Proceedings of the 2022 International Pipeline Conference

IPC2022
September 26-September 30, 2022, Calgary, Alberta, Canada

IPC2022-86870
MANAGEMENT SYSTEM ENABLED ESG PERFORMANCE

Mark S. Jean, P.Eng. Eric Grant, P.Eng

Applied4Sight Ltd. Applied4Sight Ltd.
Calgary, Alberta, Canada Calgary, Alberta, Canada

ABSTRACT As the recognition of ESG continues to grow, so too has the use
Throughout the centuries, companies have faced a of management systems, especially in the pipeline industry.
wide range of challenges and changes that have caused them to Many companies are developing or have developed a
rethink their strategies and redesign their organizations. The management system to support their organization and
recent focus on environmental, social, and governance (ESG) operations. This is one of the key tools that companies can use
performance is one of the new challenges facing companies to systematically improve their ESG performance. It provides
today. ESG builds on prior Corporate Social Responsibility the structure to support effective ESG risk identification,
(CSR) reporting, adding additional structure and rigour to the management, mitigation, and reporting, providing the necessary
process for disclosure. It is not the concept of ESG that is sustained improvement and governance oversight needed.
challenging, but the speed at which the public and other key Through a management system plan-do-check-act (PDCA)
stakeholders, including institutional investors and regulators, approach, ESG initiatives can be effectively planned, executed,
have endorsed it that creates the greatest issue for companies. It reviewed, and reported to support ongoing improvement in both
has affected their ability to attract investment, increases costs ESG as well existing operations.
for borrowing as well as for insurance. This directly impacts a
The proposed paper will discuss the relationship between
company’s ability to finance and get access to lower-cost
management systems and ESG how to leverage a management
capital for their growth and ongoing operations[1].
system to support systematic improvements in ESG
There are many different disclosure frameworks in place to performance and year-over-year improvement in ESG related
support ESG improvement and reporting. These include metrics.
including Global Reporting Initiative (GRI), Sustainability
Keywords: ESG, ESG performance, management systems,
Accounting Standards Board (SASB), Task Force on Climate-
performance improvement
related financial Disclosures (TCFD), United Nations (UN)
Sustainability Goals, etc. with new frameworks being added
and changes being made on a regular basis. While there are
many different frameworks, many share a common objective of
improved performance in one or more of the ESG pillars. This
improvement is not intended to be acute, but rather demonstrate
continual organizational improvement over time. To
effectively meet ESG requirements, companies will have to
demonstrate sustained improvements in defined ESG pillars,
supported by:

• Defined ESG strategies;

• Established processes and consistent and progressive
practices;
• Measurement, reporting, and leadership oversight; and
• Disclosure/Transparency (e.g. public reporting) [2]

