How whistleblowing can help improve your company's ESG score

The world is becoming increasingly critical of companies that prioritize short-term profits over sustainable business practices. As such, there is an increased demand from investors and employees to work with companies that provide a net positive to the world. 

Enter ESG (Environment, Social, and Governance) criteria. ESGs are a set of standards that stakeholders can use to determine if companies share their values or are at risk from sustainability issues in the future. In this article, we will break down what ESG standards are and how whistleblowing can increase your ESG score.

The ESG areas cover three broad areas of long-term sustainability namely:

• Environment Criteria refer to a company’s environmental footprint and concerns such things as the energy your company uses and the amount of pollution created. A company that tracks its CO2 and has measures to progressively reduce CO2 emissions would have a higher environmental score. A mining organization that pollutes local water sources would score much lower.
• Social Criteria address the effects a company has on people, both in and outside of the organization. If your organization follows rigorous diversity hiring practices and has strong policies in place to protect workers from abusive managers this can lead to a higher ESG score. If your company has connections with organizations that use child labor this is very likely to hurt your score.       
• Governance Criteria refer to how a company governs itself, makes decisions, and complies with the law. Embracing transparency with decision-making and corporate practices and ensuring that there is diversity among board members can boost your score. Fines for accounting mismanagement, lack of tax transparency, lack of transparency, or other corruption issues can negatively affect your score. 

Whistleblowing and ESG

The European Commission is expected to adopt a first set of sustainability reporting standards through delegated acts by 30 June 2023, as part of the Corporate Sustainability Reporting Directive (CSRD).The goal of the CSRD is to improve the comparability and quality of corporate ESG disclosures. This includes transparency about how the company is governed and specifically mentions the protection of whistleblowers.

Under the new sustainability reporting standards, companies will need to disclose information on certain governance factors, such as business ethics, corporate culture, and measures to prevent corruption and bribery. They will also need to report on the protection of whistleblowers and their policies regarding animal welfare.

A robust whistleblowing system can help an organization meet this specific criterion of the EU. Having a formal approach and tools for whistleblowing helps in several ways:  

Demonstrates a commitment to transparency 

Having a whistleblowing channel in place makes it clear to investors, employees, and the public that you are committed to making your workplace as open and transparent as possible. Not only this, having an established whistleblowing system allows those in positions of governance within an organization to keep a finger on the pulse of their company and make better-informed decisions.

Identify opportunities for development

Having a whistleblowing system in place and promoting a strong speak-up culture allows companies to find areas of improvement from employees, the people who know their organizations best. 

If employees know that your company prioritizes the environment and ethical work practices they can use that whistleblowing system to make suggestions to help your company reduce waste, improve performance, or identify business partners or liabilities that could hurt your ESG score. 

Protect your stakeholders 

Last but not least, having a whistleblowing system protects your stakeholder and your organization. If employees have the ability to report discrimination and abuse they will feel safer. If employees have a way to report questionable behavior such as suspicion of embezzlement or theft it allows your organization to address the issue before it becomes a liability. 

ESG investing is here to stay and having a whistleblowing system in place is a fantastic way to increase your score. 

Do you need advice on how to effectively introduce a whistleblowing system?