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What Is ESG Environment Social Governance And Why Is It Important
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In this video you’ll learn what ESG is and why it’s important to incorporate it into your decision making as a company. • ESG stands for Environmental, Social and Governance and refers to the three core factors in measuring corporate sustainability. • The term is derived from the concept of Triple Bottom Line . • Also known as People, Planet and Profits (PPP), which was introduced in the 90s. • It states that companies should focus on each of the three Ps and not just Profits . • The other two elements of “People” and “Planet” are equally important for a commercial enterprise to be sustainable and profitable. • This concept evolved into ESG. • Today it forms the foundation for doing business sustainably and responsibly. • The environmental criteria looks at how a company contributes to and performs on environmental challenges, such as waste, pollution, greenhouse gases, deforestation and climate, etc. • The social criteria looks at how a company treats its people. It looks at human capital management, diversity and equal opportunity, working conditions, health and safety and misleading sales, etc. • The governance criteria looks at how a company is managed and assesses remuneration of its executives, tax practices and strategy, corruption and bribery and broad diversity and structure, etc. • ESG is based on the simple idea that companies are likely to achieve and deliver strong returns if they create value for all of their stakeholders. • This includes employees, customers, and suppliers. • But it also includes the environment and society as a whole. • ESG analyses therefore focus on the way in which companies serve society and how this has an impact on their current and future performance. • ESG analysis is not just about what the company is doing today. It is extremely important to consider future trends as well. • This necessarily includes disruptive changes that can have significant implications on the future profitability of the business and even its survival. • The rigorous application of ESG practices can improve returns drastically as today’s consumers demand sustainable practices. • Also diligent implementation of ESG profiles can lead to cost reduction because it improved internal processes and helps retain employees and customer better. • Companies seeking to significantly improve ESG factors are also likely to increase their potential to outperform competitors. • By identifying and measuring ESG risks and opportunities, it can deliver both environmental and social benefits at the same time. • A growing number of businesses are currently striving to implement ESG factors to take advantage of business opportunities. • Investors also select sectors and companies by based on their positive ESG performance. • This leads to a more holistic ESG integration that is better positioned to mitigate risk and maximize returns. • Environmental, social, and governance (ESG) criteria are an increasingly popular way for investors to evaluate companies in which they might want to invest. • Many mutual funds, brokerage firms, and robo-advisors now offer products that employ ESG criteria. • ESG criteria can also help investors avoid companies that might pose a greater financial risk due to their environmental or other practices. • More recently some investors have come to believe that environmental, social, and governance criteria have a practical purpose beyond any ethical concerns. • By strictly following and implementing ESG criteria companies may be able to avoid exposing themselves to risk to avoid public scrutiny. • BP's 2010 oil spill and Volkswagen's emissions scandal, both of which rocked the companies' stock prices and resulted in billions of dollars in associated losses, are an example of this. • Find out more on https://csr.theincitement.com.
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