Environmental and social governance (ESG) is a set of criteria used in the evaluation of how a company functions, concerning both its people and planet. Incorporating ESG factors in company strategy and objectives is becoming commonplace, particularly with the increasing threat of the climate crisis prompting socially and environmentally conscious behaviour by all.
To break down the concept of ESG, the E evaluates environmental stewardship. The S, standing for social criteria, explores how companies engage with people, particularly employees, suppliers, and the community. Finally, the G, for governance, examines how an organisation manages and controls its activity, especially through policies. ESG as a concept is diverse. This brings multiple benefits, including the encouragement of a sophisticated evaluation of company behaviour that goes beyond ethical concerns. The environment and society are co-dependent of one another. The encompassing nature of ESG is considerate of this fact and successfully incorporates educational tools to provide awareness. It considers both climate change mitigation and adaption, plus the role of companies in all components of environmental stewardship.
Tracking momentum and evaluating company commitments to ESG is beneficial to all. What are companies promising? Are companies heavily focused on the social, environmental, or good governance aspect of ESG? How are rivalling companies doing in comparison to one another? By rating and evaluating ESG progress, groups endeavours to answer such important questions whilst helping businesses strive for success.
By putting ESG at the centre of company activity, sustainable operations are guaranteed for the long-term benefit of our planet and society. A study by Vontobel in 2020 found that 59% of respondents were not aware that an ESG approach to business is even possible. ESG is influential, yet underrepresented. Groups like the ESG Foundation are working to change this. I encourage companies to get involved with the foundation to make a positive change for both business and planet.