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Compliance with ESG principles is a requirement in today’s market. In this article, you will learn more about these principles and how to adapt your organization to meet this demand.
Becoming an increasingly popular agenda item for companies, across both the consumer market and investment companies, ESG is the acronym that summarizes the commitment of organizations with environmental, social and governance values.
ESG principles have gained great importance in the market, as they influence consumer choices and investment decisions.
In a context in which good financial results are no longer enough for a company to be successful, being up to date with the ESG agenda is the secret to gaining public preference and receiving investments.
What is ESG?
Increasingly popular in the business world, the term ESG stands for Environmental, Social and Governance.
A company’s commitment to ESG shows how aware a company is of its positive and negative impacts on the world and the society, a position that reflects on the business and in the entire ecosystem around it.
Organizations aligned with the ESG agenda understand that the adoption of best governance practices contributes to the positive balance of companies in all sectors, minimizing their impact on the environment and helping to build a fairer world, without giving up the best administrative processes and sacrificing profitability.
E – Environmental
In the acronym ESG, the letter “E” stands for environmental and includes sustainability initiatives.
These initiatives should not be only about marketing claims: the strategy must be translated into well-executed projects in order to avoid practicing greenwashing, which is positioning the brand as sustainable without tangible actions.
Initiatives and projects that promote real environmental changes can be:
- actively position against planned obsolescence practices in the company and in the industry;
- waste disposal and management;
- carbon emission reduction;
- decrease in the use of plastic in packaging;
- reverse logistics for disposal of polluting materials
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S – Social
The letter “S” is for the social aspect, that is, how a company connects and communicates with the people around it, whether these people are customers, employees, suppliers or the community in which the company operates.
Some examples of actions that a company can take to build a more harmonious and humane relationship with the community are:
- reviewing hiring criteria to open space for socially disadvantaged groups;
- aiming for and achieving stellar client ratings;
- building more diverse teams;
- promoting gender equality in salaries;
- genuinely respecting human rights and labor laws;
- building fair relationships with other players in the market.
A good example of social ESG practices is the fact that many companies are moving away from requiring fluency in a second language in the hiring process.
Instead, they offer courses in corporate education plans to train professionals internally while they perform daily tasks.
As with sustainability, in the social sphere, consumers are more and more attentive to the practice of social washing, such as using symbols from social groups on packaging and product lines to win over market share, without taking serious action.
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G – Governance
The letter “G” refers to the administration of companies, that is, referring to the conduct of the executive team.
Corporate governance must be characterized by the commitment to meet the expectations and interests of employees, customers and shareholders of the company.
For this, executive management and the board of directors need to be aware of aspects such as:
- maintain the transparency of financial and accounting processes, with accurate and transparent reports;
- ensure the maintenance of an independent board of directors;
- propose adequate compensation to shareholders, considering the long-term value, viability and profitability of the business;
- anti-corruption practices;
- carry out audits on a frequent basis;
- collaborate to reduce conflicts of interest.
Why are ESG principles on the rise?
It is important to point out that the adoption of environmental, social and governance practices is attractive for clients, for the people on the the team, and for those who invest in an organization.
Therefore, the ESG agenda has been gaining relevance since companies began to differentiate from competitors in the market due to their commitment to these pillars.
This scenario justifies the high demand for courses on ESG principles, helping organizations align with these values.
The movement of the market has allowed people to become increasingly critical of what they consume.
As a result, they question more and more whether the actions taken and the values upheld by a company match their own even before contracting a service or purchasing a product.
In addition, investors are more aware of this practice, which is why they have been demanding commitments to the ESG agenda and that companies’ internal operations have transparency.
How can ESG principles be applied in the company?
Applying ESG principles across the organization requires a few basic steps. Each will lead down a solid path of commitment that will be noticed by customers, employees, shareholders, investors and suppliers.
- seek a thorough understanding of ESG principles (consider training your team with a ESG course);
- assemble a team to meet the needs of implementing the ESG agenda (excellent opportunity to build learning communities);
- map possible points that need to be adjusted to such criteria, investing in technology for this adaptation;
- select partnerships that are also committed to ESG principles.
Compliance with ESG principles as a factor for receiving investments
With the popularization of the term, investors are focusing on companies that adopt ESG principles. In other words, the acronym has become a new criteria for investments.
Therefore, it is important to keep in mind that, in addition to analyzing financial metrics, a company’s environmental, social, and governance commitments are also evaluated by potential investment companies – not committing to the ESG agenda decreases the chance of receiving new investments or even renewing partnerships.
It is possible to adapt your company to ESG principles and practices, keeping it future-proof and socially relevant.
While those who consume now have more access to information, there are also more tools and channels to demand responses from companies.
To align your company with the new reality, check out the new Environmental, Social, Governance (ESG) course on the Voxy platform.
Developed with content from media outlets such as Bloomberg, the training features engaging content from real-life news, so that the team can develop leadership skills while advancing in their fluency of English.