Learn what ESG score is and how to apply it to your clothing company9 min read

Summary:

• Have you already heard of ESG score? If you don’t know what this acronym means, keep in mind that it came to changing the organization’s management;
• ESG advocates for three important pillars to be followed: environment, social and corporate governance;
• Technology can help your company become an ESG-Friendly Firm. Take the free trial of the Audaces360 multi-solution to see how!

The sustainability topic has been growing and often discussed in companies.

In addition, other good practices are getting extended for better performance in organizations.

If you’ve never heard of ESG and wonder what it is, it’s time to embrace this new business reality and make your fashion business stand out.

Find out what ESG score is and how this little acronym can positively transform your clothing industry.

Enjoy the reading!

What is ESG score?

ESG stands for Environmental, Social, and Governance, and we can define it as a set of good actions. These practices make a company socially aware, sustainable, and correctly managed.

With ESG, it is possible to measure a company’s performance and commitment to sustainability.

Besides, it is possible to observe whether the business is a viable investment option, capable of generating positive impacts in the environmental, social, and financial areas and validating awareness of its role as an employer brand.

We know that a company can generate positive or negative impacts on the lives of its employees and customers.

Therefore, the ESG helps the institution track and cherish its impact on others.

Learn more: How does technology in fashion impact the textile industry?

What is the origin of the acronym ESG?

Environment, Social, and Governance (ESG) is an acronym used to measure how much a business is sustainable.

The term originated in 2004, with the publication of the Global Compact in partnership with the World Bank, called “Who Cares Wins”.

After that, the secretary-general of the United Nations (UN), Kofi Annan, asked 50 CEOs of financial institutions how social, environmental, and governance factors of the market could get integrated.

Also in 2004, the Finance Initiative of the United Nations Environment Program (UNEP – FI) released a report that showed the importance of ESG strategy for financial estimates.

Over time, improvements in business and finance leasing have proven themselves.

What are ESG investments?

Since the 1960s, investors have looked to ESG indicators to know which organizations they should put their money into.

Currently, this theme has evolved and kept even stronger.

That is because investors are not only concerned with the financial results of their capital. The focus has become the impact investments have on climate issues, recycling, and river fuel, for example, besides issues related to slave labor.

When looking at ESG investments, it is possible to notice that some of their benefits for companies are: improved financial performance, increased investor confidence, and customer loyalty.

Evidence (practical and report-based) proves that, in addition to improving companies’ image and reputation, employees feel more motivated to work for ESG-oriented organizations, and customers tend to support them more.

How do ESG investments work?

If you are savvy about traditional funding, you will also know how to make ESG investments, as they are similar. The difference is that, in ESG funds, the selection takes place according to the level of business sustainability. For a company to be considered ESG, it must meet some criteria, namely:

• Being transparent;
• Have social initiatives;
• Reduce carbon dioxide emissions;
• Opt for renewable energy sources;
• Encourage conscious consumption;
• Support inclusion and diversity in the company;
• Have a respectful and honest work environment.

How important is ESG to the fashion industry?

Due to the high demand for production, the clothing process goes through several stages that use numerous natural resources.

Clothing manufacturing responds to 1.2 billion tons of greenhouse gases released, and if nothing changes by 2050, it will be the sector responsible for 25% of carbon emissions on the entire planet.

At this point, an analysis of the consequences of this segment becomes crucial. However, only worrying about the environment is not enough – we must also look at the working conditions.

In addition to the environmental sector, companies must deal more responsibly with social issues and governance, remaining more competitive with other companies.

Studies show that companies that adopt ESG practices achieve better results in their operations and become more attractive – even financially – as they increase their profitability and market value. Thus, the investors have eyes and ears for them.

For this reason, implementing ESG practices makes the business increasingly relevant.

Learn more: Find out what Fashion Revolution is and the purpose of the movement

What benefits can ESG bring to your clothing company?

Companies that commit to ESG are on the radar of many individuals, job seekers, and other corporations to see whether they are aligned with their values and purposes.

But there are more benefits ESG frameworks can reap for organizations. Meet some of them:

1. Improved financial performance;
2. Superior image of the company in the market;
3. Increased investor and customer confidence;
4. Consumer loyalty;
5. Reduction of materials and better productivity;
6. Social diversity, greater equity, and transparency;
7. More employee satisfaction;
8. Standout against the competition in regulatory and legal criteria;
9. Lower environmental risks caused by the company;
10. Facilitation of green lines of credit.

