The term ESG stands for Environmental, Social and Governance. It is a set of standards that measure the impact of a company on the environment and society, as well as the soundness and transparency of its corporate management. These criteria help make a company sustainable and attractive to investors, customers and employees alike.
To better understand what ESG is, it’s important to review each of its criteria:
This element addresses a company’s environmental impact and relates to how the company handles the following issues:
This criterion refers to how the company enhances its social effect both inside and outside the organization, on issues like:
This aspect deals with how a company is run and managed. It relates to the following considerations:
ESG criteria are closely linked to the UN-set Sustainable Development Goals (SDGs), which are based on 17 pillars to tackle poverty, inequality, climate change and environmental degradation, and foster prosperity, peace and justice. For example, a company’s environmental carbon footprint reduction practices contribute to goals related to climate change and ecosystem conservation.
The adoption of ESG criteria and alignment with the SDGs therefore increases investor interest in a company, which benefits both the environment and the community. In addition, it can boost business growth by attracting solid investments.
The implementation of ESG standards shows that the company has a plan aimed at protecting the environment, promoting diversity and making ethical decisions at the business level. Finally, all this contributes to strengthening the reputation of the company.
If an organization wants to be more environmentally responsible and sustainable, it must begin implementing ESG criteria into its management. But how? Long-term value can be created through lowering environmental impact via environmentally friendly actions, cultivating a diverse and inclusive corporate culture, and developing ethical and transparent corporate governance processes.
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