Measuring impact

Environmental, social and governance reporting is becoming standard practice as companies consider the effects of their sustainability efforts and commit to a greater mission.

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Companies increasingly are focused on environmental, social and governance (ESG) criteria, particularly as investors, stakeholders and even consumers judge their performance and degree of sustainability based on these factors.

“I think, especially in our industry, though, it’s really been about the environment,” said Susan Robinson, former senior director of sustainability at Houston-based WM. “Not only do investors measure how we are doing with [ESG criteria] but now increasingly our customers, our employees and our regulators consider ESG metrics when they’re evaluating companies, and they expect good ESG performance.”

Robinson and a panel of speakers including Luba Shabal, director of impact due diligence at New York-based Closed Loop Partners; Marie Hache, director of ESG at PwC, who is based out of Los Angeles; and John Shegerian, chairman and CEO of ERI, Fresno, California, spoke during the Institute of Scrap Recycling Industries (ISRI) 2022 National Convention & Exposition, which was March 20-24 in Las Vegas.

It was one of several sessions dedicated to discussing the impact of extensive ESG reporting and how that can translate to business success as consumer habits and priorities evolve.

The value in accountability

Also speaking at ISRI2022, Rob Ellsworth, director of sustainability at Schnitzer Steel Industries Inc., based in Portland, Oregon, said sustainability can mean something different to each individual company. Generally, it refers to an entity’s ability to consistently create and protect value over the long-term and includes support of human ecological well-being, health and vitality over time. More broadly, it’s used to describe a company’s efforts to reduce its impact on the world. Ellsworth added that ESG refers to specific risk factors, impacts and value-creation opportunities.

As a company begins to address sustainability factors, it should start by assessing available resources, identifying the values it holds most closely and developing a strategy that it communicates with stakeholders, he said. It also should report on progress over time.

Ellsworth noted that when it comes to ESG reporting, the benefits of action outweigh the risks of inaction, highlighting several growth opportunities:

  • revenue growth by attracting customers with sustainable products and services while expanding access to resources through stronger public engagement;
  • lower energy and water consumption costs;
  • proactive achievement of regulatory compliance can earn government support;
  • increased productivity by attracting talent through reputation and improved employee motivation; and
  • asset optimization through better allocated capital for the long term.
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“There’s a growing understanding—and there’s data to support it—that profit is impacted by how we manage our business, by our impact on the environment, how we treat our employees and how we impact the communities in which we work,” Robinson said. “I think in the recycling industry this is really important for us to realize [and] to be planning for the 360-degree view. Taking care of people and the environment makes good sense.”

She added, “Our houses just simply have to be in order. We’re held accountable for all aspects of our business, whether our companies are privately or publicly held. Investors, customers, regulators [and] employees are increasing their expectations for how we operate and how we provide information about our operations, as well.”

Hache of London-based auditing and consulting services firm PwC, said when it comes to ESG and sustainability, it’s important to build trust by showing companies are not just about the financial return but also are considering and understanding the impact they have on the environment, society and employees and how all of that together helps them be a better company.

“Yes, [that allows companies to] be more competitive, perform better and drive better revenues,” she said. “But [it also helps] them think through this ‘E’ and ‘S’ function and also the governance side in a way that helps them perform longer term.”

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Where to start

Rebecca Bar, director of membership at the London-based IFRS Foundation, a nonprofit that oversees financial reporting standard-setting, spoke during a session called Path to Sustainability: What Is It and Why Should You Care. She said that without standards, companies often use an array of metrics to describe the same thing. This can cause investors to be dissatisfied with the quality of ESG disclosure.

To start, Hache advised companies to determine what ESG principles are most relevant and that align with their missions. “Environment, for sure,” she said, “[but] what are those environmental themes that are relevant to your company? It might be climate or greenhouse gas emissions. It might be waste streams … it might be water [or] biodiversity.”

When it comes to the social aspect of ESG, Hache said that can involve employee satisfaction, upskilling, retention and diversity as well as the supply chain, while governance can include ethics and compliance around board management, financial regulations and cybersecurity.

“It’s one thing to have … good programs and initiatives,” she said. “But, at the same time, you want to be able to communicate [that information] to the world in a way that is relevant and credible.”

As did Hache, the other panelists noted the importance of reporting ESG accomplishments and goals to investors and stakeholders at every stage.

Shabal said the recycling industry is more fortunate than most in that many recyclers already have the necessary data available for an organization like Closed Loop Partners to analyze, including the flow of material throughout and after leaving a facility.

“In the recycling space, that’s a fortunate thing that we have a lot of information on our hands,” she said.

Shegerian, whose company, ERI, deals in electronics recycling and information technology asset disposition services, said that when it comes to business practices, ESG is a trend that is not going away.

“This is maybe one of the most important investment and generational trends that we’re going to see in our professional careers,” he added. “For those companies that embrace the shift from linear to circular economy and who embrace the principles of ESG behavior—good ESG behavior, responsible ESG behavior—not only will they be rewarded with huge amounts of capital that are [already] available to those who are like-minded but also greater opportunities on the sales side when you’re acquiring business and growing your revenue.”

Shabal added, “Walk the talk. If you’re here to do the right thing, how do you know you’re doing it? What is your net impact on people and the planet? Do you have data to support your claims? Do what you say is right.”

The author is managing editor of Recycling Today and can be reached at mmcnees@gie.net. A version of this article originally appeared on www.RecyclingToday.com.

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