Learn more: What is takt time and how to calculate it in your company?

How is ESG score measured?

According to a Global Reporting paper, standards are the agreed level of quality requirements, which contain specific and detailed criteria or metrics of what should be reported on each topic. In general, they have in common features such as public interest focus, independence, due process, and public consultation.

It is not hard to realize the positive results of ESG good practices in corporations worldwide. But, fundamentally, they must be measured.

That involves setting clear targets and KPIs and developing a roadmap that sets out targets and progresses, as this PwC document highlights.

ESG Standards

For this purpose, some standards indicate how the company commits to ESG. Standards have a specific focus and contain details explaining what needs to be reported. Check them out below:

• International Organization for Standardization (ISO 14001);
• Global Reports Initiative (GRI);
• Prince Accounting for Sustainability (A4S);
• European Financial Reporting Advisory Group (EFRAG);
• International Sustainability Standards Board (ISSB).

ESG Frameworks

On the other hand, a framework is broader in scope, as Green Business Bureau explains, giving a set of principles to guide and shape understanding of a certain topic. Referring to ESG, meet some of them:

• Sustainability Accounting Standards Board (SASB);
• Task Force on Climate-Related Financial Disclosures (TCFD);
• Climate Disclosure Standards Board (CDSB);
• International Integrated Reporting Council (IIRC).

ESG practices that can be adopted by clothing businesses

Some good ESG practices can (and must) be adopted by fashion apparel companies.

In environmental practices, the main ones are:

• Reduction of pollutants and targets for this to be achieved;
• Decreased use of inputs and correct disposal of materials;
• Environmental preservation projects;
• Alternatives are for materials.

As for social practices, the company must have initiatives such as:

• Correctly follow labor rights;
• Have diversity and inclusion in the work environment;
• Follow health and safety rules at work.

And in terms of governance, it is necessary to prioritize actions such as:

• Values, morals, and ethics in business;
• Anti-corruption policies;
• Management with transparency, equity, and accountability;
• Zero involvement with fraud, complaints, and scandals.

Implement ESG practices in your manufacturing with the best of technology

If you want to have a good ESG score in your clothing enterprise, know that technology can generate more sustainability and commitment to the environment and your employees.

Audaces has innovative solutions that support the entire textile chain, from the creation to the production of the final piece. Find out more about our systems:

Audaces360

If you want a complete multi-solution that helps you from the creative stage to pattern development, Audaces360 is an automation that takes your manufacturing to the next level!

Audaces360 is a complete tool that enhances results by optimizing time and streamlining your deliveries.

Audaces Fashion Studio

Audaces Fashion Studio allows you to start creating fashion on three-dimensional mannequins.

In a 100% digital environment, this tool brings cost, time, and raw material savings. In addition, it is a great friend of the environment, as it avoids wastage and disposal of materials.

With Audaces Fashion Studio, it is possible to count on immediate and effective communication between stylists, pattern makers, and buyers.

You can also boost your creative work by testing fabric markings and modifying prints, shapes, and patterns.

Audaces Pattern

High-quality and accurate patterns are vital for anyone who strives for success in fashion. And with Audaces Pattern, this is possible!

Our system allows you to standardize, program, organize and control the entire manufacturing process without surpassing raw material costs.

Audaces Marker and Supera

Saving resources is a mandatory step toward achieving the desired result. With an automated system, it is possible to lay any part in a few minutes.

For this reason, Audaces Marker, together with the Audaces Supera function, allows the automatic creation of lay planning, bringing savings thanks to the algorithms that process them and keep the workstation free.

Depending on production needs, the server schedules the cutting order, assigning priorities to markers.

Conclusion

Customers, green practices, and investors are increasingly concerned about the environment and employees.

The time has come for your company to be part of this changing process and embrace transformation!

There are many ways for apparel enterprises to get started with ESG, most notably by counting on technology as an ally.

Working with software is a form to optimize the use of fabrics, paper, and other resources, bringing more comfort and agility for production. Want to know more about it? Then download our e-book for free and discover some strategies to leverage your business, with some sustainable and ESG-conscious practices:

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