What is ESG?

ESG stands for Environmental, Social and Governance. Broadly speaking, this refers to concepts of sustainability as they apply to business, and are particularly relevant when investing in companies. Think of it as the build blocks used to assess how a business is doing when it comes to sustainability and ethical issues.

ESG covers three key areas:

ESG for a business is very important, because without having a clear framework in place, there are a lot of pitfalls you can stumble into without realising it. Understanding ESG factors can help you identify potential risks.

A truly sustainable business is a more agile and resilient business. It’s much easier to withstand sudden market shifts if your supply chain is sustainable, for example.

ESG frameworks are also often used by investors as a form of risk management for investors. If you don’t have one in place, investing in your becomes a much less attractive proposition.

The ESG covers a number of criteria. These include but are not limited to:

• Reducing carbon emissions
• Using more energy efficient practices
• Dealing with water scarcity
• Combating pollution (particularly air and water pollution)
• Waste management strategies
• Human rights observance
• Meeting labour standards
• Measuring customer satisfaction
• Promoting gender equality
• Protecting data
• Displaying executive compensation policies
• Having anti-bribery and corruption policies
• Implementing whistleblower schemes 

For more ESG criteria, check out this guide.

Companies that engage in risky or unethical practices (the kinds of behaviour that an ESG will flag up) is naturally a riskier investment. By having this information clearly available you become more attractive to investors.

Brokerage firms even offer exchange-traded funds (ETFs), as have mutual funds. Robo-advisors are also being seen to promote ESG options.  

Investing in companies with a strong ESG is commonplace enough that it has multiple names, including impact investing and socially responsible investing. 

There are loads of great benefits to utilising ESG, including: 

With so much to track, getting an ESG strategy in place might seem like an impossible task. An ESG reporting tool can massively help support your strategy. They will help you create a sustainable strategy, collect data and report more effectively.  

If you’re looking to dig into more detail and get an idea of how to start implementing your very own ESG strategy, we’ve put together a simple guide that will support you. You’ll learn: 

• How to define your ESG objectives
• How to get your strategy moving
• How to make use of available tools and resources. 

With sustainability as one of our core values, we’re keen to support every organisation in creating a more sustainable world, and to protect their profitability in the face of a range of challenges. 

Whether that’s through tools like real-time payroll, improved workforce management, MHR has been helping businesses innovate for nearly forty years.

Discover how we can help you