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1. INTRODUCTION
The concept of environment, social and governance (ESG)
has been in place in various forms and degrees for many
decades. In each of the preceding years, there has been varying
degrees of emphasis placed on each of the three ESG pillars
based on the concerns of society at the time.
The late 1960’s brought what many feel was start of the
modern environmental movement. Some large incidents,
including the Santa Barbara oil spill, which occurred in January
1969 in the Santa Barbara Channel, was one of the catalysts for
the increased focus on the environment and the role that humans
were having on it [3]. One of the key moments defining the
environmental movement was the inaugural Earth Day, held on
April 22, 1970 and annually since [4]. Social movements pre-
date environmental movements, with periods of reform and
significant change occurring after World War II (1945 – 1950s).
It was during this period that feminism, gay rights, and civil
rights movements were beginning to form and take root and
were the precursor to more modern social considerations in
ESG. The growth of corporate governance has also increased
over time due to concerns with corporate oversight and business
ethics, but first became visible in the 1970s [5]. Over the last
several decades, the focus on corporate governance has
continued to grow. Incidents associated with large corporations
and attributable in whole or in part to poor governance, have
occurred including Enron Accounting Irregularities [6],
Volkswagen emissions scandals [7], Lehman Brothers sub-
prime mortgage [8]. This shook investor and public confidence
in the governance at large organizations and created demand for
improved oversight.
While there has been varying degrees of focus on
environment, social and governance areas independently over
the years, it wasn’t until more recently that attention was
directed to all ESG pillars in an integrated and deliberate
manner, guiding and influencing investment decisions. Even
today, the approach to ESG continues to evolve, requiring even
more systematic approaches to demonstrate rigour and
improvements in performance. The good news, however, is that
the use of management systems has also continued to grow
during this period and can be a very powerful tool that can be
leveraged to support the ever changing ESG landscape.
2. ESG LANDSCAPE – PAST AND PRESENT
There has been an ongoing debate as to when ESG emerged
as a significant influence on investment behaviours. Many
sources cite 2005 as the start of modern ESG regime, with the
“Who Cares Wins” [9] initiative. It was the first notable use of
the term ESG and one of the first gatherings of institutional
investors, asset managers, analyst, government bodies and
regulators to discuss the impact that environment, social and
governance value drivers were having on broader financial asset
management and investment. This further led to the
development of the 2006 United Nation’s Principles for
Responsible Investment (PRI) report, outlining key principles
to support putting responsible investment into practice. Others
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have felt that social investing, occurring in the 1960s with the
boycott of specific companies and industries (e.g., tobacco) was
in fact the start of the integration of social beliefs into financial
investment.
Regardless of when ESG started, it has continued to gain
momentum within financial asset management, investment, and
even regulatory circles. Several key developments have
occurred in the last decade which serve to further reinforce ESG
prominence.
2.1. UN Sustainable Development Goals (SDG)
The United Nations Sustainable Development Goals
(SDGs), also known as the Global Goals, were adopted in 2015
as a universal call to action to end poverty, protect the planet,
and ensure that by 2030 all people enjoy peace and prosperity.
[10]
Where are 17 integrated SDGs that focus on specific
priority topics. It recognizes that action in one area will affect
outcomes in others, and that development must balance social,
economic, and environmental sustainability. The integrated
approach utilized for the UN SDG’s is reflective of the
approach that is being taken for ESG more broadly. Key goals
surrounding Gender Equality (Goal 5), Affordable and Clean
Energy (Goal 7), Decent Work and Economic Growth (Goal 8),
Reduced Inequalities (Goal 10), Responsible Consumption and
Production (Goal 12), Climate Action (Goal 13) are aligned to
and have greater influence over general ESG direction.
2.2. Davos Manifesto 2020
The World Economic Forum (WEF) and the International
Business Council (IBC) developed a stakeholder capitalism
model they hoped would become the dominant approach to
defining organizational responsibilities. Stakeholder capitalism
positions private corporations as trustees of society and is
viewed as the best response to today’s social and environmental
challenges [11]. The Davos Manifesto states that companies
should pay their fair share of taxes, show zero tolerance for
corruption, uphold human rights throughout their global supply
chains, and advocate for a competitive and level playing field.
In supporting this approach, a suite of 21 core (e.g. Board
composition, GHG Emissions, Land use and ecological
sensitivity, etc.) and 34 expanded metrics (e.g. Social value
generated, average wage, etc.) and disclosures have been
defined. Core metrics consist of a set of 21 more-established or
critically important metrics and disclosures. Expanded metrics
include a set of 34 metrics and disclosures that tend to be less
well-established in existing practice and standards. The metrics
established go beyond typical financial metrics, explicitly
incorporating ESG goals as a complement.
3. APPLICATION OF ESG
