ESG De-quoted

"Investing in companies with strong ESG practices not only benefits the planet and society but also leads to long-term financial gains for investors."

A lot goes around on ESG these days, but what is it really?

ESG stands for Environmental, Social, and Governance. It’s facilitated by a framework that is applied to evaluate a company's performance in relation to its impact by these sectors.

Enabling the ESG criteria manages to attract stakeholders and investors, and that is a key driver for businesses. The beauty of it is that Investors who use these criteria, by choosing companies to invest in, are evidently supporting companies that are environmentally friendly, socially responsible, and well-governed. Therefore, a cycle of activities is arising that exploits business opportunities, while simultaneously benefits the whole ecosystem.

Our ESG Experts at Infocreditgroup can help you understand further the concepts of ESG and craft an ESG strategy that matches your line of business.

Let’s start from the top. What are some of the ESG focus areas?

Environmental

• Carbon emissions from business

• Waste Management practices

• Use of renewable energy

• Toxic emissions

• Natural resource conservation

Social

• Treatment of employees

• Employee advancement and trainings

• Diversity and inclusion

• Health and safety

• Human rights

• Community relations

• Philanthropy

Governance

• Board composition

• Management and leadership

• Business practices and ethics

• Tax transparency

• Bribery and corruption

• Audit committee composition

Exploiting the above criteria ESG kicks off a chain reaction, whereas more companies become interested in aligning their investments with their values and concerns, on climate change and social issues. ESG investing is not only responsible, but also smart investing, and is perceived as a great opportunity for businesses.

It's a fact that our generation is accused of the following Environmental (E) consequences, and one of the reasons is failure to meet ESG criteria:

• Pollution and waste = Environmental problems

• Natural disasters = The rising temperatures

• Biodiversity loss = Ecosystem disfunction

• Degradation of natural resources = Consumption security

• Habitat destructions = Infectious diseases

• Environmental degradation = Economic instability

• Costs rising = Livelihood crisis

As for the Social (S) and Governance (G) consequences:

• Labor practices = Performance issues

• Human rights = Forced Labor, child labor

• Diversity = Inequality

• Unfair working conditions = Staff turnover

• Poor governance = No clarity, bribery, ethics

Consequently, by applying ESG criteria the following examples shall prevail:

• Regulated sustainable products and services

• Carbon offsetting shall improve with net-zero emissions standardization

• Renewable energy grows cheaper

• Working from home conquers

• Long term performances

• Increased transparency

• Improved market reputation

• Greenwashing is punished

• More organizations will have to disclose climate risks

• and so on.

ESG performance, can be a major driver and a competitive advantage for companies, as it:

• attracts investors

• draws consumers and stakeholders

• inspires trust and responsibility

• enhances brand loyalty and reputation

• retains top employee talents

• improves operational efficiency and reduces costs

• transforms risks into opportunities

• and many other.

It’s also a fact that ESG participation is already becoming increasingly exponential, with many companies integrating the criteria, at corporate governance and strategy level. The word goes around that, apart from being stained as irresponsible, whoever remains last shall suffer from the competition.

Regarding ESG reporting, it aims to assist companies communicate their business activities on society and the environment, comparatively, effectively, and thus demonstrates commitment to sustainability and responsible business practices.

The EU highlighted mandates on reporting today are:

• 2024 – For companies already subject to the NFRD (Non-Financial Reporting Directive)

• 2025 – For large companies (Over 40 million Revenues, 20 million Balance sheet total and 250 Employees – two out of three)

• 2026 – For listed SMEs’ and non-complex institutions (some could optout until 2028)

ESG reports can take many forms, including standalone reports, integrated reports, dashboards, and online disclosures, which must include (but not limited to) information relevant to:

• Strategy and Profile

• Governance

• Performances and metrics

• Sustainability achievements 

Invest in a sustainable future, because the world can't wait for tomorrow.