Breaking down ESG – Environmental strategy

You won’t have escaped all the recent talk about Environmental, Social, and Governance (ESG) strategies, especially after COP28 last year. The global push toward decarbonisation and sustainable business practices has made it essential for companies to develop a strong ESG environmental strategy.

With net-zero targets fast approaching and the demand for renewable energy growing, businesses must assess how their operations impact the environment. A well-defined ESG environmental strategy can help companies reduce carbon emissions, improve sustainability, and meet regulatory requirements.

In short, these are:

Investors are becoming more interested in how a business deals with its environmental obligations, and this leads into the other two areas of Social and Governance. If a business is working hard towards becoming Net Zero, has a great social policy, and has good ethical and moral standards, then it becomes a very attractive prospect. More businesses are taking this in-house and creating committees or departments to take on the responsibility of creating and implementing ESG policies. 

Environmental issues are such a hot topic and it will get more important as the global community comes together to reach environmental energy targets that have been put in place.

Using an ESG strategy to look for environmental opportunities   

Having an ESG strategy will not only help you work out what you need to work on, it can also help with identifying different schemes, opportunities, and grants that might be available. These can be looked at in order of necessity, what you’re already doing and what might help in the future. 

When setting up your ESG strategy, it is a good idea to look at the business as a whole, from sites to any business vehicles and even suppliers. More and more businesses are working towards their Net Zero targets with a roadmap with smaller, more manageable targets to help reduce their carbon in a way that works for them. This is true for a lot of manufacturers, where business leaders are looking at the supply chain and how they can cut down their footprint by doing business with companies that already have clear policies in place. 

Some things will be simple changes, whereas others involve audits, reports, and board level sign-off. The important thing is that there is no time like the present, and getting started can take a few simple steps, the first one being reading this article.

Climate change

There is a lot to focus on when it comes to climate change, but that doesn’t mean it has to be a scary topic to think about. Simply following the framework below can be a great starting point.

Direct and Indirect Carbon emissions

The carbon emissions a business creates through its facilities and company vehicles are known as Scope 1 emissions, or ‘direct emissions’, whilst the emissions that exist as a result of purchased electricity, heat, or steam are Scope 2, or ‘indirect emissions’. Understanding these and reducing or even eliminating these emissions will have a direct and immediate impact on climate change. Learn more about Scope 1 and 2 emissions.

Product carbon footprint

In addition to your Scope 1 and 2 emissions, you may also need to consider the total carbon emissions impact of the products you make or services you offer. This involves a deeper understanding of your Scope 3 emissions, which includes upstream (all of the carbon emissions generated in getting your product to the back door) and downstream (carbon emissions that happen as a result of your products life after it leaves your facility. Naturally, reducing these emissions is more difficult as you are often unable to directly control the emissions that occur within your supply chain, but putting in place policies or incentives to drive action is one way to control the total carbon footprint of your business. 

Reliance on fossil fuels

The electricity generated in the UK in 2023 was around 45% renewable, 20% nuclear, and 35% from fossil fuels (gas and coal, mainly gas). This means that for those not on a renewable energy tariff, 35% of their electricity usage came from fossil fuels. Having a renewable energy contract will mean that your energy is coming from 100% renewable sources and your business will reduce the impact on the environment and eliminate those all-important carbon emissions. 

Financing environmental impact

You may have heard of companies saying that as well as reducing their carbon emissions, they are trying to offset as much as possible. This could be by investing in local biodiversity or conservation initiatives, planting trees or by installing renewable energy solutions. There’s also a new way of making a difference which can be very effective for businesses looking to drive down scope 3 emissions, called ‘carbon insetting’. This is where investments are made within the company’s supply chain to reduce emissions which in turn reduces that company’s scope 3 emissions, that’s what we call a win-win. Find out more about Offsetting vs Insetting.