Understanding the history and drivers for ESG is important
in getting perspective on what has happened and the influences
that may impact it in the future. However, it is the application
of ESG where the principles, goals and reporting become more
tangible for organizations. To support the interpretation of ESG
goals and define specific and actionable requirements related
each pillar, a range of different frameworks and rating agencies
have been established. The following section describes the
more established frameworks and agencies in place.
3.1. Disclosure Frameworks
A range of different disclosure frameworks have been
developed to support ESG. A disclosure framework is a
standard that outlines the requirements for disclosure, including
what needs to be disclosed and typically in what form. Each
have unique priorities and have taken different approaches to
address their priority ESG requirements. The most common
and more frequently referenced frameworks have been outlined
for reference.
3.1.1.Global Reporting Initiative (GRI)
GRI was established in 1997 due to public outcry over
the environmental impacts of the Exxon Valdez oil spill. The
aim of the organization was to create an accountability
framework to support companies in applying responsible
environmental principles and practices. It has since expanded
to include broader social, economic and governance
considerations. In 2016, GRI established it’s GRI Standards,
transitioning from providing guidelines to setting the first
global standards for sustainability. It has also developed a
Sector Program that further breakdown its standards into 40
distinct categories that consider industry specific factors and
impacts. Many investors, businesses, and governments use
GRI’s ESG framework today and it is one of the most widely
used sustainability disclosure frameworks in place. [12]
3.1.2.Carbon Disclosure Project (CDP)
CDP was developed in 2000 as a not-for-profit charity
that oversees a global disclosure system for investors,
companies, cities, states, and regions to manage their
environmental impacts. This includes requirements for
companies to measure and manage their risks and opportunities
on climate change, water security and deforestation. CDP
currently manages the world’s largest, most comprehensive
dataset on environmental action. It supports its users in making
environmental conscience decisions that strives to support both
economy and the environment. [13]
3.1.3.Sustainability Accounting Standards Board
(SASB)
SASB began in 2011, to guide the disclosure of
financially material sustainability information by companies to
their investors. SASB standards work to align and identify
sustainability information which is financially material across
the range of ESG pillars. Because materiality is a key
consideration, SASB has developed a range of industry specific
standards to support different industries and sectors. [14]
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3.1.4.Taskforce on Climate-related Financial
Disclosures (TCFD)
The Task Force on Climate-Related Financial
Disclosures (TCFD) is an organization that was established in
2015 with the goal of developing a set of voluntary climate-
related financial risk disclosures. In 2017, the TCFD released
climate-related financial disclosure recommendations designed
to help companies provide better information to support
informed capital allocation. TCFD’s disclosure
recommendations are structured around four thematic areas that
represent core elements of how companies operate: governance,
strategy, risk management, and metrics and targets. The four
recommendations are interrelated and supported by 11
recommended disclosures that build out the framework with
information that should help investors and others understand
how reporting organizations think about and assess climate-
related risks and opportunities. While TCFD is one of the
newer disclosure frameworks, the approach is being supported
by regulators and other framework agencies and is starting to
lead the way for how ESG disclosures may take form in the
future. [15]
3.2. Rating Agencies
Utilizing the Disclosure Framework requirements allows
for more consistent public disclosure of ESG related
information. Rating agencies use this information to assess the
relative performance of companies to support review by
institutional investors and other rating industry clients. They
leverage their proprietary models to analyze available
information and assign scores or ratings to various companies.
The four major rating agencies for ESG that dominate the
current market included MSCI, Sustainalytics, RepRisk, and
ISS.
3.2.1.MSCI
While it wasn’t until 2009 that MSCI became publicly
traded company, it has a long and storied history dating back to
1969. MSCI is one of the largest independent providers of ESG
ratings. Their ratings are designed to measure a company’s
resilience to long-term material environmental, social and
governance (ESG) risks. The MSCI ESG ratings model
identifies the ESG risks that are most material to a range of sub-
industries or sectors. [16]
3.2.2.Sustainalytics
Sustainalytics, created in 2008, measures and assesses
the degree that a company has unmanaged ESG risk. This is
measured by a unique set of material ESG issues, so it only
considers issues which have a potentially substantial impact on
the company’s economic value. The rating scores ESG
performance from negligible to severe risk. The rating is
comprised of three central building blocks: corporate
governance, material ESG Issues (MEI), and idiosyncratic
issues (black swans). [17]
 3.2.3.RepRisk
Since 2006, RepRisk has been leveraging the
combination of artificial intelligence (AI) and machine learning
with human intelligence to translate big data into actionable
