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Environmental, Social, and Governance (ESG) principles provide a framework to understand and measure how an organization addresses risks and opportunities related to its environmental and social impacts. Evolving global challenges such as climate risk, intensified economic pressures resulting from the COVID-19 pandemic, and increasing privacy and data concerns will likely shift consideration of institutional impact as it relates to these principles. Not all sectors of the economy face the same ESG issues, and as such, organizations manage and report on issues they deem material. As existing challenges evolve and new challenges emerge, identifying financial and nonfinancial material issues inherent in an organization’s day-to-day activities may require a broadened lens.
From access and affordability, to achieving more diverse student populations, to committing to sustainability-focused capital projects, to managing cybersecurity risks, higher education institutions have long considered and worked to address ESG factors. Espousing opportunities to institutionalize environmentally and fiscally sustainable practices, leaders have incorporated ESG principles into their institutions’ strategic and operational plans, including their missions, visions, and planning. As early as 2008, the Association of Governing Boards of Universities and Colleges published information on the importance of sustainability in higher education.1 A review of the Association for the Advancement of Sustainability in Higher Education’s campus sustainability hub yields more than 780 campus strategic plans that include elements or references to sustainability since 2011.
Often considered a governance component overseen by the college or university’s board of trustees and business officers, a higher education institution’s enterprise risk management strategy will often detail risk management objectives, identification methods, assessment and monitoring mechanisms, and response approaches. Recognizing that ESG risk management entails operational considerations beyond standard business and financial risks, higher education leaders often adapt and require multilayered approaches. For example, the American College & University Presidents’ Climate Commitment (ACUPCC) recognizes that mitigation and adaptation are complementary strategies for addressing ESG-related risks. Led by a steering committee of more than 25 college and university presidents and chancellors, the ACUPCC comprises nearly 700 institutions, representing 6 million students, who have made their greenhouse gas emissions inventories, climate action plans, and progress reports publicly available.2
Longstanding dialogue around endowment investment strategies in higher education have evolved to include consideration of ESG factors with respect to capital investments and resource use across campuses. The U.S. Green Building Council reports that between January 2017 and December 2021, more than 36,835 projects earned Leadership in Energy and Environmental Design (LEED) certification, covering 4.63 billion gross square feet, with higher education projects amongst the top six space types with 1,356 projects.3
College and university campuses are also examining the use of electric vehicles (EVs) to support their sustainability objectives. Industry and government partnerships designed to support planning and implementing EV charging on campuses have increased as more state, utility, and other local programs have become available to help fund fleet electrification and build charging stations.4
Every higher education community is unique and their interest in and concern for ESG factors will reflect their distinctiveness. While there are as many reasons as institutions, they can be loosely grouped along a few key guideposts:
Risk mitigation is a preemptive method colleges and universities can undertake. Guidehouse’s ESG materiality assessment is designed to inform your organization’s approach.
Initially used to provide guidance for the preparation of financial statements, materiality as a concept served as the cornerstone of the disclosure system established by federal securities laws. While the U.S. court-defined definition of materiality is still in use today, sustainability reporting frameworks such as the Global Reporting Initiative and accounting standards developed by the Sustainability Accounting Standards Board (SASB) have adopted the materiality concept in consideration of organizational impact, arguing that organizational impacts are — or will become — financially material over time.6 SASB standards identify a minimum set of sustainability issues most likely to impact a particular industry, including disclosure topics, accounting metrics, technical protocols, and activities that can be communicated to investors regarding sustainability issues that can impact a particular corporation’s ability to create value.7
While higher education institutions have made considerable strides in incorporating ESG principles in their governance and operations, expanding efforts to reflect issues identified by SASB standards would enhance commitment to these principles. Per SASB, the top material sustainability disclosure topics relevant to the education industry are:
In addition, SASB also lists key activity metrics like number of students enrolled, applications received for enrollment, average registered credits per student, number of teaching staff, and other staff as relevant to ESG principles.
Uniquely positioned as service providers with social, environmental, and financial impacts through the use of energy, water, transportation, and other resources, higher education communities must remain prudent in their approach to managing risks. Newly emerging strategies and operating models present shifts to the institutional risk profiles of higher education institutions.
Integral to the application of ESG principles is the identification of relevant material issues that are important to the college or university’s stakeholders. The creation of strategies to mitigate or adapt to these issues — and measuring progress toward identified targets and metrics — are key. While organizational complexity will impact the approach, Guidehouse can assist your institution in identifying relevant material issues unique to your institution and support you in implementing comprehensive, forward-looking strategies that promote environmental and financial sustainability.
Guidehouse helps organizations identify and meet their ESG objectives, from identifying materiality to tracking, measurement, and disclosure. Contact the Guidehouse team to learn more about the Guidehouse Materiality Assessment and start your efforts to identify, prioritize, map, and assess the top ESG issues that impact your organization and are relevant to your stakeholders.
Thank you, Ashley Ramchandani, Roshini Das, Minnie Frye, and Albert Hawks for contributing to this article.
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