ESG risk score: What it is and how to work with it

What is an ESG risk score?

Companies are at risk of falling short of ESG requirements, which can ultimately lead to regulatory penalties, reputational damage, and a loss of investor confidence.

The ESG risk score shows how far a company is from meeting its environmental, social, and governance (ESG) standards, on a scale from 0 to 100. It turns a complex topic into a clear, measurable number.

The score also helps highlight areas that may need more attention – reducing the risk of non-compliance and helping the company stay on track with its ESG goals.

Any given ESG risk score will vary depending on industry, business activities, and the quality and availability of relevant data.

For example: A manufacturing company will face very different ESG risks than a software company – such as emissions and resource use versus data privacy or labor practices. Additionally, companies with limited ESG data may receive higher risk scores due to uncertainty, not necessarily poor performance.

That’s why ESG risk scores should always be interpreted within the context of the company’s sector and how transparent and proactive it is about managing ESG issues.

How we deal with ESG risks in Cemasys

We assess ESG risks using the IFRS Framework. The International Financial Reporting Standards (IFRS) are global standards designed to streamline financial reporting and facilitate easier communication between companies and investors.

We can help you manage the complex requirements of the IFRS (and related standards) by integrating data collection, alignment with multiple frameworks, automating reporting, and providing a reliable audit trail.

Let’s help you manage ESG requirements. Get in touch today.

Examples of ESG risk factors

In the sections below, we’ll highlight common risk factors within each area of ESG reporting — namely, environmental, social, and governance.

Examples of environmental risks

Carbon emissions and climate impact

Carbon emissions are a key environmental risk factor for companies. High levels of greenhouse gas (GHG) emissions contribute to climate change and can expose a company to regulatory penalties and a loss in investor confidence.

Today’s companies are expected to report and reduce their carbon footprint. Failure to do so can have various negative impacts on the company’s performance – especially as climate-related disclosure requirements become more common across global markets.

Read the customer story: IBF A/S replaces manual GHG emissions tracking with a clear CO₂ overview using CEMAsys’ Carbon Footprint solution.

Resource efficiency

Resource efficiency refers to the effective use of natural resources, such as energy, water, and raw materials, in a company's operations. Poor resource management is a risk factor that can lead to waste and environmental harm, potentially resulting in regulatory fines and reputational damage.

Focusing on resource efficiency, companies can effectively reduce their environmental impact. Additionally, by improving resource management, companies can lower operating costs and increase bottom-line profitability.

A win-win situation for both stakeholders and the planet alike.

Waste management

Another environmental risk factor is waste management. While all companies generate and manage waste to some extent, how effectively they handle it can present significant risks.

CEMAsys supports companies by providing a comprehensive platform to analyze and report on waste generation and disposal. This enables data-driven decision-making to optimize waste management practices and improve regulatory compliance.

Get in touch today.

Examples of social risks

Labor practices and human rights

Labor practices and human rights are critical social risk factors for companies. Poor treatment of workers, unsafe working conditions, unfair wages, or violations of human rights can lead to legal penalties and serious reputational damage.

CEMAsys helps organizations monitor social risks by tracking key labor metrics and compliance indicators, enabling them to identify issues early and take corrective actions to protect workers and uphold ethical standards.

Health and safety

Health and safety are core components of the social pillar in ESG, representing both a legal and moral responsibility. Inadequate health and safety practices can lead to workplace accidents, which in the short term can negatively impact production capacity, and in the long-term result in penalties and reputational harm, and a low ESG risk score.

Health and safety also include psychological harm and risks, usually qualified and monitored through recurring employee surveys.

Examples of governance risks

Insufficient transparency and reporting

Companies are obliged to stay transparent in their reporting. This includes anything from financial performance to executive compensation.

Failing to be transparent can result in loss of credibility, and may even be non-compliant in regard to certain standards, resulting in a low ESG risk score. Conversely, being transparent can build trust and demonstrate that the company is serious about accountability.

Anti-corruption and ethics Compliance

Weak internal controls and inadequate oversight can leave companies vulnerable to corruption, bribery, fraud, and other unethical practices. These risks can pose legal penalties while also causing lasting reputational damage and loss of stakeholder trust.

Maintaining strong ethics policies is essential to mitigate these risks. Transparent reporting and proactive governance help ensure that companies operate with integrity and meet both legal requirements and stakeholder expectations.

Read more: ESG reporting requirements

Experience how CEMAsys can help shape your ESG reporting and management – get in touch today.

Mitigate ESG risks through clear reporting and regulatory alignment

Mitigating ESG risks can be done effectively through clear reporting and regulatory alignment. The primary question, then, is to what extent your company is equipped to do that.

Having the right tools, processes, and expertise in place is essential to meet evolving ESG requirements. Doing it right will even allow you to turn ESG risk management into a strategic advantage. If you’re unsure where your company stands or how to improve, we’re here to help.

In our ESG advisory services, our experts help shape sustainability strategies, craft your unique narrative, and ensure full regulatory alignment. At CEMAsys, we guide you through the entire ESG reporting journey. This includes aligning your reports with international frameworks such as IFRS, CSRD, TNFD, or SASB, ensuring accuracy, credibility, and long-term value.

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