research, analytics, and risk metrics. It systematically screens
a range of publicly available information to flag and monitor
material ESG risks and violations of international standards that
can have reputational, compliance, and financial impacts on a
company. On a daily basis, over 100,000 public sources are
reviewed including print media, online media, social media
including Twitter and blogs, government bodies, regulators,
think tanks, newsletters, and other online sources. [18]
3.2.4.Institutional Shareholder Services (ISS)
ISS was founded in 1985, and more recently has
expanded to support ESG assessment. It takes a sector specific
and materiality focused approach, highlighting key issues that
represent the most material sustainability issues for a given
industry and company. It identifies correlations between
sustainability and financial performance with over 250 ESG
rating scores and underlying categories, including Prime
ratings, financial performance scores and areas of key concern.
Their ratings on companies, countries and green bonds provide
investors with the in-depth insight to effectively incorporate
sustainability in their investment decisions. [19]
3.3. Use by Investors
ESG is increasingly becoming a greater factor in
determining the investment worthiness of organizations.
Investors are increasingly considering ESG factors in their
portfolio selection and are using rating agencies to support their
own assessments. [20] While they don’t rely solely on rating
agency data, they do use it combined with their own internal
reviews to determine whether a company can support its
sustainability goals and objectives.
A key example is BlackRock Inc., an American
multinational investment management corporation, and one of
the world's leading providers of investment, advisory and risk
management solutions with an asset base reaching $10 trillion.
They were early adopter of sustainability and have used
Environmental, Social, and Governance factors in order to
provide their clients with better risk-adjusted returns, in keeping
with both their fiduciary duty and the range of regulatory
requirements around the world. As a result, they assess whether
the companies that they invest in are adequately managing and
disclosing sustainability-related risks, and to make them
accountable if they are not.
BlackRock has also increased their focus on governance,
requiring companies in sectors that are significantly exposed to
climate-related risk, to have boards that are fluent in how
climate risk affects the business and the approaches being used
to assess, adapt, and mitigate that risk. [21] This underscores the
emphasis and pressure being place on organizations to have
governance over ESG related issues.
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3.4. Regulatory Oversight
As ESG continues to expand in application, regulators are
increasingly looking to apply additional scrutiny and in some
case requirements to reinforce or expand on what is already in
place. Regulators across North America are adding their own
lenses to the ESG frame including the Canadian Securities
Administrators, Canadian Energy Regulator and Security and
Exchange Commission.
3.4.1.Canadian Security Administrators (CSA)
In Canada, the Canadian Securities Administrators (CSA)
held a roundtable on ESG Related Issues in Asset Management
on September 27, 2021, following which they issued guidance
to Investment Funds on their ESG disclosure practices. [22]
3.4.2.Securities and Exchange Committee (SEC)
In the U.S., recent progress toward clarifying ESG
disclosure standards has been made by the SEC. In May 2020,
the SEC Investor Advisory Committee approved
recommendations urging the Commission to begin an effort to
update reporting requirements for issuers to include material,
decision-useful environmental, social, and governance, or ESG
factors. This was intended to support the creation an ESG
disclosure framework for consistent and comparable
information without the use of a third party rating agency.
Inconsistency amongst ratings has influenced the SEC to move
forward in creating a standard framework. Further in December
2020, the ESG Subcommittee of the SEC Asset Management
Advisory Committee issued a preliminary recommendation that
the Commission require the adoption of standards by which
corporate issuers disclose material ESG risks. [23]
In March of 2021, the SEC announced a Climate and ESG
Task Force to pursue enforcement for ESG misconduct and
disclosure gaps [24]. This initiative was intended to identify
material gaps and “greenwashing”—statements that mislead
investors by overstating or misstating a company’s climate
friendly practices or products.
More recently, on March 22, 2022, the SEC has proposed
requiring U.S.-listed companies to disclose a range of climate-
related risks and greenhouse gas emissions. [25] This move has
the potential to further progress the requirements around
environmental reporting by requiring companies to
demonstrate:
• Governance of climate-related risks and relevant risk
management processes (i.e., Governance);
• Assessment of materiality of climate-related ESG
factors and the impact on companies' businesses and
consolidated financial statements (i.e. Risk
Management (incl Materiality));
• Assessment of how any identified climate-related risks
have affected (or are likely to affect) companies'
strategies, business models, and outlooks; (i.e., Risk
Management (incl Scenarios);
 • The impact of climate-related events and transition
activities on consolidated financial statements and
financial estimates and assumptions used in the
financial statements; and
• Climate-related performance metrics including Scope
1, 2, and in some cases, Scope 3 (i.e. Metrics &
Targets)
While the listing of SEC activities is not intended to be
exhaustive, it is indicative of the increased scrutiny and
