us. We’re here to help you build a better, brighter future.