What is ESG ?
Environmental, social, and corporate governance, is a set of criteria through which a company can be measured in terms of its ethics and sustainability, providing a measure of the degree to which the company is futureproof, outside of simply its financial performance.
What are the criteria that make up ESG?
The ESG analysis is increasingly used by many responsible investors as a way to determine the long term success of a company. The three criteria of ESG are:
- The environmental criteria typically considers to what extent the company addresses its harm on the environment through areas such as emissions management, which can be determined through a carbon footprint report.
- The social criteria looks at areas such as employee pay, employee satisfaction, supplier relations, and the effect on the community in which it operates.
- The governance measurement looks at company leadership systems, executive pay, audits, and internal controls.
All of these criteria can be factored into a larger score to assess the level of harm or benefit that a company is having in its ecosystem. As legislation is changing and becoming more strict in terms of what damage companies are allowed to do, these principles are becoming more of an indicator of the long-term lifespan of a company, and its ability to prosper in the future.
For more information, check out Greenly’s blog articles on this subject:“What is ESG”