After decades of frenzied debate about whether corporations should serve society or their shareholders, a historic United Nations (“UN”) paper published in the early 2000s first used the term ESG to refer to Environmental, Social and Governance considerations. Titled “Who Cares Wins,” the report outlined the need for sustainable developments by corporations and highlighted the critical role ESG considerations would play in ensuring the future of humanity and civilized society.
Unsurprisingly, the environmental pillar is simultaneously the most critical and challenging consideration to address. Over a century of burning fossil fuels has resulted in significant damage to the atmosphere, throwing the planet out of its natural cycle of heating and cooling, and resulting in human-caused climate change.
Several countries worldwide are already dealing with the effects of climate-change-induced extreme weather events, and many experts predict that climate change could have catastrophic effects on humanity if left unchecked. As such, the environment pillar in ESG requires that corporations do what they can to mitigate their impact on the environment. Carbon emissions, both recycled and virgin materials, biodiversity and deforestation, land use and water resource use all fall under the environment pillar.
The social pillar is focused on addressing issues associated with labor practices, employee development, gender issues, and health and safety standards. This pillar is more concerned with a corporation’s impact on its workforce and what it can do to provide its employees with a safe and equitable work environment as well as fair wages.
Governance, on the other hand, is concerned with addressing board diversity, corporate behavior, compensation issues and shareholder rights.
All these factors cumulatively form ESG, a framework designed to help shareholders understand how their company manages risks and opportunities associated with environmental, social and governance criteria. According to research, 88% of publicly traded companies, 79% of private and venture equity-backed companies, and 67% of private companies had ESG initiatives by 2020 while an estimated 89% of global investors incorporated some form of ESG into their investment strategies by 2022.
Regulators in the United States and the European Union as well as other countries have been working to promote more ESG accountability to measure the impact of ESG considerations more accurately. This is especially critical to addressing the increasingly dire issue of climate change amid high emissions from the largest corporations on the globe.
The U.S. Securities and Exchange Commission (“SEC”) recently proposed regulations to standardize and enhance climate-related company disclosures, opening the door to the creation of standardized matrices for ESG rating agencies worldwide.
As corporations await those standardized reporting requirements, some entities such as Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) are, of their own volition, implementing ESG practices in their operations because these practices are not only good for the environment and the people but they also deliver bottom-line benefits too.
NOTE TO INVESTORS: The latest news and updates relating to Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) are available in the company’s newsroom at https://ibn.fm/RFLXF
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