ESG: How Pact is supporting environment, social and governance standards around the world

Climate change. The Covid-19 pandemic. Gender, racial and income inequality. Human rights violations. These are just some of the critical global challenges that the private sector can help to address. One key way to ensure that companies and organizations are doing their part is through ESG, or environment, social and governance standards – a top-of-mind topic among corporate boards, CEOs, investors and consumers. NGOs like Pact also have an important role to play. Cutting across several sectors, Pact’s ESG work is led by Roger-Mark De Souza, our Vice President for Sustainable Markets, along with the directors of our environment and livelihoods, mining and energy work – David Bonnardeaux, Cristina Villegas and Matthew Cullinen, respectively. Here, they discuss why ESG matters and how Pact and the private sector are partnering for intentional action and positive social impact.

What is ESG?
The term ESG refers to Environment, Social and Governance standards for company or organization operations. It is also a framework to facilitate socially responsible investing. Together ESG reporting and disclosures are a means for entities to favorably distinguish their positive contributions to the environment and social issues, as well as to showcase their diverse and equitable corporate governance structure. The three criteria include:

Environment – A company’s impact on the environment including its carbon footprint, value chain-driven deforestation, production of waste and pollution related to manufacturing and processing, as well as sustainability measures in its supply chain.

Social – How the company is viewed in terms of social impact, within and outside of its operations. Social factors of interest include health and safety, working conditions, racial diversity and impact on local communities. 

Governance – A company’s internal corporate structure and management, from accounting and tax practices, executive remuneration and anti-corruption measures to board diversity, shareholder rights and risk management.

Why is ESG important?
There has been a growing consumer interest in social and environmental corporate responsibility, with consumers demanding not only high standards of sustainability but also quality in employment from prospective employers. Value chains are global and as such, investors have the unique power to hold companies accountable for child labor practices, environmental degradation and poor governance through divestment or the funding of competitors. And policymakers and regulators see ESG frameworks as a way to leverage the corporate sector in the fight against social and environmental problems such as climate change and racial diversity in the workplace, for example. In many geographies, ESG reporting will soon become mandatory. For example, 50,000 large and listed companies in Europe will soon have to follow rules under the Non-Financial Reporting Directive, which requires companies to disclose information on their social and environmental challenges.

At the same time, companies with robust sustainability strategies have shown to be more resilient in the face of crises such as the ongoing Covid-19 pandemic, or climate-related impacts, and in turn are more attractive to the ever-growing ESG-savvy investors.

There are a multitude of ESG metrics and reporting frameworks, in many cases inconsistent and non-comparable. Nevertheless, there is a drive to simplify the process and ensure better alignment and transparency to verify and assure companies are delivering on their ESG goals. At COP26 a major step was taken to globally align ESG reporting, with the creation of the International Sustainability Standards Board, which will provide the foundation for consistent and global ESG reporting standards.

What are some of Pact’s key ESG offerings?
For more than a decade, we’ve worked in the mining sector supporting companies that are improving conditions for miners, mostly artisanal and small-scale miners. In central Africa, Pact implements ITSCI, a traceability due diligence program for the responsible sourcing of tin, tungsten and tantalum. Our programming also helps stop child labor in mining and boosts women’s economic empowerment, labor rights and worker safety for miners, who historically have been some of the most exploited yet vital laborers on the planet. Our Moyo Gems program is a great example of how we empower miners to earn fair prices through ethical sourcing.

In the environmental space, Pact provides technical advice on sustainable production methods and agricultural and forestry practices with an emphasis on mitigating the impacts of climate change. We also develop financial models and connect sustainable business models with responsible investors. In addition, we help companies to work with local communities to align their practices with sustainable certification standards, allowing them to access new markets. In Madagascar, for example, we’re helping local businesses to obtain Green Globe certification for sustainable tourism.

In the realm of livelihoods, Pact supports better access to finance and jobs in communities in private sector value chains, and we build understanding of labor rights and access to labor and social protections. Our work on energy focuses on expanding access to renewable energy and on helping communities to use energy productively, such as to farm more efficiently and increase local incomes. We offer corporate consulting to identify future energy-related opportunities that will help end energy poverty. 

Who are Pact’s private-sector partners in ESG?
Our private-sector partners have ranged from Microsoft to Shell to global jewelry companies. In Asia, we’re helping Nestlé and Jacobs Douwe Egberts Peet’s to reduce the carbon footprint of Robusta coffee in their supply through less environmentally harmful growing methods, and ultimately supporting both companies as they work toward reaching their net zero by 2050 commitments. We’ve facilitated the development of the first global sustainable coconut charter with major coconut and coconut oil buyers like Barry Callebaut and Unilever. This will reduce carbon emissions as well as improve farmers’ livelihoods.

Our energy partners include Chevron, with whom we’ve stimulated economic growth and improved health and educational outcomes in rural Myanmar through the productive use of renewable energy, connecting villages to off-grid power. In Ecuador, we’re working with Solaris Resources, a Canadian mining company, to ensure positive ESG outcomes for local mining communities. These are just some examples.

What does the future hold for Pact’s ESG work?
In addition to expanding work with our current ESG partners, we have a lot to offer new partners. We believe there is greater opportunity for traditional and electric vehicle companies, as well as tech companies. We are already working in the Democratic Republic of Congo to build responsible supply chains for cobalt, a key ingredient in the batteries that power EVs and portable consumer electronics. There is a great need going forward to ensure that these components can be sourced without forced labor, child labor and major environmental degradation.

We also see a lot of opportunity to improve ESG outcomes through partnerships with electric utilities and energy equipment manufacturers, to ensure that electricity is a resource available to all of us, rather than just the privileged. We also hope to partner with apparel companies, as there is a lot of progress to be made globally in labor rights and protections in the garment industry.

To learn more about how Pact supports ESG or to explore a partnership with Pact, contact @email.