Environmental, Social, and Governance (ESG) refers to a set of criteria used to evaluate an organization’s operations, focusing on its impact and accountability in three key areas:
- Environmental: This aspect assesses how a company manages environmental factors such as carbon emissions, resource conservation, waste management, and overall sustainability efforts.
- Social: The social dimension looks at a company’s relationships with its employees, suppliers, customers, and communities. It includes labor practices, diversity and inclusion, human rights, and corporate social responsibility (CSR) initiatives.
- Governance: Governance evaluates how a company is directed and controlled, including its leadership structure, transparency, shareholder rights, executive compensation, and adherence to ethical business practices.
Initially used in business and government to measure an organization’s societal impact, ESG has become integral in evaluating corporate responsibility and sustainability. Reporting on ESG factors is governed by a mix of binding regulations and voluntary frameworks, helping investors and stakeholders assess long-term risk and alignment with broader societal values.