Risk

ESG: Environmental. Social. Governance.

What ESG means for safety

E S and G are three letters business leaders are hearing more and more as part of day-to-day business. What does it mean? Why should leaders consider these factors? How does safety play a role in ESG?

What is ESG?

ESG stands for Environmental, Social, and Governance—they are non-financial factors that many investors, governments, businesses and organizations are using or measuring to identify risks and growth opportunities. Many companies are now issuing ESG annual reports to show their commitment and work on everything from environmental action to data security, labour practices to board composition. It’s a global push that is building on the work in corporate social responsibility that started with roots in the 1950s and took hold in the 1990s.

“ESG wasn’t even on the radar a decade ago,” says Collin Pullar, president of the Saskatchewan Construction Safety Association (SCSA). “That has changed quickly, with reports that two-thirds of publicly-traded company CEOs now have ESG elements as key parts of their performance and compensation plans.”

ESG is impacting businesses as investors, customers and buyers check to see who they are doing business with, and what that company is doing beyond delivering a product or service. This interest in the facts behind the performance is driving activism, policies and even consequences for companies and leaders.

How does safety fit in ESG?

“In July, Suncor Energy’s CEO stepped down the day after another workplace death,” says Pullar. “It was the final straw for many, as the company had seen 12 deaths since 2014—a level that is truly unacceptable.” The resignation also came on the heels of activist investor Elliott Investment Management calling for changes. In the spring, the investing firm wrote a letter outlining recommended actions for Suncor’s board and management due to Suncor’s poor safety record, operational challenges, and the company’s lagging share price. “People are paying attention to more than just money,” says Pullar. “Investors care whether companies are committed to protecting their workforce and have a low tolerance for a track record of repeated injuries or fatalities.”

The case of Suncor Energy is an extreme example, but it shows how safety is an integral part of company performance. “Safety as it fits into ESG is more than counting incidents and near misses,” says Pullar. “It’s also about how engaged management and leadership are in safety and whether they are perceived to care about the people behind the business.”

For construction firms, it can mean not only recording safety incidents, but also reporting on things such as who is conducting toolbox talks, and what policies are in place for overall wellness—physical and mental. “Even if you’re a small business, you’re likely doing many things that would indicate your commitment to ESG principles. You don’t have to generate a fancy report, but you can have a one-page document that shows what you’re doing to meet safety goals and metrics,” says Pullar.

Beyond safety

Pullar also points out that many companies, big and small, are doing things under the ESG umbrella and may not even know it. “Your organization may be diverting materials from the landfill, supporting local charities, or have programs for engagement with under-represented groups,” he says. “All of those count. Keep track, write it down and tell others. ESG doesn’t have to be daunting. It’s well on its way to being standard business practice, so now is the time to consider how these three little letters reflect on your business.”