ESG and EHS: Similarities, Distinctions, and Responsibilities
What does Environmental Social Governance (ESG) have to do with Environmental Health and Safety (EHS)?
In a sense, one completes the other, much the way puzzle pieces (EHS) fit into the larger picture (ESG) to form a whole.
Granted, key differentiators (e.g., regulations, core purposes, etc.) set them apart as unique entities. But given their overlapping similarities, including criteria, reporting, and responsible parties, they pair almost as well as macaroni and cheese.
As such, EHS professionals and those managing ESG processes often perform similar tasks, and they may even be one in the same within their organizations. In fact, according to our own anecdotal survey of EHS professionals, 62 percent of respondents have been asked to provide ESG data, reporting, or engagement information.
Additionally, chances are that more and more EHS experts will be donning ESG hats—or at least taking on related duties—in the future. That’s because while ESG hasn’t been around as long as EHS, it’s gaining momentum, and its role is evolving from that of an investment-assessment instrument to more of a Swiss-army-knife tool that impacts customer perceptions, partnership decisions, access to new markets and buyers, and more.
So if you’re among the 38 percent of our survey respondents that haven’t even heard of ESG, or you’re part of the 30 percent who indicated they’re learning on the fly, this article is for you. It provides a broad comparison of these two entities, highlighting both where they overlap and diverge. Plus, it illustrates that many EHS pros are already playing in the ESG sandbox likely without even knowing it.
ESG and EHS: A Quick Comparison
Before we jump to comparisons, let’s level set on what ESG is and how it’s implemented.
ESG was first mentioned in a United Nations Principles for Responsible Investment report in 2006. Soon thereafter, ESG became a tool for investors to evaluate social, environmental, and governance risks that could affect a company’s stock price. Today, however, it has evolved into a brand assessment and reporting strategy that has far-reaching ramifications on a company’s bottom line.
ESG works something like this: Using self-defined criteria* that’s important to their unique businesses, companies large and small assess their own ESG performance and the risks associated with their findings. They then tout areas where they excel and set goals to improve areas where they lag. (*Note, the Securities Exchange Commission has proposed potential guidelines, which means additional guidance and regulations may be coming.)
Once this information is made public, companies can leverage it to reap related benefits. Of course, ESG data can also reflect poorly on a firm. But positive or improved ESG reports can influence the actions of myriad entities, from partners and employees to investors, communities, and more. (For a deeper dive into ESG, check out “ESG: Environmental, Social, Governance... What is it? Why should companies care? And how do you begin?”
At their core, then, ESG and EHS perform related functions.
- ESG presents a framework that investors and others can use to evaluate a company through the lens of environmental, social, and governance-related responsibilities and risks.
- EHS is a business function that relates to workforce health, safety, and environmental training, policies, procedures, risk identification and mitigation, and federal, state and local government compliance.
While both ESG and EHS can help companies avoid costs and decrease risks, ESG factors also have the capability to draw investors, attract new customers, retain employees, tap into new markets, and more.
Similarities and Distinctions Between ESG and EHS
Certainly, EHS and ESG aren’t identical. But there are a host of similarities, and in fact, EHS professionals are already performing tasks and assembling metrics that relate to ESG.
For example, if you’re doing any of the following, you’re probably also creating—or at least dabbling in—metrics that you can report on in ESG initiatives.
- Tracking incidents and hazards and performing mitigation efforts.
- Ensuring that all employees have training specific to the risks associated with their work.
- Confirming that EHS policies are ethical.
- Ensuring that training, procedures, tasks, etc. are performed in a manner or via a system or practice that is inclusive and promotes diversity and equity.
- Managing your chemical database effectively and including government-required environmental reporting, e.g., EPA Tier II.
- Ensuring employees have no-barrier access to SDSs (safety data sheets).
- Focusing on employee health and well-being.
To identify additional ways in which EHS pros are involved with ESG, let’s take a closer look at the similarities and distinctions between these two frameworks.
62% of EHS professionals have been asked to
provide ESG data, reporting, or engagement information.
To state the obvious, ESG and EHS overlap heavily in terms of environmental factors. Both assess how well a company is controlling environmental impacts, caring for the planet and employees, conserving and consuming energy, etc.
ESG tracking might include things such as the number of employees that completed environmental training, amount of waste that’s recycled, total number of reported incidents with environmental impact, and other data points.
Thus, several environmental factors within ESG are already collected and reported through EHS efforts. As such, most EHS experts simply need the right tools, technologies, and strategies to apply existing environmental data and processes to an ESG framework.
Social (Significant Similarities)
There’s also considerable overlap when it comes to social, health, and safety factors. In fact, the health and safety segments of EHS actually fit within the social sector of ESG.
Along with other criteria, the social arm of ESG includes things such as human rights and labor standards, product safety, community relations, and data protection and privacy. Reporting metrics might include the number of reported safety incidents per site; the number of product-safety complaints and issues; and so on.
Again, EHS experts likely are collecting data and implementing actions related to these issues. Converting this data to an ESG framework typically involves a few extra steps and the right tools.
Governance (Slightly Different)
One area where there is less overlap between ESG and EHS concerns governance, which in ESG terms refers to how the company is controlled, directed, and managed, and what processes and stipulations hold leaders accountable. So we’re talking about bribery and corruption, political contributions, diversity within the board of directors, executive compensation, and other noteworthy items.
While ESG governance tracking doesn’t perfectly align with EHS roles, some tactics still overlap.
For example, governance metrics might include compliance and reporting metrics around ISO standards, the presence of systems and procedures for crisis and risk management, and more.
Whose job is ESG?
Given the similarities between ESG and EHS, it stands to reason that responsibility for both efforts fall squarely on the shoulders of EHS professionals, right?
Well, yes and no.
Clearly, EHS experts are already eyeballs deep in much of the data and processes required of both ESG and EHS. So there are logical crossovers, and supporting an ESG framework is more about reformatting and adjusting existing information so it’s reported and presented within this framework.
That said, given the broad scope of ESG criteria, EHS pros likely need to partner with Human Resources reps as well as a host of other stakeholders to establish an ESG initiative (or work with those charged with this task) and to continually gather and report on these metrics.
For example, in almost all organizations, there are different people—as opposed to a single soul—responsible for cyber security, water usage, sexual harassment training, etc. As such, most ESG programs will need input from multiple departments and professionals, such as:
- EHS Experts
- HR Professionals
- Security and Risk Professionals
- Environmental Managers
- Operations Experts
- Maintenance Personnel
- DEI Leaders
- Learning and Development Personnel
- Information Technology Experts
- Logistics Personnel
- Supply Chain Managers
- Finance Professionals
Bottom line: Each company likely aligns ESG-related tasks in a different manner. Some bring in ESG experts to lead the charge. Others create a team of existing employees and task each of them with a chunk of data collection, measurement, and tracking that relates to their existing roles.
At the end of the day, however, EHS pros will likely play a large role in the process. After all, EHS overlaps with ESG in several ways, and the EHS industry already has several tools, technologies, and tracking mechanisms in place that can streamline ESG efforts. In fact an EHS platform is the core tool for tracking and reporting on ESG data.
For EHS pros, chances are high that an ESG change is coming—if it’s not here already. But rather than building strategies and tactics from the ground up, this change is more about fine-tuning what they already do and enlisting better tools and techniques to aid the process.