Climate change vulnerability

This is all about the way that people and/or ecosystems are likely to be affected by climate change. Scientific modelling can show the impact of certain degrees of global warming in a couple of very simple, but devastating ways. In some scenarios, vast areas of the globe become either submerged underwater cities, or hot, uninhabitable deserts. This could become a problem if your own facilities, your main raw material suppliers, or customer locations are affected. Understanding the specific impacts of those climate change scenarios can help your business futureproof against those vulnerabilities. 

Natural capital depletion

Natural capital depletion is the removal or change in natural resources, such as soil, freshwater and ecosystems across the world, and how this impacts businesses.

Water Stress

Water stress, for example, is a very real problem. A shortage of water can lead to problems with production and manufacturing, as well as agitate supply chains and potentially cause conflict. Businesses should look at their water consumption and how it can be reduced. This can be things like ensuring maintenance of pipes to avoid leaks and clean water waste and looking at cutting down on overuse – for instance, using hot water taps rather than a kettle. Businesses that use a lot of water in manufacturing or production should be looking more closely at their processes and contract arrangements to see if there is anything they can do in terms of reducing and recycling waste water. 

Biodiversity and land use 

Biodiversity is just as key when looking at environmental issues as climate change. Businesses will need to look at how sites are affecting the land around them, including developments for new sites or if your production processes are harming the local wildlife. Using initiatives that look after local wildlife and help restore and regenerate natural resources is going to help position the business as one that is sustainable and forward-thinking. 

Raw material sourcing 

When looking for the raw materials for your products, you should be making sure that these are sourced sustainably and that everyone in the supply chain is as transparent as possible with where their materials are coming from and what environmental impact there is. With more complex supply chains, this can be a challenge, but it is worth speaking to suppliers to work out how sustainable each point in the chain is.

Pollution and waste

A comprehensive ESG environmental strategy includes tackling pollution, landfill waste, and electronic waste (e-waste).

Toxic emissions and waste 

When creating your product, there probably will be waste products of some kind, but some of this can be harmful to the environment and having to deal with those properly will increase your carbon emissions. By looking at what your manufacturing processes use and pump back out; you can look at updating and upgrading the machinery, working out where changes can be made to reduce or completely erase toxic emissions.   

Packaging material and waste 

Working out what packaging you use for your finished product is going to become more important than ever. We’ve seen food and drink businesses reduce the amount of plastic or non-recyclable packaging they use over the past decade. Other industries are now following suit and thinking about the packaging they use and if it’s going to be recyclable or reusable. As a business, you can also look at how you recycle and dispose of packaging and general waste used within the company. By recycling more paper, kitchen waste used by staff, and disposing of packaging that is used in deliveries, you’ll help cut down landfill waste and help the environment. 

Electronic waste

Millions of electrical devices are discarded every year, these will often end up in landfills, but they can then become a threat to wildlife and humans. Such devices, like computers, mobile phones, and appliances, should be treated and disposed of in the correct way so they do not end up discarded and as a potential threat. Using an e-waste business to safely dispose of or recycle the device will be a much better way of helping the environment. You could also look at getting the item fixed so it can be reused and recycled within the business, or there are initiatives for reusing and recycling electronics and donating them to schools or shelters.

The Road to a Strong ESG Environmental Strategy

There are many different solutions to the environmental challenges ahead, but not all of them will be right for your company. The key thing is to agree, as a business, what your main challenges are, how important they are to solve, what the benefits of improvements would be, and understand what would be involved in getting there. Once you do this, you have your roadmap, which can become your guiding light. 

At Businesswise Solutions, we work with many businesses that are working through their own ‘roadmap’. We do this through our team of experts, in house technology, and innovative hardware to bring more actionable insight to energy usage. By using our knowledge in the industry, we guide you to a strategy that will ensure your business is well on its way to decarbonisation and becoming more sustainable.

By implementing an effective ESG environmental strategy, businesses can reduce emissions, enhance sustainability, and meet climate targets—all while improving their brand reputation and operational efficiency.