Ethics Oversight Board: Embedding Ethics into ESG—Fourth Quarter 2023

Embedding Ethics into ESG 

By Reneé Fair, CVA
NACVA Ethics Oversight Board

ESG refers to environmental, social, and governance standards implemented into a business. These ESG standards can be used in a wide variety of applications. These standards are increasing in popularity among corporations today, including but not limited to: procurement practices, occupational health and safety, information security and customer privacy, supplier environmental impacts, and business ethics. As a business leader, perhaps you may be looking at ESG wondering where to start and seeking to better contribute to your corporate ESG goals and initiatives. Here are a few things to keep in mind as you look at implementing ESG in your business:

1. Keep it simple. Start with areas of your business that are the “low-hanging fruit.” This could be sourcing products, product delivery, examining your facility management, or your board diversity, as just a few examples. ESG does not have to be hard.
2. Watch your bottom line.ESG is not meant to negatively impact your business. In fact, when you look at ESG relative to your customers, you can implement practices that will attract them to your business. In the case of procurement, this can become a source of competitive advantage, which can set your business apart from the competition.
3. Review your current policies and practices.Do you have a diversity policy around hiring? Do you have community outreach initiatives? Often a business already has ESG-related practices in place that are just not labeled as ESG.
4. Do business right and transparently. Everything we do in this ESG, sustainability space has to be grounded in doing business right and with transparency. From a business ethical perspective, this will include making sure education and policies are in place to promote ethical behavior.

Let’s say, for example, a manufacturing company procures goods and services from several suppliers and identified as one of its ESG goals to have “no human rights violations from key suppliers.” A cross functional and collaborative effort with legal, supply chain, procurement, and data and analytics teams can provide tools, screening, and warning flags which can highlight suppliers involved in litigation related to allegations from human rights organizations. These insights can then help close the loop in closely monitoring and ensuring the company is aligned to its strategy by refining its vendor database.

ESG provides opportunities for company leaders, such as ethics and compliance teams, to add more value to their organizations by supporting their company’s ESG efforts. Ethics and compliance leaders play a unique pivotal role in ESG since they are often responsible for risk assessments and third-party due diligence; they have access to important data, they own important policies, and they oversee the company’s code of ethics.

Ethics and compliance leaders are encouraged to get deeply involved in business strategy, establish themselves as a true business partner, and integrate themselves in cross-functional meetings and with leadership teams. This will provide opportunities to demonstrate the importance of ethics and compliance to ESG, and where you can proactively add value.

Leaders are also encouraged to get involved and learn from others. Perform benchmarking with other companies and gain valuable insights. Learning in this space can never stop and sharing what knowledge is gained.

Reneé Fair, CVA, is a Certified Valuation Analyst (CVA) and managing partner and co-founder of Trustee Capital LLC, an independent valuation and analytics automation consulting firm based in Tampa FL. Trustee Capital LLC specializes in business valuation, data visualization, analytics, and robotic process automation. Mrs. Fair currently serves as the Chair for NACVA’s Ethics Oversight Board.

Ms. Fair can be contacted at (813) 465-2204 or by e-mail to rfair@trusteecap.com.