ESG for Beginners - Footprint of a household

Introduction

"What is E, S & G?" This was the first feedback I received from a kind reviewer of the launch edition of "A Practitioner's Guide to Corporate ESG Reporting". She said, for someone like her, who is not close to the corporate sustainability world, I should include an introduction to E, S & G. "This is a newsletter intended for sustainability practitioners, and I expect them to know (or at least pretend) to know something about ESG", was my instant response to this feedback. But this feedback, quickly threw me off, the high horse of corporate sustainability, I was riding. While I attempt to share learnings with the sustainability focused corporate cohort, the majority of the corporate workforce are likely to echo her sentiment.

So, let's get started. I looked several dictionaries for the right definition. I found the one from Cambridge English dictionary the most relevant. It says,

ESG is an abbreviation for environmental, social, and governance: a set of ideas or policies that consider the effects on the environment and on society of how a business operates, for example when choosing investments or when reporting on the activities of the business.

In my opinion, the best way to introduce ESG to anyone, is by demonstrating the footprint of their household across environment, social and governance metrics. I am adapting the Cambridge's definition in this case - "Considering the effects, of the choices made by you or your household, on the immediate (and often extended) environment and the society you live it". I have tested this approach with many of my colleagues. A great example of this is carbon accounting. The best way to learn about it is to calculate the carbon footprint of your own household. With this approach, i hope you will start from a place of familiarity and continue to build upon it.

E for Environment

Historically, humans had three key needs - Food, Clothing and Housing. In the modern urban world we live in, a fourth need has been added - Transport. Our daily lives are a continuous stream of consumption of goods and services across these four needs. Everything we consume has an environmental footprint. The household footprint is aggregated into the societal and then the global environmental footprint.

The Environmental Footprint is often the most identified and relatable. There are several ways in which our actions impact the environment. Please click here for interactive infographic.

Our every day actions can result in:

1. Depletion of natural resources like Water, Minerals, Forestry, Animals.
2. Climate Change due to the emissions of Green House Gases
3. Pollution of Air, Water and Soil
4. Loss of Biodiversity & Ecosystems
5. Degradation of Waterbodies and Marine life

A number of these are interconnected as well. Depletion of natural resources and increased pollution leads to loss biodiversity and ecosystems. The extraction of resources, processing , shipment and consumption of the products results in emissions of Green House Gases (GHGs). These GHGs have been proven to be the biggest cause of climate change. If we trace the origin of the goods and services that we consume, we will end up either in a farm or a mine.

Everything we consume originates either in a farm or a mine.

Food - The most basic human need is food. There are two main sources of food - Plants and Animals. Both of these are grown in Farms. Modern agriculture is very resource intensive. Agriculture is responsible for 70% of fresh water withdrawals. Growing food for an increasing human population strains the natural resources available to us. According to Food And Agricultural Organisation (FAO), Expansion of area under agriculture is the cause of 90% of global deforestation. Global demand for meat is growing: over the past 50 years, meat production has more than tripled. The world now produces more than 350 million tonnes each year. However, the production of meat has large environmental impacts – increasing greenhouse gas emissions, agricultural land, and freshwater use. There is an increased demand for fish, which has resulted in overfishing, with fish stocks collapsing in a number of areas. According to World Resources Institute, Agriculture was responsible for 12.3% global GHG emission in 2020.

Clothing - Humans need clothing to protect themselves from the elements. These clothes can be made of types of materials - Natural and Synthetic. Natural materials are cotton, silk, plant fibers, linen, wool, leather. All of these originate in a Farm. Synthetic materials like Polyester, Rayon, Nylon are derived from the crude oil value chain, which originates in a Mine. Of course there are materials made of mixed fibers too. Use of

Housing - Structure - We need a house to shelter in. The house can be made up of Soil, Bricks, Wood, Concrete, Metal. The construction industry needs a lot of water and generates a lot of waste, which goes to the landfill. Increasing human demand for housing is being met by clearing forests, filling up waterbodies likes lake and riverbeds. The housing demand is also fueling extraction of raw materials and minerals from mines. These often need clearing of forests, mountains and/or loss of ecosystems. Converting these raw materials into concrete and steel needs huge amount of energy and generates a significant portion of GHGs. Clearing of forests, mountains and loss of ecosystems leads to loss of biodiversity. The wood used in houses comes from forests. These can be native forests, which are cleared or from farms growing lumber. The paints and plastic in wires, furniture, utensils comes from crude oil, which again originates in an oil well, which is a Mine. Recycling of materials used in houses, devices can help reduce the extraction of virgin raw materials.

