Breaking Down ESG to Easy Peasy ESGeezy

ESG has quickly become the latest buzz-acronym in sustainability circles—and let’s be honest, the corporate world loves a good acronym. But while ESG is gathering all the headlines, how many of us really know what hides behind a few letters? To put it simply, they stand for Environmental, Social, and Governance (which somehow makes it even more corporate and explains nothing) and yet pressures are mounting for companies to incorporate these principals So, let’s all just step back, take a deep breath, and read on because as the title suggests, we’ll be taking it from ESG to easy peasy ESGeezy.

What is E in ESG?

You can't spell easy without 'E', also can’t spell Environmental without at least two ‘E’s, but what does this mean besides a green logo and the occasional ‘save the whales’ campaign? The environmental component of ESG goes beyond minimizing negative impacts and ecolabels, it’s about pioneering positive change and diving deep into how companies interact with the natural world. While planting a few trees and ensuring the lights are switched off when you leave a room is all well and good (so definitely don’t stop doing those things), we are past the point where we need a little bit more action than that. This involves looking at how a company uses resources, like water and energy, and how it handles waste management and emissions – I’m talkin’ renewable energy and reusable goods people!

But to fully grasp the environmental aspect of ESG, it's crucial to understand the different categories of emissions a company can generate, classified into Scope 1, Scope 2, and Scope 3 emissions:

• Scope 1: Direct Emissions are from owned or controlled sources. Addressing these emissions can involve shifts to electric vehicles or improving energy efficiency.
• Scope 2: Indirect Emissions from Purchased Energy occur from the generation of purchased electricity, steam, heating, and cooling. Companies can reduce these emissions by switching to renewable energy and enhancing energy efficiency.
• Scope 3: Value Chain Emissions include all other indirect emissions from a company's value chain. These emissions are often the largest share of a company’s carbon footprint and can include everything from the production of purchased goods to employee commuting and waste disposal.

This might make it sound more complicated than it really is, so if you just bear with me while I compare ESG emissions to a cake. I think I can both simplify it and leave you craving frosting.

So, if indeed we imagine ESG emissions as a three-layered cake, where each layer represents a different type of impact a company has on our planet:

• Scope 1: The Self-Managed Layer. This is the first layer, the base of our sustainability cake! Scope 1 emissions come directly from things a company owns or controls, like their cars chugging along or factories puffing away. To make this layer less hefty on the environment, companies can switch to electric vehicles and make their buildings more energy-efficient. It’s like swapping out processed sugar for dates – it’s healthier and just as yummy!

• Scope 2: The Outsourced Energy Layer. Scope 2 is all about the emissions that come from the energy a company buys to keep the lights on and machines running. This includes electricity, heating, and cooling that someone else produces but the company uses. Think of it as ordering a pre-made layer of cake from your local bakery. To make it greener, companies can choose renewable energy sources like wind or solar power, making this layer a bit more organic!

• Scope 3: The Extended Family Layer. This is the top and trickiest layer of our cake! Scope 3 emissions come from all the other activities related to a company but not directly under its control. This includes emissions from suppliers, the transportation of goods, employee travel, and even what happens to products after they’re sold. It’s like considering the environmental impact of every ingredient, guest, and party favour involved in making and celebrating with your cake – Are the ingredients organic and local? Did your party guests travel from far away? Are the party favours reuseable? Reducing this layer means working with greener suppliers and finding more sustainable ways to handle logistics and waste.

Effectively managing these emissions is essential for a comprehensive ESG strategy. This will influence both environmental impact and a company's financial and reputational standing (that means more money and no greenwashing). So there you have it, no more gatekeeping emissions with technical jargon! Just a couple of sustainability pros making you hungry for change.

Let's Get Social with it: What is S in ESG?

Social responsibility in ESG is all about how a company treats its employees, suppliers, customers, and community. Basically, if I am going to stick with this whole cake/party analogy I seem to have gotten myself into, you want all the guests to welcome, safe, and valued – while having a great time, of course! This includes championing workers' rights, embracing diversity, and actively contributing to the community (e.g. through charity runs or garden projects). Companies that get this right don't just throw great parties; they build a loyal fan base, see their teams flourish, and keep customers coming back for more. That's the magic of strong social responsibility; good vibes = good results.

Playing by the Rules: The G in ESG

Governance in ESG is essentially about setting the rules of the game for how a company is managed. It focuses on creating transparent leadership and systems that align with the best interests of all stakeholders, including shareholders, employees, and the community. This involves having a diverse and effective board, robust anti-corruption policies, fair executive compensation, and incorporating stakeholder feedback into business decisions.

If you are going to be playing a game at your party, then you want to make sure the game is played fairly, everyone has a voice, and the prizes make sense. Good governance ensures that everything runs smoothly, maintaining fairness, and building trust with all players and spectators alike. It's the backbone of a company, reducing risks and enhancing trust among investors and the public, making sure the company not only plays the game but sets the standard for how it should be played.

ESG metrics (How to Be Better)

I really hope you stuck with me through that analogy – at least I thought it was clever! But to sum it all up, the above ESG metrics make sure you are doing right by the environment, your peers & community, and gives you the structure and rules to do so. What’s more is you can actually measure all of your ESG metrics and publish them (HINT: that’s literally all an ESG report is). These ESG reports are all the rage these days (I’m looking at you CSRD), and they just give proof on how well a company is managing its environmental impact, social responsibility, and governance. This transparency helps investors and consumers make informed decisions, influencing everything from investment choices to purchasing behaviours. For companies, keeping track of these metrics means they can identify areas for improvement, whether this is through utility cost reductions, giving more back to your local community, or realizing that everyone deserves a raise (and trust me, they do).

What you can simplify, you can understand

While it is certainly easy to get caught up in terminology and get overwhelmed with the amount of resources out there (which in my opinion are all saying the same thing in the same complicated way), just remember it’s as easy as baking a cake!

Well… that might be an overstatement, but the point is this; if I can break down ESG into a silly party analogy, you can certainly wrap your head around the scopes and metrics of it. Don’t let the jargon throw you off or get you down!

And for businesses at the beginning of their ESG journey, start with a fact-finding mission to see how your current practices stack up against ESG standards. Then, set some clear, achievable sustainability goals. Bring everyone into the loop early—from team members to stakeholders—so your game plan is not only practical but also pumps up your broader business goals.

Or better yet, join our next ESG Leadership Course! Our next cohort kicks off on September 26^th. This in-depth ESG certification course will arm you with the essential tools and insights to become a sustainability leader. Book a call to learn more or register now and soon you’ll be a rhyme master telling everyone how ESG is actually just nice and breezy, easy-peasy ESGeezy.

About the Author

Kiri Spanowicz is the Communications Officer at Fifty Shades Greener, bringing a blend of sustainability knowledge and a spirited approach to her content. With a background in marine biology and years as a scuba diving instructor, Kiri leverages her deep appreciation for the natural world to advocate for environmental education. She is dedicated to crafting content that is not only fun and cheeky but also richly informative—believing that learning about sustainability should be as entertaining as it is enlightening. Her work, aimed at making environmental awareness engaging and accessible, has been recognized across various platforms. Follow Kiri's journey on LinkedIn or through the Fifty Shades Greener blog for a lively take on transforming both business practices and personal habits for a greener future.