In the past year, a new acronym has been showing up in trucking: ESG. It stands for environmental, social, and corporate governance. Although so far we mostly hear about it from large, publicly traded fleets, the principles of ESG could benefit all sizes and types of fleets. In fact, I bet you may already be further ahead than you think.
ESG reports give information on how companies strive to protect the environment, address social causes, and otherwise conduct themselves responsibly.
If you haven’t gotten a request for proposal from a shipper yet asking for information on your company’s policies on ESG or related topics such as sustainability, it’s likely only a matter of time.
The term first became a buzzword in the financial/investment world a couple years ago. ESG reports from companies were a way for environmentally and socially conscious investors to measure the sustainability and societal impact of their investments.
But ESG, or the principles behind it, are becoming broader than just a tool for investors. In 2019, the Business Roundtable said for the first time that companies should serve stakeholders, not just shareholders. That means customers, employees, communities, and suppliers.
A 2019 Forbes article on ESG explains that each company chooses its own areas of focus.
“ESG causes can be strong environment standards, such as sustainable natural materials, water conservation and CO2 reductions. Or they can be advancing social issues, such as diversity in workforce and leadership, human rights or poverty reduction. Or they can revolve around ethical corporate governance measures, such as anti-corruption and capped executive compensation.”
And it’s a term and concept that is making inroads into the trucking and logistics arena.
Last year, Morgan Stanley’s Airlines and Transportation Analyst, Ravi Shanker, started talking about what ESG could mean for trucking. The industry has been going through rapid changes, he noted, from the rise of e-commerce to freight-matching apps to electric and autonomous trucks.
At the same time, exterior pressures are at play. There is increasing regulatory and social scrutiny of carbon emissions globally. Diversity and inclusion have taken on new importance.
We’ve seen ESG reports, or sustainability reports citing ESG principles, from large, publicly traded companies such as Werner, J.B. Hunt, XPO Logistics, Schneider, and U.S. Xpress. Publicly traded companies must document their contributions to these publicly, at a minimum as a part of their annual reporting.
But you don’t have to be publicly traded or a big company for ESG principles to be important.
Investors aren’t the only ones looking at these issues. They also matter to shippers, the general public, to employees and potential employees. So even if you don’t need an official ESG report for investors, it might be a good idea to develop some sort of documentation, maybe a page on your website, to advise them on your activities in these areas.
ESG is a pretty broad umbrella, and it’s quite likely you’re already doing things that fall under it.
Under environment, you could include fuel economy, use of alternative fuels or electric trucks, running newer lower-emissions trucks, route optimization for better freight efficiency, energy-saving and recycling efforts at your facilities, and so forth.
Social issues include things such as driver pay and benefits, employee health programs, the diversity of the executive team, efforts to improve diversity among employees, a commitment to safety for employees and the general public, community service, and efforts to prevent human trafficking.
Corporate governance covers things such as management structures, policies, standards, information disclosure. Good corporate governance is seen at companies that avoid legally or ethically questionable practices, that address long-term risks to business, that have diverse management and a high level of transparency, that are professionally run and financially stable.
And ESG reports don’t only focus on what you’re currently doing – they cover the goals and plans your company has to improve in these areas. So as you’re going through how well you do in these areas, you’ll likely see opportunities for growth. Set goals, make a plan for how to meet those goals, and don’t be afraid to share them with the world.
This editorial originally appeared in the May 2021 issue of Heavy Duty Trucking under the headline, "What is ESG, and Why Should You Care?"