EA – Executive Acceptance
Sustainable Personal & Corporate growth Strategies
ESG – Environmental, Social, Governance
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CEO’s Update I Executive Acceptance Editorial
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These three terms are playing an increasingly important role, both for investors and for companies themselves. We offer ESG solutions for companies that want to be sustainably successful. With the right sustainability strategies, you can increase your company’s value. ESG – Environmental, Social, Governance, let’s take a look at what that means.
What does ESG - Environmental, Social, Governance
ESG, ranges from climate change to workforce diversity to sustainable financing strategies. The trend toward taking responsibility has manifested itself among corporate leaders in well-known companies. This is because ESG has evolved from a risk and compliance issue to a lever of value generation. Leaders have recognized that sustainability, properly implemented, is an opportunity – for more growth, profitability and higher shareholder value.
Translated with www.DeepL.com/Translator (free version)
Detailed definition in the online dictionary
Definition of terms: The term „ESG“ has become established as the standard for sustainable investments. These three letters describe three sustainability-related areas of responsibility of companies:
The „E“ for Environment stands, for example, for environmental pollution or hazards, greenhouse gas emissions or energy efficiency issues (Environment).
Social („S“) includes aspects such as occupational health and safety, diversity or social commitment (corporate social responsibility).
Governance („G“) refers to sustainable corporate management. This includes, for example, topics such as corporate values or management and control processes (corporate governance).
ESG - Criteria
Environment
Climate
Resource Capability
Water
Biodiversity
Social
Employees
Safety & Health
Food Security
Demographic change
Governance
Risk and reputation management
Supervisory structures
Compliance
Corruption
Source: Own presentation based on Schindler: Nachhaltige Kapitalanlagen – Chancen nachhaltig nutzen; Frankfurt a.M., 2018. p. 20.
ESG as a broad term for CSR - Corporate Social Responsibility
For our German readers, I would like to translate the meaning of ESG – Environmental, Social, Governance – into German. It means that companies should make the environment, social issues, i.e. the stakeholders, and corporate governance sustainable. It is about voluntary responsibility and sustainable action, which is more consistent than the legal requirements demand.
But what exactly does that mean in practical terms?
Of course, you first have to look at the company that wants advice, because there are different criteria according to which a company can be evaluated in the context of ESG. If we look at a company in the energy sector, for example, the share of CO2 emissions, the share of renewable energy, environmental management or compliance with environmental guidelines that can be used as criteria for an assessment.
In the case of a company in the service sector, the social criteria such as human capital, product liability, collective wage agreements, compliance with anti-discrimination guidelines, freedom of association or the staff turnover rate predominate.
However, always and everywhere in the sustainability assessment of an organization, the quality of the
the quality of management and thus of (corporate) governance should be taken into account.
Corporate Governance
Specifically, this means guidelines to prevent corruption, bribery and money laundering, independence of the Board of Management, programs for internal whistleblowers or the signing of and compliance with sustainability standards of internationally recognized institutions. For example, the United Nations Principles for Resposible Investing (UN PRI).
ESG is also an issue for the capital market
Investors are placing increasing, clear value on sustainably managed investments. Often we also talk about ethical-sustainable investments, sustainable, ecological and socially responsible investments.
You can read more about capital markets and sustainably managed investments in our family office magazine, kevin-underwood.com.
If you’d like to talk to me about the topic, feel free to contact us, and we’ll give you customized advice with company-centric ESG solutions. Because as I’m sure you’ve read, one of our passions is to grow your shareholder value and your stakeholders in a sustainable and profitable way.
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