Developing Your ESG Framework

What Does ESG Mean?

There is more to measuring the sustainability of a company than just the physical impacts on the environment from manufacturing its products. It typically involves other elements of an entire organization and its employees. Environmental, social, and governance (ESG) metrics are a comprehensive way sustainability efforts can be reported to stakeholders. More than 90% of large, publicly-traded companies in the United States report ESG metrics (McKinsey & Company). These metrics continue to evolve – and reporting them can help your organization reach its sustainability targets while building trust with stakeholders.

In this article, we will help explain various environmental, social, and governance metrics to consider, the framework to disclose ESG data, and the impact all of this can have across the value chain.

Environment

Typically, environmental metrics are focused on the operational risk of raw material suppliers and polymer manufacturers – and the impact those products have on the planet. These metrics can be focused on greenhouse gas (GHG) emissions across the value chain, reducing waste-to-landfill, and increasing renewable energy consumption.  

Social 

Sustainability commitments are generally not just focused on creating a better planet – they can also involve health & human safety, and human rights. Social metrics are becoming more important to include in reports. Social-related data reported to stakeholders rose 37% in 2021 compared to 2020 (McKinsey & Company). These metrics can involve employment guidelines, community involvement, and diversity and inclusion. 

Governance 

Governance metrics can help an organization ensure it is working to meet social and environmental goals. This includes ethical business practices and disclosing the performance of sustainability efforts. 

ESG metrics can vary by organization or industry – depending on your sustainability goals. Avient focuses on ESG metrics that ensure employee safety, support a growing sustainable solutions portfolio, and positively impact our environment by reducing waste and energy consumption. 

Disclosing ESG Efforts

Measuring performance based on ESG metrics can help your organization and its various stakeholders develop trust and unity on sustainability goals. For example, a 2022 Ernst & Young Global Corporate Reporting and Institutional Investor Survey found that 99% of investors value ESG metrics when making business decisions. This was a drastic change from 2018, when only 32% of investors factored ESG metrics into their decisions. To ensure ESG metrics are reported accurately, the following industry frameworks can help guide your organization: 

1) Global Reporting Initiative (GRI): includes three categories of standards that provide transparency of ESG metrics to all individuals involved in an organization:

• Universal standards: provide the recommended information, including general information about its organization and the operational risk to the environment. 
• Sector standards: guidelines for the various applications that use an organization's products, such as energy consumption, raw material sourcing, or any recycling efforts.
• Topic standards: typically focused on other ESG-related metrics such as waste, health and safety of employees, or financials. 

2) Sustainability Accounting Standards Board (SASB): these standards can be applied to a number of different industries – and can frequently change depending on the most pressing issues, including: 

• Environment issues: typically involve the most relevant topics, such as product carbon footprint, waste management, and energy consumption. 
• Social issues: generally involve the workplace safety of employees and community engagement. 
• Governance issues: focused on the operational safety of equipment and facilities – and the ability to address all ESG metrics accurately. 

3) Task Force on Climate-Related Financial Disclosures (TCFD): a four-step framework that can help organizations accurately disclose financial information as it relates to the following climate issues:  

• Governance disclosures: typically describe your organization’s view on climate-related issues.
• Strategic disclosures: generally associated with stating short-term and long-term ESG goals.
• Risk management disclosures: typically assess the risk involved with the framework for achieving sustainability commitments. 
• Metrics & targets: plan for the organization to measure the success of ESG initiatives. 

However, greenwashing stakeholders is a common mistake that can happen when reporting ESG disclosures. This is the idea of promoting sustainability efforts that an organization is taking part in but is not taking action on or is inaccurately reporting the progress of environmental goals. To help avoid greenwashing, it can be beneficial for organizations to utilize these frameworks to provide accurate information to stakeholders. Learn more about how Avient uses these frameworks in our 2021 Sustainability Report.

ESG-related assets are expected to make up 50% of all globally managed assets by 2024 (Deloitte). For this investment to succeed, it can be important to develop a collaborative value chain with organizations who have similar ESG goals. 

Identifying Sustainable Collaborations 

Are you looking for organizations within your industry’s value chain with similar sustainability commitments? When identifying organizations within the value chain – whether it be a raw material supplier, polymer manufacturer, or original equipment manufacturer (OEM) – it can be helpful for each to be aligned on ESG metric goals. If all organizations become aligned, it typically results in progressing your sustainability commitments. To help guide this alignment, it’s beneficial to establish policies to evaluate other organizations in the value chain. Here are some ESG factors to consider when deciding on collaborations within your industry’s value chain: 
1) Environmental factors

• Ensuring that facilities and equipment are equipped to recycle or reuse water or waste.
• Incorporating renewable sources for means of power and electricity.
• Manufacturing eco-conscious products – whether they enable the circular economy or reduce your carbon footprint. 
• Complying with industry or geographic location standards.

2) Social factors

• Supporting employees with basic human rights and avoiding discrimination.  
• Hiring processes that are in compliance with employment and wage standards. 
• Establishing a culture in which employees feel safe and valued. 

3) Governance factors

• Verifying the compliance status of licenses, certifications, standards, laws, data privacy, and intellectual property. 
• Creating policy guidelines to ensure that organizations within your value chain ensure alignment of sustainability efforts. If you would like to learn more about how Avient chooses sustainable suppliers, check out our Supplier Code of Conduct.

Avient seeks superior collaboration amongst our raw material suppliers to provide sustainable solutions in an effort to meet ESG commitments. We typically analyze raw material suppliers through EcoVadis – who evaluates an organization based off 21 different sustainability topics that are categorized into environment, labor and human rights, ethics, and sustainable procurement. Each category is scored out of 100 and given a total rating of bronze, silver, gold, or platinum. Currently, 70% of our suppliers have achieved an EcoVadis Silver rating that is associated with the UN Global Compact guidelines.

Key Takeaways

Reporting ESG data to your stakeholders will benefit an organization in the short term and long term as it can help meet your sustainability targets and builds trust within the organization. 

• ESG represents any environmental, social, or governance metrics relating to sustainability goals. 
• There are industry frameworks that can help with reporting ESG metrics – such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or the Task Force on Climate-Related Disclosures (TCFD).
• Identifying sustainable suppliers that are aligned on ESG metrics can help advance sustainability commitments. It can be beneficial to consider environmental, social, and governance factors when deciding on those involved across the value chain. 
• Avient is committed to sustainable collaborations, as demonstrated by having more than 70% of our raw material suppliers reach an EcoVadis Silver rating.

If you are interested in learning more about your ESG data and how to achieve your sustainability goals, contact us.