Housing - Energy - In the modern houses, we need electricity to enjoy the modern conveniences. We also need energy sources to cook our meals. We also need energy to heat and/or cool our houses. Global electricity supply comes from four key sources - Coal, Gas, Renewables and Nuclear. Usage of Coal and Gas result in emissions of GHGs, with Renewable and Nuclear power having zero generation emissions. Among these, use of Coal produces the most GHGs. Use of Gas for power generation or heating resulting in lower emissions of GHGs than coal. Coal & Uranium (for nuclear power) comes from Mines. Gas again comes from gas well which is also a Mine. Majority of the human population lives in Asia and Africa and coal is the primary power source in these regions. Humans need an energy source for cooking. Most urban regions have progressed from using wood and coal to gas or electricity based cooking. Gas is probably the most preferred cooking fuel across the world. Gas is also the preferred heating source for the population living in colder climates. Use of renewable energy such as solar and wind can significantly reduce the extraction of resources and the corresponding GHG emissions.

Transport - The development of modern means of transport have contributed significantly to the quality of human life. Today, it is possible to move people and goods across large distances with speed and safety. We use a number of means of transportation - Bicycles, Two-Wheelers, Cars, Buses,Trains, Boats, Ships and Planes. Construction of these modes of transport needs a lot of metals, which comes from Mines. According to World Resources Institute, transportation was responsible for 13.4% global GHG emission in 2020. On an individual or (for most) household basis, ground transportation would be responsible for a fairly small percentage of emissions. But, use of aviation, will significantly increase the household emissions. Depending upon the number ( and the distance) of flights taken, it can easily double (or triple) the household emissions.

I hope the above section helps you get a basic understanding of the environmental footprint of your household. It is always better to see some examples. I have been working for the past few years to quantify the impact of my household across these areas. We had the opportunity to live in the UK for the past 18 months. I take this opportunity to update my workings with a household footprint from UK too. I also went ahead and calculated the average monthly carbon footprint of our household in both these countries. This is intended as a yardstick which should approximately and directionally right.

Please click to access the detailed infographic.

S for Social

Social is all about the people and society around us. There is a Social Footprint for everything we consume. Everything we consume in our life is possible through the efforts of a number of people. While some of it is visible, most of this human effort is invisible to us in the modern world. As individuals, all of us fit within the social for the corporates we work in.

The three key categories of people impacted by our actions are:

1. Our own workforce - These are the wonderful people who work with us to make our lives better. These are the people we pay directly for their services. It might vary on where you live. In the western world the common ones would be baby sitters, caregivers, cleaners etc. In Asia, it is much more common to have household help. These can be cooks, drivers, live-in house help along side the nannies and caregivers.
2. Workers in the Value Chain - These are the people making our lives possible, even when we don't know about their actions. The ones you can identify are - Staff at restaurants, cafes, stores or transport companies. And then there are the vast majority we don't see - Farmers producing our food, workers producing the things we use, chefs who prepare the food in delivery systems. Perhaps, the most visible group in today's world is the delivery agents who frequent our doorsteps to deliver our food and e-commerce packages.
3. Affected Communities - These are the communities who are almost always invisible to us but can be impacted severely by our actions. These can be the indigenous populations living in forests who have been impacted by clearing of forest to make way for farms, factories, houses or infrastructure projects. Another example can be the native owners impacted by acquisition of land for development.

All of us wish to work for companies that provide the best practices and think about our welfare. This should apply to the people who are impacted by our actions too. Some of the key social impacts are captured in the infographic below. Please review it and if you are not considering any of these, do consider including them in the way you engage with direct workers.

I am sure we always try to provide the best working environment to the people who makes our lives better. As individual employers, we need to ensure that we provide the best working condition, wages and opportunities for development. We need to ensure that our decisions to employ any individual or group is free from any and all biases. As consumers and customers, we also have a big role to play in ensuring that all the workers in the extended value chain are taken care of. By choosing companies and products, with positive social practices, we can provide a very strong signal to ensure the welfare of the workers in the extended value chain.

G for Governance

As per the European Union European sustainability reporting standards (ESRS), Governance is all Business conduct policies and corporate culture. Adapting this to an individual would mean the individual or household ethics, culture and conduct. Some of the key areas applicable to households under governance will be:

1. Compliance with laws and regulations pertaining to you as an individual.
2. Anti Corruption & Anti- Bribery - Committing to prevention of corruption and ensuring that you never pay a bribe.
3. Paying workers and contractors on time - Always all the directly engaged workers and contracts on time.

Conclusion

This has been a long read. Thanks for bearing with me this far and I look forward to your feedback and comments. I have tried to keep it as relatable as I can. Please let me know, if it worked. Do point to any sections, where it can be simpler.

I started with individual infographics for Environment, Social and Governance. To conclude and refresh, I present a consolidated infographic across ESG, with examples of household impact across each of them.

I will consider this edition a success, if it helps you learn about the footprint of your household. This newsletter will achieve a greater purpose, if even one of you, use this learning to make a lifestyle change to reduce your footprint.

Every change must start with ourselves. Quoting Mahatma Gandhi :

We but mirror the world.

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