ESG

ESG stands for Environment, Social and Governance – three key factors that are important to investors and companies. This concept has become central to assessing sustainability and corporate social responsibility. In this text we will look at what ESG means and why it is important to take it into account.

Environment focuses on the impact of business on planet Earth. This includes issues such as climate change, natural resource conservation, energy efficiency, emissions reduction, waste management and more. Today, as the severity of climate change and environmental degradation is increasingly recognised, investors are increasingly motivated to support companies that seek to minimise their negative impact on the planet (achieving a high rating is having an ISO 14 001 – Environmental Process Management system in place and certified).

Social responsibility refers to a company’s relationships with its employees, customers, suppliers and the communities in which it operates. This can include issues such as human rights, diversity and inclusiveness, working conditions, employee health and safety, as well as community engagement and charitable activities. Investors are increasingly receptive to companies that care about their employees and communities, as well as those that apply ethical standards in relation to their customers and suppliers (achieving a high rating is having ISO 9 001 – process management and ISO 45 0001 – occupational safety management systems in place and certified).

Governance focuses on the structure, processes and ethics of the company’s management. This includes issues such as transparency, ethical behaviour, board independence and diversity, compliance with legal and regulatory requirements, but also long-term strategic decision-making and risk management. Investors are interested in companies with well-functioning and transparent governance that protects their interests and minimises risks (a high rating is achieved by having an ISO 50 001-certified energy management system in place, including the calculation of a ‘Carbon Footprint’).

Why is ESG important? There are several reasons

Financial performance

Studies show that companies with better ESG indicators tend to have better long-term financial performance and lower investment risk.

Risk management

ESG factors can serve as a risk indicator for investors. Companies that do not address their negative environmental impact or have governance problems may face financial and reputational risks.

Reputation and customers

Companies with positive ESG profiles can gain loyal customers and maintain a good public reputation, which can lead to long-term success.

Ethics and Responsibility: today, the importance of ethical and responsible business is increasingly emphasised. ESG tools and strategies can help companies better understand and manage their impact on the world around them.

Overall, ESG is not just a trend, but rather is becoming the standard for assessing corporate sustainability and social responsibility. Investors, consumers and regulators increasingly expect companies to take these issues seriously and integrate them into their business models and strategies.