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What is ESG?

Updated: Sep 25, 2022


ESG - Environmental, Social, Governance is the major trend for business in the 21st century.




There is no simple, universally accepted definition of ESG, and of course, the meaning of ESG differs from each perspective: Corporate, Investor, Government, Society - Community.


In general, ESG is a set of principles guiding a company, fund management, or practice.

With corporate, ESG is more likely a sustainable strategy or framework which keeps business in the balance of positive environmental and social impact while maintaining good governance to generate profits for all shareholders. Often, Corporate uses ESG to attract investors and conscious customers, simultaneously as a defense mechanism when something bad happens.


ESG has become increasingly known within the investor community. As mentioned earlier, companies with good ESG performance stand out in the eyes of investors. Why? Because along with other financial factors, investors use ESG to screen and categorize their investments portfolio. ESG investing is very much related to risk management. It is proven that businesses with good ESG performance are highly likely to be benefited in the long term, which means less risk for investors and vice versa. Sometimes, ESG investing is also used to refer to responsible or sustainable investing.


In the lens of the government, ESG is a driving force for policy decision-making and regulations. While it is a voluntary base for most aspects of ESG reports now, the government should start pushing the journey of making ESG reporting a requirement for businesses, especially with the significant issues.


Finally, society, or in other words: the general audience, customers, and NGOs… see ESG as a filter for judgment to decide on good or bad companies. Many issues are raised from the society or community where a business operates and are expected to be addressed by the industry even before the government regulates the rules. That is why companies, when deciding on ESG materiality, should not only consider investor needs or government rules but have to analyze community pictures.


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Here are some of the significant ESG aspects.

Environmental

  • Emission

  • Energy consumption

  • Natural resources use

  • Waste management

  • Green transition

  • Pollution

  • Product life cycle management

Social

  • Community engagement & development

  • Labor practice - safety

  • Customer safety and satisfaction

  • Human right

  • Supply management

  • Employee & customer privacy

Governance

  • Inclusion & diversity of management board

  • Executive compensation

  • Political activities

  • Supply policy

  • Corruption & lawsuit.

  • Taxes


Reference:




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I started Sustainability House with the goal of offering readers a glimpse into my thoughts and experiences. What started out as weekly posts have evolved into a dynamic site packed with information about various topics that are near and dear to me. Take some time to explore the blog and see for yourself what makes you curious and eager.

 

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