ESG criteria (Environment, Social, and Corporate Governance) are a set of factors used to evaluate a company’s environmental, social, and corporate governance performance. These criteria have become increasingly important in recent years as investors and consumers seek to invest in and support socially and environmentally responsible companies. Read more about it in this article.
Companies that adopt ESG criteria
Socially responsible investment refers to an investment that takes ESG criteria into account. However, why do companies decide to take responsibility for issues that, in principle, do not seem strictly corporate?
It may be due to legal obligations or to the discovery of something fundamental to the progress of organizations: there are issues that, although they may not appear to be so, have a direct impact on employee performance and, therefore, on the company’s results. Environmental, social, and governance issues are clear examples of such topics.
Corporate governance could be explained through another important parameter within any organization: corporate culture. In this sense, governance is the translation of that culture into processes, decisions, and actions that translate into the real, practical, everyday lives of employees, the principles and values embodied in the underlying philosophy that governs the organization.
It is strongly influenced by the type of people who make up the company’s board of directors: their age, their cultural and educational background, their business experience, their individual and shared personal values and the diversity they may present in terms of other parameters.
What is a socially responsible investment based on?
1. ESG criteria: the environment
The first criterion, the environment, refers to how a company manages its environmental impacts. This includes the reduction of greenhouse gas emissions, waste management, and conservation of natural resources.
Some specific aspects to consider in implementing this criterion include:
- Measuring and monitoring the company’s carbon footprint.
- Adopting renewable energy practices.
- Proper waste management.
- Implementing natural resource conservation practices.
2. ESG criteria: social
The second criterion, social, refers to how a company manages its impact on the society of which it is a part. This includes human rights management, diversity and inclusion, occupational health and safety, and supply chain management.
Some specific aspects to consider in implementing this criterion include:
- Adopting equality and non-discrimination policies and practices.
- Managing health and safety in the workplace.
- Promoting fair practices in the supply chain.
3. ESG criteria – how the company is governed
The third criterion, corporate governance, refers to how a company manages and controls itself. This includes board structure, executive compensation, financial transparency, and risk management.
Some specific aspects to be considered in implementing this criterion include adopting correct governance practices, transparency in financial disclosure, and appropriate enterprise risk management.
How to apply ESG criteria to a company?
To implement these ESG criteria in a company, it is important to follow a series of steps. First, it is vital to assess the company’s current performance on each ESG criterion and set clear objectives for improving performance.
This may involve conducting an environmental and social impact assessment, evaluating current corporate governance policies and practices, and identifying opportunities for improvement.
Develop an action plan
Once clear objectives have been established, developing a detailed action plan to implement the necessary changes is essential. This may include adopting specific policies and practices to address the areas in which the company needs to improve, allocating resources to support these changes, and identifying the key performance indicators that will be used to measure progress.
It is important to involve the entire organization in implementing ESG criteria, from senior management to operational-level employees. Training and awareness raising are essential to ensure that all employees understand the importance of ESG criteria.
The relationship between ESG criteria and employee well-being
ESG criteria are related to the well-being at work of employees in a company in several ways.
Employee quality of life
Firstly, the social criterion focuses on managing human rights, occupational health, and safety. A company that prioritizes these aspects and establishes appropriate practices and policies to ensure the safety and well-being of its employees promotes a healthy and safe working environment. This, in turn, can reduce stress and improve employees’ quality of life, contributing to their well-being at work.
Ethics, good management, and transparency
Secondly, the corporate governance criterion focuses on adequately managing business risks. When a company implements adequate and transparent governance practices, it can reduce the risk of fraud, corruption, and other issues that can negatively affect employees’ well-being at work. For example, when a culture of integrity and business ethics is fostered, employees can feel safer and more secure in the workplace.
Environmental sustainability
Finally, environmental criteria can also influence employees’ well-being at work. Companies that implement environmental sustainability practices can reduce the negative impact of their business activity on the environment and employee health. For example, when renewable energy practices are used, and waste is managed correctly, exposure to toxic and hazardous substances can be reduced, which improves occupational well-being.
In summary, ESG criteria are related to the occupational well-being of employees in a company, as they focus on practices and policies that support safety, integrity, and sustainability in the workplace. By implementing these criteria, a company can create a healthier and safer work environment for its employees, which can contribute to their well-being at work.
We hope you found this post about ESG criteria interesting. If you would like more information about ifeel’s emotional well-being service for companies, simply request it, and we will contact your team as soon as possible.
