ESG stands for Environmental, Social, and Governance. This is a framework used by investors and companies to evaluate the non-financial impacts of a company and assess the potential risks and opportunities related to sustainability. ESG factors provide a lens through which investors and stakeholders can look at the ethical impact and sustainability practices of a company.
This considers how a company performs as a steward of nature. It includes issues such as climate change impacts, resource depletion, waste management, and pollution.
The social ESG pillar examines how a company manages relationships with its employees, suppliers, customers, and the communities where it operates. This includes key areas such as labor standards, diversity and inclusion, human rights, and community engagement.
The governance aspect of ESG focuses on company leadership and other metrics like executive pay, audits, internal controls, and shareholder rights.
While ESG and sustainability are often used interchangeably, ESG is more investor-focused. ESG criteria are primarily used by investors to assess potential risks and opportunities that may not be captured by traditional financial analysis. These have been increasingly integrated into investment decision-making processes to identify companies with superior long-term performance prospects. Given its use for assessments, ESG often emphasizes measurable, quantifiable metrics that can be incorporated into investment models.
On the other hand, sustainability is more encompassing. This focuses more on the ability of an organization to maintain processes, systems, and activities indefinitely without depleting resources, harming natural cycles, and negatively affecting communities. Sustainability considers the overall impact of an organization on the planet and society, aiming for a balance across various pillars to ensure long-term viability.
While sustainability metrics can inform investor decisions, they are also used by companies to improve their operational efficiencies, innovate product lines, engage stakeholders, and align with global sustainability goals.
Keslio is an international sustainability advisory that helps companies and investors navigate their sustainability journey. We support our clients through various services, such as strategy development and implementation, reporting and communications, and greenhouse gas emissions calculations.
We’re passionate about supporting business leaders and their companies with sustainability and ESG and we’d love to help you. To talk to us and find out what Keslio can do for you, please use the section below to contact us, or email us at hello@keslio.com.
