ESG — an acronym that stands for Environmental, Social, and Governance — is an umbrella term used by investors to refer to factors that measure the sustainability and ethical impact of an investment in a business or company.
It’s a lens through which investors can evaluate the behavior of a company, as well as how it’ll perform financially. And doing so is a trend that’s growing rapidly as more and more consumers show that they’re willing to pay more for products that are socially and environmentally conscious.
Here, we dive into the criteria for the ESG metric and discuss why it’s key for companies to consider creating an ESG strategy.
What defines ESG?
There are three factors that make up ESG: environmental, social, and governance. Each of these categories comprises specific criteria.
Environmental looks at how a business acts as a good steward of the environment. Criteria include:
Climate change
Air and water pollution
Waste management
Energy generation and usage
Greenhouse gas emissions
Social evaluates how a business manages relationships with people, from its employees, to its customers, and the communities it serves. Criteria include:
Working conditions
Employee training opportunities
Community engagement
Diversity
Health and safety
Governance examines a company’s leadership, executive pay, and its internal controls and audits. Criteria includes:
Company operation and ethics
Executive pay
Board diversity and structure
Tax strategy
Political lobbying and donations
Why is ESG important?
Consumers’ buying behavior over the past 10 years has proven the power of ESG reporting — customers seek out companies with strong ESG performance, even if purchasing products from those businesses is more expensive or more difficult. In fact, a recent report from Forbes says that nearly 75% of millennials are willing to spend more money on sustainable conscious products.
Beyond the bottom line benefits of increased consumer spending, additional reasons that companies should consider ESG as part of their business strategy are:
ESG provides investor insights.
Reporting on ESG metrics gives investors greater intel about company risks and how to overcome those risks.
ESG brings financial returns.
Studies show that approximately 90% of companies with strong ESG profiles have equal or better financial performance than their non-ESG counterparts.
ESG helps combat climate change.
ESG reporting offers a peek at how companies are handling climate change, arguably one of the greatest issues our world faces today. In the near future, it will likely become mandatory for companies to share how they are responding to climate change, from how they’re mitigating the physical risks (extreme weather, biodiversity loss) to how they’re managing the transition risks (the economic shift to a low-carbon society).
How can a company generate positive ESG performance?
Across all three ESG factors, there are myriad options for how a business can boost its ESG evaluation.
Building executive bonuses that rely on more than just revenue or income
Learn More About How Elevation’s Impact on ESG
Contact us to discuss our three-pronged approach to whole-home solutions — solar, smart technology, and energy efficiency — and discover how companies that partner with us are improving their ESG.
What Is ESG (And Why Does It Matter)?
ESG — an acronym that stands for Environmental, Social, and Governance — is an umbrella term used by investors to refer to factors that measure the sustainability and ethical impact of an investment in a business or company.
It’s a lens through which investors can evaluate the behavior of a company, as well as how it’ll perform financially. And doing so is a trend that’s growing rapidly as more and more consumers show that they’re willing to pay more for products that are socially and environmentally conscious.
Here, we dive into the criteria for the ESG metric and discuss why it’s key for companies to consider creating an ESG strategy.
What defines ESG?
There are three factors that make up ESG: environmental, social, and governance. Each of these categories comprises specific criteria.
Environmental looks at how a business acts as a good steward of the environment. Criteria include:
Social evaluates how a business manages relationships with people, from its employees, to its customers, and the communities it serves. Criteria include:
Governance examines a company’s leadership, executive pay, and its internal controls and audits. Criteria includes:
Why is ESG important?
Consumers’ buying behavior over the past 10 years has proven the power of ESG reporting — customers seek out companies with strong ESG performance, even if purchasing products from those businesses is more expensive or more difficult. In fact, a recent report from Forbes says that nearly 75% of millennials are willing to spend more money on sustainable conscious products.
Beyond the bottom line benefits of increased consumer spending, additional reasons that companies should consider ESG as part of their business strategy are:
Reporting on ESG metrics gives investors greater intel about company risks and how to overcome those risks.
Studies show that approximately 90% of companies with strong ESG profiles have equal or better financial performance than their non-ESG counterparts.
ESG reporting offers a peek at how companies are handling climate change, arguably one of the greatest issues our world faces today. In the near future, it will likely become mandatory for companies to share how they are responding to climate change, from how they’re mitigating the physical risks (extreme weather, biodiversity loss) to how they’re managing the transition risks (the economic shift to a low-carbon society).
How can a company generate positive ESG performance?
Across all three ESG factors, there are myriad options for how a business can boost its ESG evaluation.
Environmental:
Social:
Governance:
Learn More About How Elevation’s Impact on ESG
Contact us to discuss our three-pronged approach to whole-home solutions — solar, smart technology, and energy efficiency — and discover how companies that partner with us are improving their ESG.
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