Getting an official stamp of approval on a product has long enhanced its marketability and credibility with consumers. This can perhaps be best witnessed in the organic food industry, which now includes additional ESG-related stamps for fair trade, non-GMO, and Rainforest Alliance certifications, among others.
The rise of ESG investing has encouraged the launch of a new round of ESG certifications meant to give impact investors another metric to assess investing opportunities and measure impact. These certifications cover a far broader range than previous alternatives, encompassing gender and racial equity, social justice, and new climate initiatives.
Getting to know the newcomers to ESG certification offers investors another opportunity to enhance their impact.
Made with Black Culture
This new certification aims to address a long history of appropriating and commercializing Black culture by white institutions without giving the creators their due economic rewards. Made with Black Culture will use blockchain technology to mint the intellectual property of Black producers, certifying that products are the result of equitable relationships among companies, creators, and retailers.
MLT Black Equity at Work
Launched in the wake of the national protests over the murder of George Floyd in 2020, the MLT Black Equity at Work certification establishes a rigorous standard for employers to achieve workplace equity. Companies ranging from Moody’s to ViacomCBS have adopted the standard, which focuses on three areas—people, purchasing, and philanthropy. The certification’s benchmarks and best practices spread across five pillars, including Black representation at every level; compensation equity; inclusive, anti-racist work environment; racially just business practices; and racial justice contributions and investments.
Equity Trade Certification
Approved by the United States Patent and Trademark Office in March 2021, the Equity Trade Certification aims at the cannabis supply chain. It provides a way for consumers to identify products, manufacturers, and retailers committed to increasing social justice and equality. The certification is a response to challenges faced by cannabis companies run by people of color, specifically enterprises participating in “equity license” programs that prioritize communities most severely affected by the war on drugs.
Set for a pilot launch in autumn 2021, the UK- and EU-focused certification Foundation Earth sets scores ranging from A+ to G to grade the environmental impact of food sold by retailers using multiple factors. The UK version will use four key criteria, including water pollution biodiversity and carbon, while the EU method will include 16 categories such as climate change, ozone depletion, and ionizing radiation.
Compact by Design
Global tech giant Amazon created its own sustainability certification, Compact by Design, in 2020 to highlight products with efficient designs such as minimal packaging. “At scale,” Amazon notes, “these small differences in product size and weight lead to significant carbon emission reductions.” The company has also incorporated four new ESG certifications:
- Safer Choice: for products made with safer ingredients
- EWG Verified: for products that reduce unhealthy chemicals
- Regenerative Organic Certified: for food, textiles, and personal care ingredients made with ethical and sustainable production practices, and
- Animal Welfare Approved: for food made from animals raised on independent farms using sustainable and ethical methods.
More Paths for ESG Investors
As the ESG world struggles to find consensus about how best to measure companies’ impact, these certificate programs can provide fresh, useful data points for assessment and help to better reflect America’s changing demographics in investing.
The supply chain encompasses many intersecting elements of ESG. New ESG-related certifications can help investors uncover new avenues to support ethical products from companies and encourage practices focused on sustainability and social equity.