What do we mean by ESG?
This is the fundamental question. “Environment”, “Social” and “Governance” represent the spectrum of all that is possible to do in terms of impact for a company and, therefore, to foster governance that is designated as responsible. In other words, the acronym ESG represents a set of formal criteria for assessing the risks and opportunities associated with sustainable development issues.
| Environment | Social | Governance |
| GHG emissions | Workforce and diversity | Structure and roles |
| Waste management | Health and safety | Codes and values (ethics) |
| Water consumption | Customer management | Transparency and reporting |
| Biodiversity | Communities | Financial and other risks |
ESG is often referred to as those criteria that are extra-financial, in the sense that they are not concerned with a company's financial performance or profitability, but rather consider a wide range of factors that will have an impact on all those who interact with the organization in one way or another.
CSR or ESG?
We sometimes tend to confuse the terms CSR (corporate social responsibility) and ESG. Indeed, some will tell you that these two acronyms share many things, and that they are now used to mean the same thing. That said, the term CSR is much more widely used in Europe, while the acronym ESG is more widespread in North America.
ESG becomes essential, here and elsewhere
Regardless of the term used, there has been an explosion in the conversation around ESG principles in recent years, particularly in the media, but also among stakeholders. Indeed, more and more people along a company's value chain are talking about these topics, and over the years, ESG principles have become a must. Between 2017 and 2020, Quebec saw a 50% increase in assets held in socially responsible finance. Nevertheless, there is still work to be done, as our figures show that only 22% of companies surveyed publish a real ESG target with quantified objectives and an action plan.
Questioned by La Presse journalist Julien Arsenault, Geneviève Bouthillier, Vice-President, Mid-Market Private Companies at CDPQ Placements, was clear about the public's expectations of responsible corporate governance. I would be concerned about a consulting firm that didn't think about diversity, equity and inclusion,” she explains. She wonders how the same company could go about attracting the best talent if it failed to consider its impact on the environment. “If it has a blind spot on one of the important ESG factors, we're going to have a doubt.”
The ESG plan in business strategy
If it was still an option in recent years, integrating ESG elements into an overall business strategy is now mandatory. One example is employer branding. Here again, the figures from our studies in Quebec speak for themselves: 82% of employees say they feel personally concerned by environmental protection, and 75% of these consider it important for companies to implement equity, diversity and inclusion measures.
Clients such as Microsoft, Rio Tinto, Hydro-Québec and SmartCentres are just some of the companies that evaluate the ESG performance of their subcontractors before awarding them construction and manufacturing contracts, as mentioned in an article in La Presse. To name a concrete example in Quebec, the ESG team of general contractor Pomerleau, a giant in commercial and industrial construction in Quebec, has grown from a handful of people to over 40. Last year, the construction specialist decided to integrate its ESG report into its annual balance sheet for fiscal year 2022 - a practice not yet widespread in North America.
In conclusion
Will ESG be everywhere in the coming years? Environmental, social and governance principles will increasingly take center stage. In an interview with Les Affaires, Professor Étienne St-Jean of the Université du Québec à Trois-Rivières pointed out that “the more established an SME is, the greater the force of inertia. There's less interest in modifying the product to address social and environmental issues. Conversely, for those launching a new business, there's a need to stand out. Bringing a greener product adds value.” Surprising, you might say! In any case, principals, investors and customers will continue to put pressure on companies to change their practices.
So we can see that there's still a lot of work to be done to move from the “talk” stage to the implementation of a real, concrete plan.
To find out more :
ESG : Designing an action plan
