How To Calculate Your Individual ESG Score
If you're a company manager, entrepreneur, or leader who wants to understand your potential investors, clients, or partners better, simply looking at their credit ratings might not be sufficient. You also need to obtain their personal ESG (environmental, social, and governance) score, which will help you make informed decisions.
This post explains the concept of a personal ESG score, which is similar to a credit score. However, instead of evaluating an individual's creditworthiness, this score assesses their ESG risks.
We provide a detailed explanation of an ESG score meaning, how the ESG score works and offers guidance on how to calculate it for a company. Additionally, the post outlines the benefits of having an ESG score.
Read: Sustainalytics ESG Risk Rating: A Guide for Responsible Investing
What is a Personal ESG Score?
Financial and other organisations use personal credit scores to determine an individual's risk level when considering offering services like loans. These organisations are now expanding this assessment to include personal ESG scores, which give companies an understanding of an individual's sustainability rating.
Companies are adopting this evaluation as governments urge them to act more responsibly and sustainably, and stakeholders push for greater transparency in business practices.
The personal ESG score assesses an individual based on three main factors: their environmental, social, and governance impacts. Many companies now believe that only individuals who prioritise corporate sustainability can be trusted with high-responsibility tasks. As a result, individuals with high personal ESG scores are more likely to receive employment, partnership, investment, and other corporate opportunities.
In this sense, a personal score is simply an extension of the institutional acceptance of greater transparency at the corporate, company level. If you do something as a business decision-maker, it necessarily does reflect the individual as well. Yet, it’s not quite the same as the precautionary adage of ‘never mixing business and pleasure’.
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Benefits of Using Personal ESG Scores
Using a personal ESG score can offer several benefits, such as enabling you to comprehend your contacts better. It can aid in filtering out individuals who do not align with your values, especially when seeking potential partners or investors. Additionally, using ESG scores can provide further advantages.
This system enables a company to achieve its sustainability objectives by identifying low-risk partners.
The scores are important in helping you select or collaborate with individuals who are innovative and committed to ESG issues, as well as sustainability at both the local and global levels. Is the individual you intend to hire or partner with knowledgeable about climate issues, carbon credits, greenhouse gas emissions, and how they impact corporate financial performance?
A company's ESG performance is important for strengthening its brand as it can influence the decision of investors, consumers, and other stakeholders when considering whether to work with the company or not.
If you assess your personal ESG score, you can set an example for your industry and encourage others to do the same. Reviewing personal scores can show that your company is committed to sustainability, which may help attract more investors.
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Do I Have an ESG Score?
As an individual, you won't typically have an ESG score like companies or investments. ESG scores evaluate how well businesses and investment portfolios perform on environmental, social, and governance issues. Nevertheless, you can still examine your own sustainability practices and ethical behaviours to ensure they align with ESG principles. Although there is no universally accepted approach for calculating a personal ESG score, you can evaluate yourself by reflecting on your own conduct and habits regarding environmental impact, social obligations, and governance principles. Here are a few measures you can take:
Environmental Impact
Evaluate your energy consumption and explore ways to reduce it (e.g., using energy-efficient appliances, reducing water usage).
Consider your transportation habits and explore options for minimising your carbon footprint (e.g., using public transport, carpooling, cycling, or walking when feasible).
Assess your waste management practices and explore opportunities for recycling, composting, and reducing waste generation.
Social Responsibility
Reflect on your contributions to the community and society at large (e.g., volunteering, supporting local causes, donating to charitable organisations).
Evaluate your consumption patterns and consider supporting ethical and sustainable products and services.
Assess your treatment of others, promoting diversity, equity, and inclusion in your interactions and decisions.
Governance Practices
Consider your personal financial practices and ensure transparency, accountability, and ethical behaviour in your financial dealings.
Reflect on your ethical decision-making and integrity in personal and professional contexts.
Assess your involvement in responsible investing and supporting companies with strong governance practices.
You can create your own set of guidelines to support ESG values in your everyday life by thinking about these aspects and making intentional choices that prioritise sustainability and ethical practices. This self-evaluation may not generate an official ESG rating, but it can be a valuable step towards promoting a sustainable and socially responsible mindset.
