How does ESG and zero waste fit together, and where does sustainable investing come in? This article covers exactly how ESG and zero waste go hand in hand, and what role sustainable investing plays.
Nearly all ESG ratings in existence today include waste management and materials used as key indicators. This shows just how much emphasis investors are placing on waste management. In this article, we explore the concept of sustainable investing and how ESG and Zero Waste fit together.
A quick recap on ESG and Zero Waste
➔ ESG
Socially conscious investors use environmental, social, and governance (ESG) criteria to screen potential investments based on how sustainably a company conducts its business. Read our blog for more information on ESG scores.
➔ Zero Waste
As you may already know, zero waste doesn’t have just one definition, and the phrase can often be used by companies to talk about slightly different things. Simply put, zero waste means sending no waste to landfills. While that may seem ideal, it’s a bit more complicated.
Zero waste is essentially about redefining the system. We currently live in a linear economy where raw materials are transformed into final products and then discarded as waste. The goal of zero waste is to move to a circular economy where waste is non-existent. You can find out everything you need to know about the circular economy in our blog.
Now that you’re all caught up, let’s look at how ESG and zero waste fit together.
Sustainable investing, ESG and Zero Waste
Sustainable investing is when investors select companies (or other investment portfolios) based on their performance in managing ESG issues. While some investors do their own research to understand a company’s performance, many rely on ESG ratings published by major investor research organisations. Sustainable investment ensures that companies aren't only judged on their financial performance, but on what and how they contribute to society as a whole.
In sustainable investing, ESG factors play a significant role, and that’s why companies need to take ESG ratings seriously.
➔ Zero Waste and ESG
Although ESG ratings vary across industries, a company's rating largely depends on how effectively they manage their waste.
For example, increasing your rating through strong waste management practices could lead to your company’s inclusion on ESG-focused indexes, like the Dow Jones Sustainability Index. Being included on more indexes means more demand for your stock, which leads to stock price appreciation.
On the other hand, if your ratings flag an issue (like poor waste management) as a concern in their reports, it increases the investor perception of risk associated with your company. This negatively impacts sentiment, limits your company’s capacity to attract new forms of investment, and potentially increases your cost of capital.
What can your company do to incorporate ESG into your practices?
Each industry has unique ESG factors, with some placing more emphasis on certain issues than others. For example, with energy companies, environmental factors are more important because of the growing threat of climate change. This will be a major driver of risk in an energy company's long-term value, so it’s essential to identify the most pressing factors and create an appropriate ESG strategy.
For an IT company, social aspects such as privacy, and data security will be more important.
Companies shouldn’t try to be all things to all people. Identifying 3-5 ESG criteria that align with your strategy and industry is a good place to start.
Regardless of the industry, companies need to strive towards a circular economy. By doing so, your company can not only create resource efficiency, but provide opportunities, impact multiple sectors, and change lives.
Adopting circular economy principles can also make enormous strides toward achieving a zero waste society. With all that being said, we’ve compiled our top strategies to help you get further along on your zero waste journey.
You don’t have to do it alone. Speak to one of our experts and we can assist you with aligning your waste operations with your ESG objectives, ultimately making your business sustainable and more attractive to investors and customers.
