Matthew Golabek | Senior Anaylst
ESG is the disclosure of information regarding how a company is seen by quantifiers of Environment, Social, and Governance. ESG has always been around. Initially, it was a subconscious concept that companies worried about passively but were not required to report on. However, the 21st century has ushered in an increased public accountability for foreign and domestic companies regarding their impact on the environment, response to social justice, and transparent governance. Governing agencies such as the World Economic Forum and International Business Council have established standardized measurements to quantify ESG contributions and companies are now required to report on ESG. OSINT investigators are increasingly being hired to identify ESG concerns for corporate development and expansion into new markets, countries, and cultures. ESG due diligence is the process of analyzing a company’s ESG policies and risk factors, which help advise on a variety of business decisions such as investments and mergers/acquisitions. Disclosure of this information will paint the 50,000-foot view of a company and if they are investment and /or partnership-worthy.
There are several ESG areas of concern we see trending, highlighting the need for due diligence in these zones:
- Environmental Aspect: What is a company doing to be a good steward of the environment? Do they actively work to combat climate change? Do they have an understanding of emissions? Are they involved in activism and have an energy strategy? Do they practice environmental sustainability?
- Social Aspect: What is a company doing to improve the livelihood of its employees and office atmosphere? Are employee career paths being nurtured, is training provided enabling employees the ability to progress professionally? Is there a focus on inclusiveness, raises, bonuses, and comp time? Does the company promote a diverse workforce?
- Governance Aspect: What is the company doing to remain sustainable in the future? What company internal controls are utilized? Is the company managed ethically? What kind of data protection does the company provide?
Although not currently a verified aspect of ESG, we at Hg feel there is also a need for a Digital Aspect. With the world continually engaging in technology, what are companies doing to market their ESG strategies across the digital landscape? Additional facets we consider are positive vs negative data marketing, news and media mentions, and the use of social media and how a company engages with the public, specifically regarding social concerns or other sensitive issues.
All this data can easily be located through open sources. Such locations to find this information include the company website (leadership pages, about page, news/events pages, etc.), Securities and Exchange Commission (company business filings), and Dun & Bradstreet to name a few. However, capturing and reporting on this information is conducted on a company-by-company basis; there is no standard criteria to follow, and the measurement of such indicators is subjective. The lack of universal measures for disclosure is concerning, which is why it is imperative to arm investigators with the proper tools to conduct ESG due diligence and author reports that provide potential investors, competitors, and compliance professionals with thorough, transparent, real-time intelligence about a company’s non-financial key performance indicators. At Hg, we seek to resolve this challenge by providing services that capture such information, delivering detailed reports to empower decision-makers. The scope of our ESG due diligence work is personalized for each target and devised to capture their paramount ESG issues.