What is ESG (Environmental, Social, and Governance)?

ESG (Environmental, Social, and Governance) is a framework used to assess a company's sustainability, ethical impact, and corporate governance practices. Investors, businesses, and regulators use ESG criteria to evaluate risks, opportunities, and long-term value creation.

The Three Pillars of ESG

1. Environmental (E) Focuses on how a company impacts the environment, including:

• Carbon emissions and climate impact
• Energy efficiency and renewable energy use
• Waste management and circular economy practices
• Water conservation and pollution control
• Biodiversity and deforestation

2. Social (S) Evaluates a company’s impact on people, including:

• Employee well-being and fair labor practices
• Diversity, equity, and inclusion (DEI)
• Human rights and supply chain ethics
• Community engagement and social responsibility
• Customer privacy and data security

3. Governance (G) Examines corporate leadership, ethics, and transparency, including:

• Board diversity and independence
• Executive compensation and accountability
• Anti-corruption and ethical business practices
• Shareholder rights and corporate transparency
• Regulatory compliance and risk management

Why ESG Matters

• For Businesses: ESG helps companies enhance brand reputation, mitigate risks, and attract investors.
• For Investors: ESG investing prioritizes long-term, sustainable growth while managing financial risks.
• For Regulators: Governments worldwide are enforcing ESG disclosures to ensure corporate accountability.

ESG Reporting and Compliance

Various ESG reporting standards guide companies in disclosing sustainability performance, including:

• Global Reporting Initiative (GRI)
• Sustainability Accounting Standards Board (SASB)
• Task Force on Climate-Related Financial Disclosures (TCFD)
• Corporate Sustainability Reporting Directive (CSRD)

The Future of ESG

ESG is shaping the future of business by integrating sustainability into decision-making. With increasing regulations and investor focus, ESG is no longer optional—it’s a competitive advantage.