ESG stands for environmental social governance. The ESG criteria evaluates these 3 practices within a company.
Employing ESG criteria has risen in popularity over the past few years as younger investors, in particular, are looking to invest in companies that align with their own values.
It is clear that no one company can be perfect in all of the environmental, social, and governance categories of the ESG criteria – each investor and company must decide what values are most important to them.
Read on to learn about ESG and how you can asses your company within this criteria.
What Is Environmental Social Governance?
ESG is a method of evaluating companies on their environmental, social, and governance values, and the actions they take to employ these values into their practices.
ESG is specifically a tool for investors looking for new investments. Based on a company’s ESG report, investors can determine if a company is aligned with their values, or if they will pose a greater financial risk due to social or environmental practices.
That being said, let’s discuss the range of behaviors used to assess companies based on ESG criteria.
The ESG environmental criteria can be used in evaluating environmental risks a company may face, and how they are handling those risks. It can also include a company’s energy use, pollution generated, the natural resources used/conserved, animal treatment, and waste.
An example would be how a company handles disposing of hazardous waste. They may need to answer questions such as “Where do they dispose of this waste?” and “What is generating this waste?”. Another example would be managing toxic emissions, are they complying with government regulations around toxic emission production, and what are they doing to reduce toxic emissions.
The ESG social criteria evaluate a company’s social justice values and business relationships. Social responsibilities include the conditions of their workers, the sourcing of goods, and the health and safety of their staff.
An example of positive ESG social criteria ranking can be a company that supports its local community, donates to charities within their core values, sources goods from factories that uphold those values, and display a working environment that is beneficial to their employee’s wellbeing.
Governance is the way in which a company manages its accounts. Investors are looking for companies that are transparent and meticulous with their accounting, and give stockholders an opportunity to make decisions within the company.
The governance criteria also measure a companies ability to avoid conflict, are not involved in political coercion, and do not take part in illegal activities.
Environmental Social Governance (ESG) Training
Environmental social governance training is an important investment for any company that is looking to cultivate a positive brand identity, attract new investors, bring on quality staff members, and reduce risk when a transition to a “greener” business model.
Are You Ready to Improve the Quality of Your Business?
Now that you know more about environmental social governance, you’re ready to take your company to the next level and become an example of social responsibility in the corporate world.
If you enjoyed learning about ESG, check out our blog to learn more about how you can advance your business.