The socially responsible investment movement has recently made a comeback and has transformed the way we look at business decisions. Instead of focusing solely on maximizing shareholders’ short-lived profits, companies are beginning to see the benefits of focusing on often-overlooked environmental, social, and governance impacts. ESG deals with the ethical responsibility businesses face in today’s society. It is vital for businesses to pay attention to the effects they cause as ESG has a profound impact on a company’s revenues, whether they choose to acknowledge it or not.
ESG stands for Environmental, Social, and Governance which are the three pillars that socially conscious investors and shareholders seek to understand regarding the organization’s impact on the world. This impact can be quantified by ESG reports, scores, and rankings. You can request a free demo for your company’s rankings through Hydrus.ai.
ESG criteria for each pillar:
Environmental impacts can include:
- Risk Mitigation
- Reduction of Emissions
- Managing Resources and Carbon Footprint
Social Impacts can include:
- Human Rights
- Safety and Health of Workers
- Relationship with Community
Governance impact can include:
- Shareholder’s Rights
- Managing and Monitoring Systems
- Code of Ethics
Positive influence ESG has on organizations
Organizations that choose to pursue a high- ESG have found financial success in the long run.
Having a high ESG not only makes the company seem more appealing to investors, but reports from MSCI show that organizations that seek a high-ESG ranking have overall lower market risk and cost of capital. Businesses’ with high-ESG also tend to hold a good reputation for their brand. (MSCI)
Though ESG is influential to businesses’ performance, it remains underrepresented compared to other business activities. It is crucial to bridge the knowledge gap of ESG, and for stakeholders to educate themselves on the importance of investment and support of the Earth through ESG. It is paramount that we encourage the recognition of the importance of ESG.