By: Luis Gerardo Ramírez Villela
Environmental, Social and Governance (ESG) standards help shareholders and stockholders not only to manage potential risks within their corporation but also to identify improvement opportunities in connection with environmental, social and governance principles to be applied in connection with its corporate sustainability.
As of today, corporate sustainability is a big concern not only for potential investors but also for customers who seek well managed and recognized corporations with a sustainability strategy to reach their goals.
It is known that the pillars of corporate sustainability are (i) environmental pillar, (ii) social pillar, and (iii) economic pillar. Depending on the industry sector of each corporation, the relevance of these pillars may vary but, in all contexts, must be considered within their business plan to understand their own sustainability and create an effective plan that will allow them to grow.
Environmental Pillar
In this respect, this pillar is relevant to determine the associated costs for the business operations and the potential risks and liabilities that could have an impact in the day-to-day- business operations. Please note that in Mexico, depending on the location of the business, federal or local laws may apply and therefore specific requirements and joint liability may apply.
Having specific internal environmental policies and controls will help the corporations not only to have a positive financial impact but also a mediatic impact.
Social Pillar
This pillar is relevant not only for the shareholders and stockholders of a corporation, but also for the employees and related parties participating directly or indirectly in the business operations. Maintaining values and internal policies through the creation of codes of ethics and conduct as internal manuals will result in a best practice management for the workplace and scaling up the business.
In Mexico specific labor rules and regulations must be considered not only for the employees but also for third parties providing specific services which would need to be fully regulated in the internal regulations.
Economic Pillar
The most relevant pillar for any corporation since it involves maintaining a profitable business through compliance, governance, and an appropriate risk management. Specifically, and in follow up with ESG’s principles, governance is basic and involves the establishment of adequate and accurate accounting and legal internal regulations which would allow a corporation to generate a sustainability strategy designed for success.
From a legal perspective and considering these three pillars, the best strategy would involve not only the creation of internal codes, manuals and regulations but also performing periodic due diligence processes in order to verify from a compliance perspective that business is being carried out in due course.
Since sustainability involves the entire supply chain of a corporation, the main goal shall be creating a corporate sustainability practice that will generate a positive effect against customers and society, besides the improvement of the business operations.
