In this article, we break down the ESG basics and highlight what this looks like in practice for businesses of all sizes.
Environmental, Social and Governance (ESG) practices and the urgency for action across the globe have never been greater. More and more organisations are adopting ESG practices, with consolidation in ESG reporting standards such as CSRD and ISSB making it more appealing for organisations to implement ESG measures across their business. We have also seen technological innovation enabling this to be more feasible at scale. For example, we see organisations like Formula 1 leading the charge. But ESG isn’t just for household names; we believe any organisation, like our client Data Zoo, can strive for ESG greatness.
In this article, we break down the ESG basics and highlight what this looks like in practice for businesses of all sizes, taking inspiration from the recent release of Formula 1’s first ESG Impact report. We may even throw in an F1 reference or two, for good measure.
The ‘What’ of ESG
Environmental, Social and Governance are the three focus areas of sustainability reporting, designed to measure a company’s activities beyond the typical financial risks and opportunities. These areas are holistic and flexible so they can be adapted to the varying ESG challenges, from climate change to gender inequality.
Much like cybersecurity, ESG efforts can be measured and reported against leading global standards. Most notable is the CSRD (Corporate Sustainability Reporting Directive) with Double Materiality Assessments as a starting point and AssuranceLab’s own ESG Framework. We developed our framework specifically to make ESG more accessible for companies across all sectors and sizes.
Organisations aim to measure their ESG initiatives for various reasons; to improve operational practices, attract the best talent, promote sustainable investments, and meet stakeholder expectations.
The ‘E’ of ESG: Environmental
Think renewable energy and water. Think greenhouse gas emissions, carbon reduction, and fossil fuels. Think Valtteri Bottas riding a pushbike. The Environmental component relates to the nature around us and the impact we have on the physical world. This includes biodiversity, waste and circularity. Whilst it might seem like the most ‘obvious’ part of the ESG trio, it’s actually the most complex to measure.
For Formula 1, the environmental initiatives revolve around carbon reduction, sustainable fuel use (both on and off the track), and renewable resources at each Grand Prix. One standout initiative at the Las Vegas Grand Prix in 2023 was the use of Atmospheric Water Generators to promote water reuse, reducing the event’s impact on the drought facing the Southern Nevada region.
If you’re a tech start-up your environmental initiatives will likely look a little different to recycled water on the Vegas Strip. A more realistic approach would be using a cloud-service provider that is committed to 100% renewable energy. It could look like a commitment to digital documents over printed ones or the support of staff volunteering for environmental causes.
The ‘S’ in ESG: Social
The Social component is all about diversity, inclusion and human rights. It relates to a company's stakeholders and the different initiatives to support these groups.
For Formula 1, their social impact revolves around their F1 Academy (the all-female series), working with charities for children in need, and the latest campaign ‘Career Journeys: My Untold Story’. Most notably, their all-female F1 Academy series, established in 2023 aims to find the next generation of female talent both on and off the track. This initiative highlights the importance of women in sport and provides female F1 drivers a place to compete at an elite level. Outside of racing, this initiative offers broader representation within motorsports, providing a pathway for people of all ages and genders to get involved.
Social initiatives often look similar across all organisations, no matter the industry or business level. So if you’re a tech-enabled business, this could look like hiring female employees across all levels of your organisation, implementing anti-discrimination policies or employee health & safety practices.
The ‘G’ in ESG: Governance
Governance refers to the corporate management that supports an organisation’s ethical and sustainable practices. It is demonstrated through independent board leadership, transparent reporting, dedicated working groups, and clear policies to promote wider ESG initiatives.
Within Formula 1, their delivering change initiatives are centred around key working groups responsible for various ESG projects, each designed to maximise output and collaboration. Three working groups - Diversity & Inclusion, Sustainability and Supply Chain - are all responsible for further developing the sport within these action areas and are made up of stakeholders across Formula 1, the FIA, and each of the 10 competing teams.
For other organisations, this can involve policies and oversight to support ESG initiatives. Your Code of Conduct sets the standard for employee behaviour; financial and other audits ensure transparent business practices; ESG metrics and community engagement ensure your organisation is operating ethically and meeting the expectations of your stakeholders.
The final look at ESG
Environmental, Social and Governance might look different for every business, but it ensures we’re working towards a more sustainable and inclusive future. From Formula 1 using recycled water on the Vegas Strip, to a startup conducting financial and other audits, these initiatives are important to an organisation's success, beyond simply succeeding in their field.
If you are interested in formally recognising your ESG initiatives, contact us to talk about ESG audits and reporting for your business. We’d also recommend checking out this case study with Data Zoo, who recently completed an ESG attestation with our team.
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