ESG (Environment, Social & Governance)
This concept refers to good business practices concerned with environmental and social criteria and parameters of excellent corporate governance. It is a way of assessing organizations’ behavior in the face of current situations involving the environment, quality, safety, health, relationships, people, and finances.
Environmental, social, and governance (ESG) criteria are standards (norms) for a company’s behavior. Environmental criteria consider how a company protects the environment, including corporate policies addressing climate change. The social criteria examine how it manages relationships with male and female collaborators, suppliers, customers, regulatory bodies, and the communities where it operates. Governance involves a company’s leadership, compensation, audits, internal controls, and shareholder rights.
The following are the criteria for an ESG organization
Environmental criteria may include corporate climate policies, use of sustainable energy (Green Energy), waste treatment and recycling, degree of pollution, conservation of natural resources, and animal care. The criteria can also help assess any environmental risks a company may face and how the company is managing those risks. Considerations may include direct and indirect greenhouse gas emissions, toxic waste management, and compliance with environmental regulations.
Social criteria look at the company’s relationship with stakeholders. Whether it requests/requires that its suppliers also meet established standards for ESG. The company can/must donate a percentage of its profits to the local community and encourage its employees to volunteer. Workplace conditions must reflect a high regard for the health and safety of your people.
ESG governance standards ensure that a company uses accurate and transparent accounting methods, seeks integrity and diversity in its leadership selection and is accountable to shareholders, does not use political contributions to obtain preferential treatment or engage in illegal conduct
As ESG-oriented business practices gain more traction, companies can/should track their performance through reports that extensively review their ESG approaches and bottom-line results. The final value of ESG criteria will depend on whether they encourage companies to drive real change for the common good or simply tick boxes and publish reports. This, in turn, will depend on whether investment flows follow ESG criteria that are realistic, measurable, and actionable.
The material is subject to amendment(s) in case of change in the ordinance(s). Published: 12/13/2022