In today’s rapidly changing world, businesses are no longer evaluated solely based on their financial performance. Stakeholders, ranging from investors and customers to employees and suppliers are increasingly concerned about the broader impact companies have on the environment, society, and corporate governance, ESG.

What does ESG stand for? 

ESG stand for environmental, social and governance. These are the three main pillars of the ESG framework, representing the topic areas companies are expected to report on in their annual or sustainability reports.

What is Covered under the Environmental Pillar? 

The “E” in ESG refers to a company’s environmental impact, which is paramount for all enterprises regardless of industry or scale. From resource utilization to waste discharge and emissions, every activity leaves an environmental footprint, influencing ecological health and societal well-being. Organizations are expected to act as stewards of the environment, minimizing their ecological footprint. 

The environmental pillar covers issues such as greenhouse gas emissions (including Scope 1, Scope 2, and Scope 3, particularly related to business travel and employee commuting), biodiversity, pollution, and resource management, as well as water security.

What is Covered under the Social Pillar? 

The “S” in ESG centers on a company’s interactions with its stakeholders, including employees, customers, and the community. Within the social pillar, key aspects include diversity (which refers to the variety of backgrounds and age groups within an organization), human rights, labour practices, community engagement, and supply chain ethics. Companies are evaluated based on their impact on people and communities.

What is Covered under the Governance Pillar? 

The ‘G’ in ESG pertains to corporate governance, encompassing how companies are directed. This includes aspects such as board composition (which considers diversity in terms of gender and age groups), executive compensation, transparency, and shareholder rights. Robust governance ensures ethical decision-making and fosters accountability.

ESG is more than a buzzword, it’s a fundamental shift in how we evaluate businesses. As companies embrace sustainability, they contribute not only to their own success but also to a healthier planet and more equitable societies. Whether you’re an investor, consumer, or employee, understanding ESG empowers you to support responsible and impactful organizations.