ESG | What is ESG?

6 February 2023 – ESG stands for Environmental, Social, and Governance, and refers to the three central factors in measuring the sustainability of an investment. To measure a company’s contribution and performance in environmental aspects, factors such as the amount and type of waste, any pollution, energy consumption, greenhouse gas emissions, resource use and availability, and deforestation are considered. For the social aspect, the treatment of employees and other stakeholders is examined, including equality of opportunity, diversity, working conditions, health, and safety. The governance factor pertains to how a company is structured and managed, including executive compensation, tax practices, and potential corruption and bribery.

ESG is a term primarily used by investors. From the perspective of companies, the overarching term ‘corporate social responsibility’ or ‘sustainable business’ is more commonly used. Strictly speaking, this does not refer to the legal obligations a company must meet, but rather the additional measures a company chooses to take to remain or become sustainable. In various sectors, companies have already joined forces and established governance codes or other guidelines at both national and international levels. By doing so, companies commit themselves to comply with certain regulations. This is also known as soft law.

Visit our ESG theme page on our website for more information on this topic.