involvement of the regulator in matters related to ESG. This is
likely to continue in the future and perhaps is an indicator of the
future of ESG and the approach to be considered.
3.4.3.Canadian Energy Regulator (CER)
The Canada Energy Regulator (CER) implements and
oversees a regulatory framework focused on the safe and
efficient delivery of energy to Canada and the world, protecting
the environment, and recognizing and respecting the rights of
the Indigenous peoples of Canada. The CER has established its
Onshore Pipeline Regulations to regulate the operations of
interprovincial and international pipelines. More recently, as
part of a broader regulatory review, the CER has started to
consider a broader range of social aspects within its regulatory
scope. Considerations regarding inclusion, indigenous
engagement and reconciliation and climate change are being
considered to guide regulations changes which is a more
explicit connection to ESG objectives. [26]
Despite the evolving regulatory landscape and variations of
rating methodology, there is no question that ESG risks,
especially climate-related risks, will continue to be a priority for
shareholders, investors, regulators and other stakeholders.
4. ESG GROWTH - FUTURE
The use of ESG continues to grow and is projected to
increase as priority for sustainable investments rises. The rate
of sustainable investment has increased exponentially since
2007. Over a period of 12 years, between 2007 and 2019, the
rate of sustainable investment has increased from $6.5 trillion
to over $80 trillion in assets under management in 2019 as
shown in Figure 1. [27]
FIGURE 1: GROWTH IN SUSTAINABLE INVESTMENTS
SOURCE: PRINCIPLES FOR RESPONSIBLE INVESTMENT
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As ESG continues to guide the growth in sustainable
developments, so too will be the importance of reacting and
responding to changes in the approach to ESG. One of the key
tools available to respond to the emerging direction and
approach for ESG is Management Systems, that are already
being used in many oil and gas companies.
5. GROWTH IN USE OF MANAGEMENT SYSTEMS
A management system provides the structure for a
company to organize and implement operational policies,
procedures, and other frameworks for long term sustainability.
Management systems align industry standards, internal
practices, and regulations with company goals. [28] These
frameworks help companies develop measures and targets that
provide valuable information to improve organizational
performance and drive critical decision making. The use and
prominence of management systems has continued to grow over
the years, with a range of industries either adopting it as best
practice or regulators incorporating it into regulatory regimes.
[29] The North American pipeline industry has been developing
and implementing management systems to support their
operations and regulatory compliance and can now leverage it
to support their ongoing ESG initiatives as well.
5.1. Regulatory Requirements for Management
Systems (MS)
In Canada, the Canadian Energy Regulator (“CER”) has
established its Onshore Pipeline Regulations (OPR) to govern
and regulate the operations of inter provincial and international
pipelines. The regulations, outlined in SOR /99-294 [30] outline
the requirements for companies to “ establish, implement and
maintain a management system”. The regulations have been in
place since 1999 and has been subject to changes and updates
over the years to reflect incidents, lessons learned and changes
in overall regulatory direction.
In the US, the American Petroleum Institute (API) has
established its API RP 1173 (“RP”) to support the development
and implementation of a Pipeline Safety Management System
(PSMS) for the pipeline industry. The RP standard was
developed through significant industry collaboration, with
stakeholders representing a diverse range of pipeline operators,
regulators, industry associations and other external stakeholder
groups. While regulators such as PHMSA have not legislated
the API RP 1173, they have publicly expressed their support for
the RP and have recommended that pipeline companies adopt
the approach outlined. While not applied on an industry level,
the federal regulator has required the implementation of API RP
1173 as a condition of restart resulting from an incident.
Additionally, some state level regulators have also mandated
the implementation of API RP 1173 as a result of incidents
occurring within state level jurisdictions.
Regulators of the pipeline industry are not the only ones
that have recognized and regulated the requirement for
management systems. Other high hazard industries have also
established requirements to establish management system
requirements as well. For instance, the Railway Industry in
Canada has established its Safety Management System (SMS)
regulations in 2015. The regulations provide a framework for
companies to integrate safety into their day-to-day railway
operations. The SMS was seen as an important component of a
comprehensive regulatory regime as it provides a proactive
approach to identifying safety risks and to taking action to
eliminate or mitigate those risks in order to prevent accidents
and other dangerous situations. Once fully integrated in an
organization, an SMS becomes part of the culture and the way
people do their jobs. [31]
policies developed, processes used, and governance employed
to prepare and report on the KPI’s reported. The reporting
requirements will not focus on episodic performance, but rather
sustained improvement over time. This requires a more
systematic and integrated approach, which is a key foundational
structure and objective of Management Systems. The high level
overview of the integration of ESG and MS is outlined in Figure
3.

