As the effects of climate change become more real and impactful in our daily lives, individuals and companies have begun to prioritise environmental protection and sustainability. A key result of this shift is the creation of the ESG framework which stands for Environmental, Social and Governance. This tripartite concept invites companies to make decisions that showcase a strong value and appreciation for global sustainability.
The environmental component is quite straightforward. It requires companies to ensure that their decisions are good for the environment. This can be done through value chain decarbonisation initiatives or funding climate change adaptation or mitigation programmes in their countries of operation.
While the environmental component is focused on the planet, the social element is focused on people such as staff, customers and communities of operation. A company with a strong social framework ensures that staff are cared for and provided with the required benefits. It also ensures that people in their communities of operation are not disadvantaged by their work. For example, a water treatment facility that allows wastewater to pollute surrounding communities will have failed to meet the environmental and social components of the ESG framework.
The governance element is focused on decision-making, ensuring that management and the board make decisions through a sustainability lens, considering the environmental and social risks associated with their choices. This means that they should make decisions that benefit people and the planet, not just profit.
