ESG stands for Environmental, Social, and Governance. It refers to a set of criteria used to evaluate how well a company or organization performs in three key areas beyond just financial results:
1. Environmental (E):
- How a company impacts and manages environmental issues, including:
- Climate change and carbon emissions
- Energy use and efficiency
- Waste management and pollution
- Resource depletion (water, minerals, etc.)
- Biodiversity and ecological impact
2. Social (S):
- How a company manages relationships with:
- Employees (labor practices, health & safety, diversity & inclusion)
- Customers (product safety, data privacy)
- Suppliers and local communities (human rights, community engagement)
- Broader societal issues like gender equality, human rights, and workplace conditions
3. Governance (G):
- How a company is led and controlled, including:
- Board composition and independence
- Executive compensation
- Shareholder rights
- Ethics, compliance, and anti-corruption policies
- Transparency and disclosure practices