6. CONVERGENCE OF ESG AND MS

When reviewing a TCFD based approach, which is
becoming the more prevalent and recognized method of
managing ESG related risks, regulators and investors are
increasingly looking for more integration. They are not only
looking at a company’s strategy for addressing ESG related
requirements, but also the detailed processes and plans that
guide progress towards meeting the strategy set and mitigation
of the ESG risks identified. Additionally, there is an ongoing
requirement to establish meaningful key performance indicators
(KPI) and targets to demonstrate ESG performance
improvement and progress being made against the strategy. It
isn’t enough to have these individual components in place, they
also want to see integration between the various aspects,
grounded in a strong governance structure that provides the
necessary direction, oversight and commitment to the ESG FIGURE 3: MS SUPPORT MODEL FOR ESG
influenced direction of the organization. [32] An overview of
this approach is outlined in Figure 2.
For those companies with existing MS Frameworks, there
is the opportunity to integrate the ESG requirements directly
into existing systems. For those companies just starting to
develop their management systems, they can customize their
systems during the system planning phase to address ESG.
Regardless of the status of a company’s management system
journey, it will provide the necessary structure to support
improved ESG performance, while reducing the resources
required for integration.

7. MS SUPORT OF ESG PERFORMANCE

FIGURE 2: EMERGING ESG APPROACH
Source: TCFD (fsb-tcfd.org))
This requirement for integration is a critical aspect of ongoing
ESG measurement and reporting and is likely to replace the
more prescriptive requirements in some other disclosure
frameworks that have a more checkbox based approach to ESG.
Companies will not only have to show outputs, in terms of KPI
but also be systematic and transparent on the strategies and
Management systems are typically designed to support the
achievement of organizational objectives, providing the
structure to consider, plan for, execute, review and report on
performance (Plan-Do-Check-Act cycle) in meeting prescribed
goals. The management system is typically structured as a
series of elements, with key requirements defined within each
to outline the specific expectations of the organization. These
elements and the overall structure are well aligned to the
requirements outlined within prevailing ESG Frameworks like
TCFD (see Figure 2 for details). Key elements that are often
considered within management systems and mapped to ESG
focus areas is outlined in the table below.

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 management of material ESG risks. Further, a robust
Management Review & Continual Improvement element within
the management system, can demonstrate effective governance
Management System Element ESG Consideration and oversight of ESG related strategies and goals, which is also
(see Figure 2) a key ESG requirement. The following section will describe
Leadership Commitment • Governance how a management system can support each of the 4 key ESG
• Strategy focus areas of Strategy, Risk Management, Key Measures and
• Goals, Objectives & Targets • Strategy Targets and Governance as previously outlined in Figure 2.
PLAN

• Planning • Risk
• Legal Requirements Management 7.1. ESG Strategy Integration
• Risk Management (Planning) The development of an ESG Strategy requires detailed
• Operational Controls • Risk consideration of how ESG related risks and opportunities can
• Competency and Training Management impact an organization’s business, strategy and financial
• Communication & Awareness (Mitigation) planning. An ESG strategy can be developed independently or
DO

• Procurement & Contracting be integrated within other organizational strategies, but

• Management of Change
• Information & Documentation
Management
• Monitoring & Measurement
• Incident Investigation &
CHECK
regardless of the approach selected, requires input and
engagement from an organizations senior leadership given the
potential for enterprise level impacts.
• Measures &
Targets 7.1.1.Linkage to Management System Elements
A management system, through the Leadership

Analysis
• Quality Assurance (incl Commitment element typically requires an organization to
audits) clearly define senior leadership accountabilities and
• Preventative & Corrective responsibilities and establish governance structures to support
Actions goal setting, review and decision making. The governance
• Management Review & • Governance structure established for the management system can readily be
ACT

Continual Improvement used to support the development of required ESG Strategies and
support the review of associated risks and opportunities that can
impact achieving the ESG goals set.