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How to Calculate Your Individual ESG Score
Calculating a personal ESG score follows a similar process as a company ESG rating, but with a smaller scale of assessment or data. Personal sustainability scores may take into account factors such as those used by companies.
Identify Key ESG Factors
To begin, first identify the main ESG factors that are in environmental impact, social responsibility, and governance practices. Then, within each category, pinpoint the specific aspects that are most important to you, such as carbon footprint, community involvement, workplace diversity, or ethical decision-making.
Gather Data
To evaluate your performance in each ESG category, gather data that is relevant. You can do this by checking your energy bills to understand your energy usage, assessing your waste management practices, researching the social initiatives you support or take part in, and reflecting on your personal governance practices.
This can be an interesting exercise in itself, since we tend to automate many of these processes. Bills direct debit, trash is perhaps disposed of and forgotten, and even charitable donations are now part of our auto-payment system. In effect, many of these aspects are externalised, preventing our renewed awareness of them.
If you detest spreadsheets, start with an expense tracker to keep tabs on your outgoing expenditure patterns.
Set Weightings
Allocate weights to the ESG categories based on how important they are to you personally. Please keep in mind the relative significance of environmental impact, social responsibility, and governance practices in your values. For instance, you may give more weight to environmental impact than social responsibility or governance practices.
It doesn’t matter what the results of this are. The point is to ask the questions and figure out which areas are, apparently, of greater importance to you. You may even be surprised.
Establish Metrics and A Scoring Methodology
Specify measurable metrics for each ESG factor in their respective categories. The metrics can be either qualitative or quantitative, based on availability and preference. For instance, CO2 emissions can be used to gauge your carbon footprint, the number of volunteering hours can be utilised to assess community involvement, while a scale can be used to rate ethical decision-making.
Not sure how to score? Well, remember the weighted scoring method from back in school? Here’s a quick guide on how to develop one.
Evaluate and Score
Assess your performance in each ESG factor using the provided metrics and scoring methodology. Please be honest and objective in your evaluation, and if data is not readily available, make reasonable estimations or set goals for future improvement.
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Weighted Scoring and Overall ESG Score
To calculate your overall ESG score, apply the weightings you determined to the scores of each ESG factor. Multiply each score by its respective weighting, then add the weighted scores for environmental impact, social responsibility, and governance practices. Finally, combine these weighted scores to get your overall ESG score.
Continuous Improvement
Understand that your ESG score is not fixed, and you can work on improving it. Take time to evaluate your actions regularly, set targets for improvement and monitor your progress. Focus on making positive changes in areas where your score is lower to boost your overall ESG performance.
The Bottom Line
When it comes to commercial and industrial entities, ESG scores consider a lot of information. However, on a personal level, ESG scores also take into account as much information to create a picture of you and how your actions impact the world around you. Your purchases matter, as well as who you purchase from and how they conduct their business.
Your personal ESG score is influenced by your political affiliations, including the party you support and the person you vote for, who may have actions, policies, and voting habits that impact your score. Additionally, your score is affected by factors such as the make and frequency of your car usage, as well as the number of passengers in the car when driving.
Takeaway
You can’t manage what you don’t measure.
Maybe we should say that again: You cannot manage what you do not measure. If you don’t know the data, it essentially doesn’t ‘exist’. Therefore, it’s a purely personal choice for you to decide whether or not to find the information, acknowledge it, and then decide what to do with it.
In this sense a personal ESG score is different from a credit score, as it is based on, yes, personal criteria. However, as we mentioned at the top, this is an exercise in assessing the extent to which the ESG values you espouse organisationally are evident in your own actions. To push back on the logical argument that the majority of real change in addressing the climate crisis will come from regulation, there also needs to be a starting point where the individual fundamentally connects with the idea of change, its constancy, and the need for us to be adaptive.
Yes, an ESG score is a personal choice, but as more data is harnessed in our expanding, digitised economy, your personal choices tend to become more publicly accessible. Look at the effects of societal social media use, as an example. So, considering a personal ESG score can be a proactive way in which to start benchmarking what you find personally important with your outward ESG motivations in work, as well as the stated targets of your organisation. Practically speaking, it's a proactive reputation management tool as well.
We all need personal as well as professional development, and there are always areas where the two intersect. This helps you become aware of and comfortable with those areas.
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