DemystifyingESG

Navigating ESG questionnaires:

A guide to improving your scores and practices

Demystifying ESG, a new column produced by the IAPD Environmental Committee, aims to provide valuable insights into Environmental, Social and Governance (ESG). Through exploration of ESG principles, this series will unravel complexities, offer practical strategies and showcase real-world examples to help companies navigate the evolving landscape of ESG in the performance plastics industry.
by John Homa, Indelco Plastics
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SG (Environmental, Social, Governance) scores have become increasingly important to businesses in today’s economic community. Businesses, their investors and future investors are placing greater emphasis on their manufacturers’ and suppliers’ production and business practices and are seeking transparency and accountability in these areas. An important tool for evaluating companies is through the completion of ESG questionnaires.

We are too early in this business evolution to set high marks and expect companies to fully meet all types of new ethical standards. So, scores on questionnaires will be an accumulation of collected data from a variety of sources, including your questionnaire, regulatory filings, company reports and third-party databases like Moody’s and Bloomberg. Then service businesses such as MSCI, Sustainalytics and S&P TruCost will collect, measure and present ESG ratings for public consumption.

Extruding your responses and scoring well on the questionnaire will enhance your chances of any company actively engaging with you. Your ability to show dedication to environmental sustainability and social responsibility in your business operations is likely to be well-received by them, especially the company who is requesting it from you.

Everybody is Looking at You
Scoring high on the questionnaire could also lead to additional positive publicity for your organization. Your proactive commitment to environmental conservation and social responsibility could be the catalyst in your company’s communications and marketing materials to really showcase your dedication to sustainable practices. This could help to enhance your reputation and attract other like-minded partners and clients who value these important principles. When companies collect the manufacturer’s ESG questionnaires, they are expecting a range of responses. Some companies may praise the manufacturer for their ESG efforts, while others might have concerns or suggestions for improvement. Be optimistic and ready to adjust.

Overall, scoring high on the questionnaire not only benefits your current relationship with the requesting company, but also opens new opportunities for growth and success in the future with others. Being flexible and open-minded will be equitable to your growth.

Breaking Down the Score
The scores are rolled up into three pillar categories – environmental, social and corporate governance. The first two categories are rated differently depending on the industry of the company. For the way a company is governed, the ratings are the same across all industries.
1. Environmental Impact
A progressive approach is essential for the long-term health of our planet. An increasing number of corporate board members and shareholders are engaged with this mindset. But a smaller number recognize the importance of distinguishing between industrial and consumer plastics in our efforts to make a positive impact.

RECYCLING IDEA:
Colorado Plastics implemented a Free Box and Remnants Sale program to promote the reuse of scrap materials, read about this example in the April/May 2024 issue of Performance Plastics.

Recycling is big here. A company can actively promote recycling within its operations by setting up designated recycling bins throughout the facility, providing employees with training on proper recycling practices and collaborating with suppliers and customers to implement sustainable packaging solutions. Additionally, your company can also participate in recycling programs within the community and support initiatives that promote environmental stewardship. By taking these steps, any industrial plastics manufacturing company can demonstrate its commitment to sustainability. IAPD has other suggestions which can be implemented by our members.
2. Social Responsibility Initiatives
Companies need to prioritize employee welfare, provide competitive wages and benefits, ensure a safe working environment, support social initiatives and maintain transparent communication with their shareholders. When we think about human rights at a company, we want to make sure that the people who work there are being treated well. This means they should be paid fairly, have good benefits, work in a safe place and belong to a company that helps the community. It’s also important that the company can talk openly with people about how they are doing these things. These guidelines that have less to do with profitability and more about ethics and environmental obligations.
3. Corporate Governance Practices
Companies that prioritize transparency, accountability and regulatory compliance demonstrate a culture of integrity and awareness within the organization. Strong corporate governance practices and a commitment to compliance are fundamental to long-term success and sustainability in the business world.
Business professionals collaborating on a laptop displaying the acronym ESG
Having a well-structured board of directors and advisors is vital for corporate accountability and effective decision-making. It is important to have a diverse group of members with different skills and expertise, as well as clearly defined roles and responsibilities. Independent directors play a crucial role in providing unbiased oversight and holding management accountable. Regular board meetings, financial audits and internal control processes are necessary to ensure that the company operates responsibly and in compliance with regulations. These measures help in identifying and resolving any conflicts of interest, ethical violations or financial irregularities that may occur within the organization.

It is essential for companies to ensure compliance with relevant regulations and industry standards by staying updated on changes, conducting audits, and implementing policies and procedures to mitigate risks. Investing in training programs for employees, educating them on relevant regulations and establishing clear communication channels for reporting concerns or violations are important steps in maintaining compliance.

Navigating ESG
Navigating an ESG questionnaire may seem challenging for businesses, especially without proper preparation. However, it’s important not to be intimidated by the task. This new aspect of the modern corporate world is not about greed, greater profits, or consumer manipulation, but rather about each company taking control and striving for growth through internal development and continual progress for the greater good.

Manufacturing is the industry with the greatest overall impact on the environment, society and governance. A company with significant public ESG concerns can and will threaten its own long-term viability and competitiveness. Failure to address any ESG concerns can only lead to your business turning into a rusty knob on the compost pile and suffering reputational damage.

To ensure the long-term viability and competitiveness of the plastics industry, companies must prioritize recycling and transparent governance. This includes investing in research and development to create more environmentally friendly materials, implementing recycling programs despite the struggles to success, and engaging with communities to address the social misconceptions. We are not consumables, we are industrials.

It is crucial for the industrial plastics industry to act now to mitigate its perceived negative impact on the environment. By embracing these initiatives, companies not only protect their long-term relativity but also contribute to a stronger industrial plastics industry and distinguish us from the plastic water bottles and other careless consumer waste streams.

The IAPD website has suggestions for initiatives to reduce waste, promote sustainability in the supply chain and invest in renewable energy.

For Comparison’s Sake
In the specialty chemical industry, European companies Linde and Novozymes both have relatively high scores of only 71.2 and 64.3. In the United States, Colgate-Palmolive carries a score of 69.3, and Xylem has a 68.4 score, showing that everybody has room for improvement.

It is important for all companies to take feedback seriously and use it to improve their ESG practices.

Our scores are projected to continue playing a key role in sustainability reporting and financing in the very near coming months. When companies understand and implement them effectively, these ratings will offer valuable insights to improve their disclosures. You will be ahead of the competition.

Final Evaluation
To improve your ratings, it’s essential to establish clear ESG targets, collect relevant and measurable indicators and outcomes specific to our industry and ensure that this data is both transparent and accurate. Be accountable for your facts, do not greenwash.

Companies must have a solid grasp of their ESG practices and policies before completing and returning their questionnaires. Try to have a strategy in place for addressing any feedback or recommendations from customers. Companies are prioritizing vendors who regularly update their information.

Undoubtedly, the completion of ESG questionnaires poses a significant challenge. However, companies that prioritize sustainability and responsible governance can safeguard their long-term viability and make a positive impact on creating a more sustainable future. In this new era of environmental responsibility and sustainability, it is prudent and advantageous for businesses to prioritize transparency and consistency in order to strengthen both individual companies and our industrial plastics industry as a whole.

John Homa is the Industrial Account Territory Manager at Indelco Plastics. For more information contact Indelco. at 6530 Cambridge Street, Minneapolis, MN 55426-4484, USA; by phone at (952) 925-5075 or (800) 486-6456, or online at www.indelco.com
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