TABLE 1: MS AND ESG LINKAGES
The requirements outlined within each element may require the
development and implementation of a range of processes and
procedures. This provides the systematic structure to support
day to day operations, but also allows companies to demonstrate
the rigour that is needed to support ESG reporting going
forward. Figure 4 outlines the integrated structure that is
typically considered in management systems.
The management system elements that support the ESG
Strategy Integration include: Goals, Objectives & Targets,
Planning and Legal Requirements.
Goals, Objectives & Targets (GOTs) Element
The GOTs Element of a management system defines the
considerations and steps needed to set actionable goals,
objectives and targets that support meeting an organization’s
defined strategies and priorities.

ESG Application:
The GOTs element and associated processes can be used to set
objectives and actions linked to the ESG Strategy. In addition,
the process supports setting ESG related targets, which enables
the monitoring and reporting of ESG performance and
improvement.

Planning Element
The Planning Element of a management system provides
processes that enable the systematic development of plans to
meet any goals and objectives set.

FIGURE 4: TYPICAL MS INTEGRATED STRUCTURE
The processes developed within an organization’s
management system can be directly utilized to meet ESG
process requirements, including those related to the
ESG Application:
The Planning Element and associated processes help to
systematically develop plans to meet the ESG goals, objectives
and targets set. The plan developed should define the key ESG
related activities that need to be completed and the associated

