Recent trends in the importance of ESG for organisations is driven for sure by international legislation and the fear of larger organisations getting fined for not gathering data and/or not reporting. 

Under the surface however, these trends are also being driven by a significant shift in boardroom thinking towards more “sustainable” long term objectives. This is where the trends are now starting to affect the small to medium sized organisations as the proverbial rolls down hill!. In some cases this is driven by investors seeking a truer picture in the companies they invest in, but increasingly it is becoming a performance issue for the entire supply chain. Notice we purposely didn’t use the word Environmental in our analogy!! The reason for our omission is deliberate, insofar as we believe that “sustainability”, is far much more than just an Environmental agenda. Sure it has its roots in the Environmental world, and there are a lot of competitors of ours “greenwashing” products at the moment to ride the wave of recent trends. For dulann however, apart from Environmental gains, there are also significant bottom line, financial advantages to be gained by employing the correct ESG strategy. The larger organisations have been impacted by the EU's Corporate Sustainability Reporting Directive (CSRD) for quite some time. As the work of the International Sustainability Standards Board (ISSB) starts to bear teeth, we are now seeing the next tier of organisation being impacted. This is only going to increase as time goes on. While legislation will slowly kick in for the small to medium sized enterprises, it is the boardroom push for more sustainable performance that will drive the agenda. 

Of course the challenge that a large chunk of organisations face currently, is that someone employed as an “EHS Manager”, was heretofore predominantly employed with the Safety or “S” element of EHS. Now that legislation and market forces are driving an Environmental agenda, then in many cases the ESG agenda is falling under the remit of the existing EHS team. A team that is already typically tight for resources, and also a team that has typically very little significant exposure to Environmental matters outside emissions, licensing or waste segregation. Further integration of ESG into the EHS function is expected to accelerate, and this without any doubt, will have an impact on how organisations operate. This blog explores the synergies and differences between EHS & ESG, and in particular whether they are likely to evolve together or separately in 2025 and beyond:

1. ESG trends require operational change, and the EHS function has also long been a driver for operational change. When we think about it, the EHS Function has been partly led at least by the desire to avoid Directors being prosecuted for having poor safety standards, or to reduce operational costs associated with insurance, accident claims etc. When we think of it in this way, EHS requirements and ESG requirements start to become much more obvious, and the synergies start to become much clearer. As such it's only natural that the organisation may start to turn to the EHS Team for implementation. 
2. The EHS Team are also typically quite good at data capture and reporting. The EHS department has relied very heavily upon data capture in order to make informed decisions in key functions such as incident recording, risk assessments, contractor management, plant inspections etc., so it is therefore natural that the existing EHS team would be seen as best placed and most skilled, when it comes to additional data capture and reporting for the business. 
3. In a lot of organisations this EHS Department has moved from the manual paper based processes, to the use of technology in order to gain greater efficiency and to be able to respond quickly with Data Driven Decision Making (DDDM). Organisations such as dulann have integrated EHS and ESG Software Solutions, which mean that adding an ESG Application onto existing EHS Applications is relatively straightforward to implement. In essence the EHS Team probably have the infrastructure in place already, and if not, it is more easily and cost efficiently implemented than any other department. Given the resource limitations, there is no doubt that Environmental, Social and Governance (ESG) Software will play a significantly increased role in data capture and reporting, just as it has in EHS. 
4. If you wanted to be cynical, many would say that the clue to who takes on this ESG function with an organisation, lies the Job Title….. “EHS Manager”. It's fair to say that the “E” played second fiddle in the “EHS” job title in the past, and that now all that is happening, is that the existing team are getting responsibilities and a focus that they are already being paid for, but never had to focus on (...but tell that to an already stretched EHS team!). So while this is an argument for synergy between EHS and ESG, there would also be a significant amount of upskilling required, particularly when it comes to the “Social” and “Governance” elements of ESG. For what it's worth, we at dulann anticipate that the “S” and “G” elements of “ESG”, will play second fiddle to the “E” element for the foreseeable future in most organisations. Nevertheless, whether led by the EHS Department or not, in order to meet the requirements, dulann sees a significant input requirement from the Financial team and the HR team in any organisation. ESG can not be left to the EHS department alone. 
5. Many medium sized organisations are aware of, and have acted upon, their data capturing requirements, most because they realise that it also makes long term sustainability and financial sense to do so. However legal requirements and market standards are still evolving all the time, and while most organisations are comfortable with the concept of data capture and reporting, dulann feels that this “comfortableness” is somewhat misguided, as there is typically very little understanding of the link between data capture and the legal requirements. In some cases, we believe that immature data management procedures will hinder the quality and confidence in the data outputs, and as such puts the organisation at greater risk of fines and penalties. For this reason we believe that specialist expertise in ESG requirements will need to be in most cases outsourced to a third party, if not hired in specifically. ESG can typically not just be left to the EHS Department in its current resourcing setup. 

In Conclusion

There is no doubt that the ESG agenda will play a significant role in operations, for all organisations, for the years to come. This role has to be multi departmental in order to be compliant and useful. In larger organisations, there will be dedicated resources with dedicated budgets, and a greater focus on Social and Governance. In small to medium sized operations, the ESG agenda will fall to the EHS Department, with specialist knowledge and capability contracted in as required. ESG will mean many different things, to many different organisations, but sustainability including environmental and financial, must be at the heart of everything we do. 

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Damian Donlon currently leads dulann as CEO, a company based in Wexford and Malaga, who are market leaders in the provision of EHSQ Software. Prior to the last 13 years at dulann, Damian has spent many years leading and coaching businesses to develop strategic planning, with the key focus of long term sustainability, performance improvement and succession planning. In addition to a wealth of experience, Damian also holds an MBA, and a first class honours Degree BBS.