Chris Williams, founder and chief executive of ISB Global, explores the relationship between ESG and waste management and why companies need to sort out their rubbish.
- An often overlooked area that has a significant impact on a company’s ESG score is waste management.
- Indeed, it is a significant factor that investors consider when evaluating a company’s sustainability practices.
- Businesses and investors alike should pay proper attention to waste management.
Environmental, Social, and Governance (ESG) has become a buzzphrase since the concept was introduced in the 2004 United Nations report, Who Cares Wins. An often overlooked area that has a significant impact on a company’s ESG score is waste management. So what’s the relationship between ESG and waste management?
The importance of proper waste management…
People might not realise it, but proper waste management is essential in a modern economy. When train drivers, teachers and civil servants go on strike, the impact is costly and disruptive. When waste management providers strike, you can literally smell the consequences.
Beyond the smell, improper management of waste has severe and wide-reaching environmental consequences, including soil and water contamination, air pollution and greenhouse gas emissions. Inadequate waste management also has harmful social and economic effects, creating risks to public health and the extra expense of clearing up waste that is not properly disposed of.
…and its link to ESG
When it comes to ESG, waste management is a significant factor that investors consider when evaluating a company’s sustainability practices. Companies that prioritise waste reduction, reuse, and recycling tend to have higher ESG scores. To reduce their Scope 1 emissions most efficiently, companies should implement a circular economy model in which waste materials are recycled or reused.
Beyond just the environmental benefits, a more circular economic model can significantly reduce the cost of raw materials and help increase a company’s bottom line. Investors will constantly be looking at a company’s growth and profitability; in the current economic climate, finding new ways to increase growth and supercharge profits will be an attractive proposition when looking for future investment. Focusing on creating a more circular model for businesses can’t solely be a goodwill gesture; we need to ensure it makes economic sense if we want it to become more commonplace.
Waste reduction initiatives also have a positive social impact. Companies that prioritise waste reduction reduce the amount of waste they send to landfills, which in turn benefits communities at home and abroad. For too long developed nations have shipped off their waste to countries in the developing world; when it happens, it’s people that live in these developing countries who suffer and must deal with the environment and public health impacts of other, richer, peoples’ waste – and not the governments who pocketed the money to accept it in the first place. In both developed and developing countries as well, poorly-maintained waste landfills emit hazardous gasses such as methane that contribute to climate change.
As well as environmental and social benefits, proper waste management can deliver economic benefits. Implementing waste reduction measures saves companies money on their disposal costs. Recycling programs can also generate revenue by selling recycled materials back into a secondary market of companies that can use the material in their own businesses.
What happens if you don’t prioritise waste management
At the same time, companies that fail to prioritise waste management suffer negative consequences. Not disposing of waste correctly leads to legal and regulatory punishment, reputational damage among customers and partners, a drop in investor confidence and a rise in investor criticism. For example, a company found to have illegally disposed of hazardous waste faces fines and legal action, which in turn harms its financial performance and its ESG score.
There’s a good reason why waste management is so significant in evaluating a company’s ESG score. Companies that invest time and resources in waste reduction, reuse, and recycling pass on environmental, social, and economic benefits to their communities and wider society. In contrast, organisations that neglect or ignore their waste management responsibilities damage their surroundings, their environment, their reputation – and also their bottom line, whether it’s through fines or lost business.
It’s for these reasons that companies and investors alike should pay proper attention to waste management. It’s not just a load of rubbish after all.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.