What is ESG and why is it important for your business?
What does ESG stand for?
ESG stands for Environmental, Social, and Governance. It is a framework used to assess corporate sustainability and social responsibility in three areas: environmental, social and governance.
E: Environment (e.g. your company's activities for the environment)
S: Social (e.g. your company's activities to increase diversity)
G: Governance (e.g. your company's activities to reduce money laundering)
But what is ESG and why is it so important? Let's dive into the details here.
What is ESG?
ESG refers to the criteria used to measure the sustainability and ethical practices of companies. These criteria include:
- Environmental: How a business manages environmental impacts such as climate change, resource consumption, waste and pollution.
- Social: How a company interacts with its employees, suppliers, customers and the communities in which it operates. This can include topics such as working conditions, diversity and equality, human rights and community engagement.
- Governance: How a company is governed, including management structures, bribery and corruption, shareholder rights and transparency in reporting.
Why is ESG important?
There are several reasons why ESG has become a central part of modern business operations:
- Preparing for future regulatory requirements: With the introduction of the EU Corporate Sustainability Reporting Directive (CSRD), large and listed companies will be required to report to specific ESG standards. Although small and medium-sized enterprises (SMEs) are not directly subject to these requirements, it can still be beneficial for them to prepare for future regulations.
- Identifying improvement potential: By working with ESG, companies can discover areas where they can improve their sustainability practices, which can lead to increased efficiency and reduced costs.
- Meeting transparency expectations: Customers and investors are increasingly demanding that companies are transparent about their sustainability efforts. By reporting on ESG, companies can build trust and strengthen their reputation.
How your company can work with ESG
Even if your company is not subject to direct legal requirements for ESG reporting, there are several ways you can integrate ESG principles into your operations:
- Environment: Implement energy-saving measures, reduce waste and promote recycling.
- Social: Create an inclusive workplace, promote diversity and support local communities.
- Corporate governance: Ensure transparency and accountability in corporate governance practices.
Elvium's HR systems are already at the forefront of ESG as part of its strategy to help companies streamline everyday work. Software should support companies' work processes, which is why reporting becomes more efficient and even easier in Elvium. Contact us to learn more.
ESG in a nutshell
Now you've scratched the surface of ESG. In short, ESG stands for Environmental, Social, and Governance, and it's about much more than just regulatory compliance. By working with ESG, your company can improve its sustainability practices, build trust with stakeholders and prepare for future regulations. There's no doubt that your ESG score will become a competitive parameter in the future! So stay up to date by signing up for our newsletter.