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internal groups that need to participate for each. By monitoring
the progress made on each of the ESG related activities defined,
an organization can better assess the progress being made
towards its ESG goals set and adjust where required if things
deviate from plan.
Legal Requirements Element
The Legal Requirements Element of a management system
provides the process to review compliance and monitor and
assess changes in regulations.
ESG Application:
As previously discussed, regulations surrounding ESG are
constantly changing. Leveraging the Legal Requirements
Element allows for the identification of ESG related regulatory
changes and analysis of how it may impact an organizations
ESG Strategy and prioritization.
7.2. ESG Risk Management
Effective Risk Management requires organizations to
have systematic process(es) to identify, assess and manage ESG
related risks. Companies are required to describe how they
identify and assess ESG risks and then how they determine what
mitigations may be required. Not only do ESG risks need to be
assessed, but they also have to be integrated within an
organizations overall risk management activity.
7.2.1.Linkage to Management System Elements
The management system, through the elements within
the PLAN and DO phases, support effective identification and
mitigation of risk. Leveraging the management system
processes for ESG yields systematic and defendable risk
management rigour, with the further benefits of being more
easily integrated with other organizational risks.
The management system elements that support the ESG Risk
Management focus area include: Risk Management,
Operational Control, Communication & Awareness,
Procurement & Contracting.
Risk Management Element
The Risk Management Element of a management system
supports the systematic identification of risks to the business
and elimination, or mitigation approaches required when risks
exceed thresholds.
ESG Application:
Risk assessment processes can be used to support the systematic
assessment of ESG related risks. When risk controls are
considered, it can demonstrate how an organization is
mitigating its risks and to what level, which supports disclosure
report development. Where ESG risks exceed thresholds set, it
can support the identification and application of appropriate
mitigations. The matrices, tools, and templates already in place
within the management system can be used to assess ESG risks
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so that they can be integrated and compared with other
organizational risk management activities.
Operational Control Element
The Operational Control Element of a management system
outlines the specific requirements for the development of
processes and procedures to support the organization and
operations. Through the application of various operational
controls, employees are provided the necessary information,
instructions, and support to complete their daily tasks.
ESG Application:
The Operational Control Element supports the development of
administrative controls (processes/procedures) that address key
ESG risks identified. For example, the development of
development of erosion and sediment control procedures that
address water related ESG risks or vegetation management
programs that address biodiversity related ESG risks.
Communication & Awareness Element
The Communication & Awareness Element of a management
system generally addresses internal/external communication
needs, including requirements to manage stakeholder
expectations.
ESG Application:
The Communication & Awareness Element supports
engagement initiatives with key stakeholders on ESG related
topics and communication of ESG related activities taken by the
company to address risks identified.
Procurement & Contracting Element
The Procurement & Contracting Element supports
organizations in defining specific requirements that need to be
applied to contractors and suppliers. It also outlines the process
required to ensure proper screening and oversight.
ESG Application:
The Procurement & Contracting element supports the
identification and mitigation of environment and social risks
that may be posed by contractors. For example, there may be
environmental requirements that a company may need to define
for contractors to meet based on ESG. Also, the selection of a
supplier may go beyond price and consider environmental
factors such as transportation related emissions to meet ESG
scope emission requirements.
7.3. ESG Measures and Targets
ESG Metrics and Targets need to be established,
monitored, and used to assess and manage ESG related risks
and opportunities and to demonstrate improvement in overall
ESG performance.
 7.3.1.Linkage to Management System Elements
The management system, through the elements within the
CHECK phase, supports the effective compilation, review, and
assurance of various activities within an organization.
Organizations can use the processes established to
systematically measure and monitor the achievement of ESG
related goals, objectives and targets set (see GOTs Element
reference above) and to support associated decision making
The management system elements that support the ESG
Measures and Targets focus area include: Measurement &
Monitoring, Quality Assurance and Preventative & Corrective
Actions.
Monitoring & Measurement Element
The Monitoring & Measurement Element outlines the
expectations and processes to be followed for ongoing
monitoring and reporting of key performance indicators. It
provides the means and methods (i.e., analysis and reporting
tools) to gather and report information ensuring that
information can consistently be compiled to allow the
assessment of trends in performance information.
ESG Application:
The Monitoring & Measurement Element allows for consistent
and defendable measurement of ESG related measures and
performance against targets. It supports the collection of ESG
related information and changes over time to support public
disclosures and reporting. This is particularly important, given
regulators are requiring increased rigour around the accuracy of
information reported.
Quality Assurance Element
The Quality Assurance Element within the management
system, outlines the expectations and processes to be used to
complete various assurance activities within an organization.
This can include formal audits, assessments or inspections that
measure how an organization is completing work and the
degree to which it is carrying out effective reporting.
ESG Application:
The Quality Assurance Elements allows companies to assess
the accuracy of measures and target data to be reported as well
as confirmation that the ESG risk mitigation activities that were
identified were implemented as proposed and that the risks are
being controlled.
Preventative & Corrective Actions Element
The Preventative & Corrective Actions Element supports the
systematic improvement in organizational processes and risk
mitigation activities.
ESG Application:
The Preventative and Corrective Action Element and related
processes outline the response required and what may need to
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be done when ESG targets are not met or when deficiencies are
identified as a result of quality assurance activities.
7.4. Governance
Governance around ESG related risks and performance
needs to be established to support the development of ESG
Strategies and provide oversight over ESG related performance.
This includes not only Senior Leadership governance, but also
governance at a Board level as well.
7.4.1.Linkage to Management System Elements
The management system, through the elements within
the ACT phase, support the systematic governance of ESG
performance. It provides the structure for review, including the
definition of what is reviewed, how often and the specific
accountability and responsibilities of leadership.
Management Review Element
The Management Review Element and associated process
outlines what needs to be reviewed, at what frequency and by
whom to support leadership visibility, oversight and decision
making.
ESG Application:
The Management Review Element establishes the process to
review ESG related performance information on a
predetermined and regular basis. It typically includes the
review of company ESG performance data, collected, and
compiled through the Measurement and Monitoring element,
including the achievement of ESG relate goals, objectives and
targets set, review of decisions, actions, and commitments
relating to the improvement and the response to incidents,
deficiencies, and non-conformances.
8. CONCLUSION
ESG will continue to be a key focus and driver for many
organizations, now and in the future. The ability to effectively
respond to the ever changing requirements, including those that
require more systematic assessment of ESG Risks, will be a key
differentiator between companies. Organizations that can
effectively leverage their management system to meet ESG
requirements more quickly and effectively will have a
competitive advantage in being able to maintain and attract
future investments.
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