While much of the interest around sustainability and social responsibility focuses on large public companies, private companies stand ready to make a significant contribution to these efforts by integrating environmental, social and governance principles. (ESG). Modern businesses understand that sustainability and social responsibility are no longer niche interests and prioritizing a strong ESG proposition creates opportunity and value.
What are the ESG criteria?
ESG criteria are a set of non-financial standards for a company’s activities that cover a wide range of topics.
“E”: environmental criteria relate to issues such as sustainability, energy efficiency, water use, conservation, recycling, biodiversity, pollution reduction and overall impact on the environment. environment. Every business consumes energy and its activities affect the environment.
“S”: social criteria relate to issues such as relations with employees, suppliers, customers and other stakeholders, wages and benefits, pay equity, working conditions, protection of privacy and data, the makeup of diversity, human rights and community relations. Each business operates in a larger community and can have a positive local influence.
“G”: Governance criteria relate to issues such as leadership diversity, decision-making, compliance, management integrity, political activity, investor transparency and strategic oversight. Every business needs internal governance processes and controls.
The particular orientation of each company will vary according to its industry and its objectives. And these criteria, while important individually, often win accordingly because of their overlap.
Why is ESG integration important?
As considerations of market value and social value continue to merge, the unrealized ESG capabilities of private companies can drive future value creation. Companies that proactively adopt ESG principles could benefit from differentiation, improved profiles and new opportunities, especially if these efforts are highlighted to stakeholders and the general public. A significant ESG investment could translate into brand improvement, customer and supplier engagement, talent attraction, operational efficiency, regulatory readiness and risk reduction.
Adopting sustainable and socially responsible strategies reflects a modern understanding of the forces that many believe will shape near-term opportunity and value. It is this level of understanding that underlies the dynamics of ESG integration by private companies. Benefiting from a unique position to adopt and implement such strategies, private companies are called upon to play a key role in having a positive impact on local communities from an ESG point of view.