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A management system is a means that any organization can use in its work to meet ESG and SDG ambitions. It may not be what first comes to mind when establishing ESG or SDG strategies and initiatives. However, the value of such a structured approach was recognized by a majority in DNV’s recent ViewPoint survey Are companies committed to sustainability? Over 80% fully or somewhat agree that a management system provides effective support for a company to deliver on its ESG or SDG commitments.
But what makes a management system such a valuable asset? Many companies implement a certified management system to satisfy a ticket-to-trade requirement or improve on a specific area critical to their business objectives and strategy. The beauty of this is that the very same process can also be used to support ESG and SDG ambitions in a structured way. To derive a dual benefit, however, companies must first conduct a materiality assessment and analysis based upon which they define their overall ESG and/or SDG ambitions. Then, goals isolated to a specific dimension or issue can consequently be managed and improved with the support of the related management system.
For example,the environmental standard ISO 14001 provides well established practices and guidelines and thus clearly contributes to the environmental pillar of sustainability. When the environmental management system is implemented, it can help an organization meet specific commitments to protect the environment and conserve natural resources. The management system enables a structured approach to improve performance in accordance with the ISO 14001 requirements. This helps identify and manage risks, establish baselines and improvement objectives, monitor and manage performance, and ultimately deliver on compliance obligations, customer commitments and company objectives. Certification by an independent third party proves its performance to internal and external stakeholders, which beyond being a ticket-to-trade can also support ESG or other sustainability related efforts.
Relying on a management system is also beneficial considering the width and complexity of issues a company must manage today. In addition to the main ISO standards on quality, environmental and safety management, there are specific ones on anti-bribery, diversity, equity and inclusion, information security, business continuity as well as standards specific to an industry. Thus, organizations can select the appropriate standard based on its identified ESG ambitions. They can also integrate different management systems for a holistic approach as most standards are built on a similar structure and all the other ISO standards follows the Plan-Do-Check-Act (PDCA) cycle.
ISO 14001 is just one standard upon which companies can leverage to deliver on its ESG commitments. This table shows an overview of some management system standard and within what ESG dimension it primarily contributes.
What ESG dimension can standards support?
How does the PDCA cycle work? The short answer is that it provides a cyclical structure to understand what issues to be managed, implement actions to address these, check how these have worked and correct based on this insight to continually improve. Don’t forget that the primary reason for implementing a compliant management system often is the need for certification by an third party like DNV. But let’s have a look, starting from the PDCA cycle, at how companies can use the same approach to help them deliver on ESG and SDG commitments. We will continue with our ISO 14001 example.
This is a key step for a company to understand the environmental risks and opportunities that need to be addressed. It also provides the basis for setting its overall environmental ambitions, including those related to the company’s ESG and/or SDG ambitions.
How management systems support sustainability ambitions?
One of the key processes required by ISO 14001 is to identify environmental aspects considering a life cycle perspective and determine those aspects that are considered significant, based on criteria defined by the organization. This is expected to cover all relevant activities of the company, including aspects related to its products and services, and typically include:
- emissions to air
- releases to water
- releases to land
- use of raw materials and natural resources
- use of energy
- energy emitted (e.g. heat, radiation, vibration (noise), light)
- generation of waste and/or by-products
- use of space
In addition to significant environmental aspects, risks and opportunities may also arise from changes in internal and external issues influencing the company, as well as requirements from interested parties, including those mandatory through legislation (permits, regulations, etc.)
This information is therefore a good starting point for a company in order to identify environmental matters of importance related to its ESG and/or SDGs by using the information to re-assess their relevance using an ESG and/or SDG lens to determine related ambitions.
As part of the planning process, management should establish their environmental policy, objectives and KPIs (Key Performance Indicators). These should be related to identified risks and opportunities, including determined commitments for ESG and/or SDGs. Being specific provides guidance and direction for people within the organization to align their focus and set strategies to achieve the aforementioned objectives. Examples of KPIs within environmental management could include reducing overall environmental footprint, improving performance related to greenhouse gas emissions, waste, water effluents, use of natural resources, etc.
Finally, with all this in place, the organization can identify required resources to implement the identified strategies and actions in an efficient manner. This includes mapping any training and skills requirements.
This is the phase where the organization implements planned actions to address its identified environmental risks and opportunities. These actions should include measures to control operations in a way that meets the organization's overall ESG and/or SDG ambitions and objectives. Requirements on operational controls are included in all ISO standards. Related to environmental management, operational controls can be implemented to help the company reduce waste and greenhouse gas emissions, improve sourcing of sustainable materials, etc. As companies integrate controls supporting ESG and/or SDG goals into relevant environmental operational processes, they make these dimensions part of the organization’s working culture, as well.
It is critical that organizations monitor and measure their overall environmental performance and achievements. They must verify the extent to which planned objectives and KPIs are being met. Verification methods can include performance reviews, audits, inspections and management reviews. Naturally, this phase is essential for organizations seeking independent certification. However, it is also a stage organizations may use to establish needed baselines, measure progress and verify how their environmental management performance is contributing to related ESG and/or SDG ambitions.
To complete the PDCA cycle, organizations must apply necessary corrective actions, addressing areas where there are issues, which in certification language are called nonconformities with the ISO 14001 requirements. Corrective actions are designed to prevent recurrences and improve performance. If the organization is certified, addressing or closing nonconformities to be compliant is obligatory for a certificate to be issued.
The results from the check phase basically spurs identification of opportunities for continual improvement. Results from the act phase feed back into the plan phase, completing the cycle and contributing to further improve and deliver on any environmental ESG and/or SDG commitments of the company.