ESG, or Environmental Social Governance, is an area that’s become increasingly important in how we conduct business and our everyday lives.
Launched in the early 2000s by the United Nations, ESG is a set of standards that companies must adhere to in order to ensure their activities are sustainable and ethical. This includes reducing or eliminating negative environmental impacts, promoting social responsibility, and creating governance structures that promote ethical practices.
With climate change being an even bigger issue than ever before, consumers are becoming increasingly aware of the importance of ESG, and how it intersects with the products and services they use.
ESG is how a company can demonstrate genuine commitment to making their operations and products more sustainable. It’s a model similar to Corporate Social Responsibility, but with the added focus on environmental stewardship and accountability. Whether it’s committing to reducing carbon emissions or tackling socio-economic inequalities, ESG is essential in bringing companies into the 21st century.
Organizations that embrace ESG can earn a lot of goodwill among customers, who appreciate knowing that the company’s operations are making a positive impact on the planet. They have been shown to be more profitable and attract higher quality talent. These companies are more likely to have strong governance in place and understand the importance of maintaining a healthy, safe, and equitable workplace.
If you’re looking to purchase goods or services that align with your values, ESG is an important way to evaluate how much the company practices what it preaches. It requires companies to measure and report on how they impact their environment, workers and communities in order to ensure that their operations are socially responsible.
The assessment is measured by both quantitative and qualitative standards, providing an accurate look at why a company is truly doing their part for a better world. Are their products or services contributing to a more sustainable future or simply adding extra strain on our already fragile environment?
As ESG-related decisions are becoming increasingly important to the business strategy of any organization, consumers should also consider how these principles align with their own lifestyle choices — and use them as an effective way to make sustainable purchases.
There are a number of third-party organizations that monitor and certify companies’ ESG performance. These include B Lab, Green America, MSCI, the Responsible Investment Association (RIA) in Canada, and the Global Reporting Initiative (GRI).
Each organization has its own set of criteria for assessing companies’ ESG performance, and each provides its own rankings and certifications. Bloomberg or Morningstar ESG ratings are an excellent resource to start your research.
Ultimately, understanding ESG ratings will help you make better decisions when it comes to supporting businesses that are doing their part for a more sustainable future. The goal of ESG is not to be a scorekeeping exercise, but rather an opportunity for companies to create meaningful change and for consumers to make their purchases with a conscience.